FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ___________
Commission file number ___________
Tracor, Inc.
(Exact name of registrant as specified in its charter)
Delaware 74-2618088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Tracor Lane, Austin, Texas
78725-2000
(Address of principal executive offices)
Registrant's telephone number, including area code: 512/926-2800
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Series A Warrants to Purchase Common Stock
(title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ ] YES
[X] NO
As of December 31, 1996, 24,754,303 common shares were outstanding and
aggregate market value of the common shares held by non-affiliates (based
upon the average of the bid and asked prices of these shares on the Nasdaq
National Market System on December 31, 1996) was approximately
$526,028,938.75.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. __ YES ___ NO
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
indicated part or parts of this report:
None.
PART I
Item 1. Business.
General
Tracor, Inc. provides sophisticated electronic and information technology
products, systems and services for the Department of Defense ("DOD"), other
U.S. government agencies, foreign governments and commercial customers. The
Company's business units operate in the U.S. and foreign defense
electronics, information technology and systems engineering and integration
markets.. The Company's products and services and largely support
high-priority DOD weapons, platforms and systems enable defense customers
to enhance the operational performance and readiness of existing systems
and platforms, as well as extend their useful lives and survivability. As
a result, the Company believes it is well positioned to benefit from
fundamental changes in national defense strategy precipitated by the end
of the Cold War. Since August 1993, the Company has made three substantial
acquisitions as part of its strategy to take advantage of a consolidating
defense industry. With the Company's recent acquisition of Cordant, Inc.,
Tracor has achieved a major presence, and substantially increased its
revenues, in the information technology market serving a broad range of new
DOD and other government customers. Largely as a result of such
acquisitions, Tracor's revenues and operating income have increased from
$261.8 million and $11.1 million, respectively, in 1992 to $1,082.5 million
and $92.6 million, respectively, in 1996.
Industry Overview
Beginning in the mid-1980s, the U.S. defense industry in general was
negatively impacted by the perceived reduction of threats from the former
Soviet Union and eastern European countries and, more recently, by
competing demands upon the federal budget. This has resulted in a U.S.
defense budget that has declined in real dollars, adjusted for inflation,
since the mid-1980s. For many defense contractors, the defense budget
decrease and the related DOD procurement strategies have resulted in
program cancellations, scope reductions, delays in contract funding or
awards and significant predatory pricing pressures associated with
increased competition and reduced funding. The defense budget has begun to
stabilize and, for the first time in many years, has increased in 1996,
adjusted for inflation.
The U.S. defense budget may generally be divided into four major areas:
military personnel, operations and maintenance, procurement, and research
and development. A major portion of the Company's activities are funded by
the operations and maintenance segment, relating primarily to systems,
products and services which support the readiness, improved performance and
increased life expectancy of existing platforms, weapons systems and
military forces. Despite the sharp overall decline in the defense budget,
the operations and maintenance segment has declined less sharply, as
existing weapons platforms are upgraded and maintained to provide a
cost-effective means of supporting a smaller military force. As a result,
the operations and maintenance segment has become the largest segment of
the DOD budget. Management estimates the current DOD operations and
maintenance market to be approximately $90 billion per year, or more than
one-third of the U.S. defense budget. Defense procurement relates primarily
to the development, production and acquisition of weapons platforms such
as aircraft, land vehicles and naval vessels. Until the last few years, the
procurement budget was the largest segment of the DOD budget. Over the past
decade, the declining U.S. defense budget has resulted in a significant
decrease in the military procurement budget as new generation weapons
platforms have been canceled or delayed. DOD budget priorities over the
next several years are likely to emphasize the readiness (operations and
maintenance) of a smaller force structure and the need to extend the lives
of existing weapons platforms by incrementally upgrading their
capabilities, while the procurement portion is expected to experience a
modest increase. Management believes Tracor is also well positioned to
benefit from this procurement upturn.
Declining defense budgets and increasing pressures for cost reductions have
precipitated a major consolidation in the defense industry. The Company
believes large diversified companies are likely to continue to make the
decision to divest non-strategic defense assets, as noncompetitive cost
structures and lack of critical mass and long-term commitment to the
industry put such diversified companies at a relative competitive
disadvantage. In addition, smaller, independent businesses may find it more
difficult to compete effectively in the changing defense environment and
may become available for acquisition. The Company believes this industry
condition will continue for the next several years and that businesses and
product lines will become available for acquisition on acceptable financial
terms.
Company Strategy
The Company's strategy in the evolving defense market consists of three key
elements: (i) protect and strengthen core businesses; (ii) expand and
diversify into new markets complementary to current operations; and (iii)
make strategic acquisitions of well-positioned companies which complement
the existing business strategy. Key elements in support of this strategy
are continued high-quality performance and continued improvements in
efficiency to remain highly competitive.
Protect and Strengthen Core Businesses. The Company's strategy for
protecting and strengthening its core businesses is comprised of a
number of the following key elements:
Support high-priority programs. The foundations for Tracor's core
businesses are high-priority, long-term, stable programs in which
Tracor has performed for many years. Many of Tracor's systems,
products and services support key weapons platforms and systems which
are expected to continue their important roles in the U.S. defense
strategy. These platforms include the AEGIS cruisers and destroyers,
the Trident submarines, the Tomahawk missile and key aircraft
including the F-16, F/A-18, C-17, C-130, B-1, B-2 and most
helicopters. In addition, Tracor has been a long-term incumbent
contractor in producing a large percentage of the nation's full scale
target drones, in producing a variety of range instrumentation systems
for more than 20 years, in supplying high-quality image exploitation
and mission planning systems and in providing important information
systems expertise to a number of customers including national
intelligence agencies.
Tracor's strategy is to continue its excellent performance record in
its core business areas by supplying high-quality products, systems
and services at competitive prices. Because of the Company's long-term
established presence, experience and knowledge, quality performance
and cost competitiveness, management believes the Company is well
positioned to continue to support these stable, high-priority DOD
programs.
Maintain the readiness of existing forces. The Company will continue
to compete for contracts to provide products, systems and services
which are suited to supporting the readiness of the military force,
a major thrust of the DOD's current defense strategy. A substantial
portion of the Company's operations are focused on extending the
useful lives of existing weapons systems through upgrades and
modifications rather than the procurement of costly new systems and
providing a wide range of capabilities which enhance the combat
effectiveness and readiness of military personnel and equipment.
Enhance survivability of weapons platforms and crews. The Company's
electronic warfare systems enhance the survivability of weapons
platforms and related personnel at a relatively low cost. Management
expects demand for these products to remain strong as customers seek
effective, cost-efficient means for protecting crews and high-value
assets.
Expand and Diversify Into New Markets. The Company is experiencing
success in transferring its core technologies and competencies to new
customers and markets. The expansion of the Company's core businesses
and its diversification to new businesses generally require several
years of planning, development and marketing. The Company's
diversification and expansion efforts have focused on the following
areas:
Nondefense U.S. Government. The Company has established an important
presence in the U.S. government nondefense market, which was further
enhanced with the acquisition of Cordant in September 1996. Its
information systems specialists are providing advanced information
systems capabilities to an expanding set of U.S. intelligence
customers, as well as to the U.S. Postal Service and the Department
of Justice. In 1993 and 1995, the Company was awarded contracts from
the Federal Aviation Administration (the "FAA") to perform system
engineering and integration for its new radar systems. The Company has
also received contracts from NASA.
International. The Company sells a wide range of products and services
to numerous friendly foreign governments. Products sold
internationally include countermeasures systems and expendables, radar
and electronic tracking systems, target drones, imagery systems and
automatic test equipment for F-16 aircraft acquired by foreign
governments. In addition, Tracor's aircraft avionics test equipment
business was expanded in 1995 with the winning of a contract to
provide test equipment for the new Japanese F-2 fighter. International
business accounted for 10% of total 1996 revenues.
New DOD Business. Tracor is constantly evaluating its technology to
identify areas of potential new business within the DOD. Recent
contract awards include a program in support of the U.S. Army's
battlefield digitization initiatives, a new flare development program
and a program to develop a minefield breaching system. Tracor also won
a key contract to upgrade an important National Imagery and Mapping
Agency system and a contract from the Naval Air Warfare Center to
provide design engineering and software services for a variety of
defense systems. The Company expanded its radio communication systems
business by winning the first competition for Nimitz class aircraft
carrier radio communication systems.
Commercial. The Company has developed a number of commercial
applications of its technology in areas as diverse as automotive laser
detectors, artificial heart valve testing, digital photogrammetry,
direct broadcast television antenna materials and test systems for
developing commercial satellite communications systems. In addition,
the Company has several contracts for applying a range of
sophisticated information systems capabilities to commercial and state
government customers, plus new contracts relating to major upgrades,
modifications and manufacture of structures for commercial aircraft,
including electronics installation and systems integration.
Acquire Complementary Businesses. The Company's acquisition strategy is
a key component of its overall business strategy. Tracor management
believes the continuing consolidation within the defense industry will
result in additional opportunities for the Company to make attractive
acquisitions.
Vitro Acquisition. On August 25, 1993, Tracor purchased all of the
outstanding common stock of Vitro Corporation and its subsidiaries
("Vitro"), a provider of high-technology systems engineering and
integration, software engineering, and various other services, from
The Penn Central Corporation for approximately $92 million. Tracor
financed the Vitro Acquisition and refinanced existing indebtedness
through the issuance of $105 million of Senior Subordinated Notes and
a new $78 million credit facility. As a result of the Vitro
Acquisition, the Company is one of the major providers of systems and
software engineering support to the Navy and is one of the few
companies capable of providing the U.S. Navy with the expertise
necessary for its most technologically advanced communications and
guided missile systems, including those for the AEGIS cruisers and
destroyers and the submarine ballistic missile programs. The
acquisition of Vitro also strengthened Tracor's position with key
nondefense U.S. government customers such as national intelligence
organizations and the FAA.
GDE Acquisition. On November 17, 1994, Tracor purchased all of the
outstanding common stock of GDE Holdings, Inc. and its subsidiaries
("GDE"), which has a major presence in the application of advanced
digital imagery technology to key DOD and intelligence systems and
programs, from its shareholders for approximately $102 million,
including the effect of a post-closing amendment to the acquisition
that was finalized in March 1995. Tracor financed the GDE Acquisition
by borrowing $55 million in additional term loans under its amended
credit agreement, issuing approximately $10.9 million of Series A
Notes, issuing 1,928,050 shares of Common Stock and using
approximately $19.9 million of the Company's cash on hand. As a result
of the GDE Acquisition, the Company has strengthened its position as
a provider of products and services to both the DOD and non-DOD
intelligence communities. GDE produces advanced digital technology
products for imagery information systems, mission planning and
automatic ground test equipment.
AEL Acquisition. On February 22, 1996, Tracor purchased all of the
outstanding common stock of AEL Industries, Inc. ("AEL") (now named
"Tracor Aerospace Electronic Systems, Inc."), which designs and
manufactures sophisticated countermeasures, simulation and
radar-warning receiver systems, installs and integrates electronic
avionics equipment in military and commercial aircraft and provides
state-of-the-art antenna, microwave and integrated circuit components.
The consideration paid to AEL shareholders for the common stock was
approximately $103 million in cash. AEL's long-term indebtedness prior
to the acquisition totaled approximately $20 million, of which
approximately $10 million was retired and approximately $10 million
was assumed by Tracor. Since the acquisition, Tracor has sold several
excess AEL facilities and two non-core business lines for $14 million
and another facility is currently for sale. The financing of the
transaction and related expenses was obtained through an increase of
the Company's existing bank term credit facility and from cash on
hand.
Cordant Acquisition. On September 26, 1996, Tracor purchased all of
the outstanding common stock of Cordant Holdings, Inc. and its
subsidiaries ("Cordant"), an employee-owned information systems
company. Cordant focuses on the design, development and integration
of information systems for a variety of applications, including mail
processing, records management and CAD/GIS ("computer aided
design/geographic information systems"). The purchase price of $65.7
million is subject to a contingent payment of up to an additional $10
million based upon the potential award of a large contract. The
acquisition was financed by the use of $34.2 million of cash on hand
and the issuance of two promissory notes totaling $31.5 million
supported by cash collateralized irrevocable standby letters of
credit. The promissory note in the principal amount of $26.5 million
requires a payment of approximately $1.8 million on April 1, 1997, and
an additional payment of $3.5 million on April 1, 1997, if the
contingent payment discussed above does not occur. The balance of this
note is payable upon the resolution of a former Cordant minority
shareholders' lawsuit. The $5 million promissory note for the balance
of the purchase price is subject to adjustments for indemnification
claims and is payable on March 26, 1998.
Cost Reductions. Historically, Tracor has identified substantial cost
savings following the integration of acquired businesses. Since the
acquisitions of Vitro, GDE and AEL, significant cost savings have been
realized resulting from the consolidation of facilities, staff
reductions, process improvements and elimination of other duplicative
costs. Although a substantial portion of these annualized cost
reductions are shared with customers in the form of reduced rates on
cost-reimbursement contracts, management believes the Company's cost
competitiveness has been enhanced. The Company has also identified
additional savings in connection with the Cordant Acquisition.
Core Businesses
The Company's core businesses are primarily in the U.S. and foreign
defense electronics, information technology and systems engineering and
integration markets and largely support high-priority DOD weapons,
platforms and systems. A major portion of Tracor's DOD business is
funded by the operations and maintenance segment of the defense budget
which supports the operational readiness, effectiveness and the
survivability, upgrading and long-term viability of DOD defense systems.
The many agencies of the U.S. Navy are Tracor's primary customers within
the operations and maintenance segment of the budget. The major
electronic products, systems and services comprising the Company's core
businesses are described below and the approximate pro forma revenue and
percentage of total pro forma revenue for 1996 and the approximate
historical revenue and percentage of total revenue for 1996, 1995, 1994
and 1993 represented by each are as follows:
<TABLE>
<CAPTION>
1996
Pro Forma(1) 1996 1995 1994 1993
------------- ---------------- --------------- ---------------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weapons and Combat Systems
Integration and Support $ 294,800 25% $ 294,800 27% $ 288,790 33% $ 313,665 45% $ 156,547(5) 38%
Electronic Warfare 205,999 17% 188,823(2) 18% 102,626 12% 98,981 14% 96,968 24%
Information Systems 195,796 16% 107,556(3) 10% 62,389 7% 54,358 8% 17,360(5) 4%
Weapons Testing Systems
and Support 152,363 13% 150,967 14% 126,572 14% 123,210 18% 68,803(5) 17%
Imagery and Information
Systems 97,564 8% 97,564 9% 66,210 7% 7,667(4) 1% - -
Communication Systems 89,771 8% 89,771 8% 81,934 9% 76,698 11% 67,817 17%
Mission Planning Systems 85,400 7% 85,400 8% 78,265 9% 12,241(4) 2% - -
Automatic Test Systems 67,624 6% 67,624 6% 80,134 9% 7,217(4) 1% - -
----------- ---- ---------- ---- --------- ---- --------- ---- --------- ----
Tracor Net Revenue $ 1,189,317 100% $1,082,505 100% $ 886,920 100% $ 694,037 100% $ 407,495 100%
=========== ==== ========== ==== ========= ==== ========= ==== ========= ====
</TABLE>
(1) Assumes acquisitions of AEL and Cordant as of January 1, 1996.
(2) Reflects approximately 10 months of AEL revenue in 1996.
(3) Reflects approximately 3 months of Cordant revenue in 1996.
(4) Reflects approximately 6 weeks of GDE revenue in 1994.
(5) Reflects approximately 4 months of Vitro revenue in 1993.
Weapons and Combat Systems Integration and Support. The Company provides
systems engineering and integration, software engineering and management
and technical capabilities for the operation, testing, maintenance,
upgrade, protection and extension of the lives of high-priority weapons
and combat systems including:
Submarine Ballistic Missile Weapon Systems. The Company has been the
systems integration contractor for submarine ballistic missile
programs since the mid-1950s. Tracor's role includes systems
engineering, testing, data analysis and logistics for the Polaris,
Poseidon and TRIDENT weapon systems. As the weapon systems integration
contractor for the United States and United Kingdom TRIDENT II system,
Tracor ensures the major subsystems, including missile, launcher,
navigation and fire control, are fully integrated and tested to
perform as specified.
U.S. Navy Surface Combatant and Ship Systems. Tracor is the systems
engineering and integration contractor for shipboard anti-air warfare
guided missile systems such as the Terrier New Threat Upgrade, Tartar,
AEGIS, NATO SeaSparrow and Tomahawk. The Company has performed systems
engineering for every guided missile system installed on U.S. Navy
ships since World War II. The Company develops software for track
control of the Tomahawk missile and performs combat systems
integration for the Tartar system. Tracor also operates a remotely
controlled quarter-scale submarine used to test and evaluate various
submarine component designs. In addition, the Company provides systems
engineering and integration services for ship systems on board AEGIS
destroyers such as propulsion power plants and electrical power
generation plants.
Anti-Submarine Warfare Systems. The Company has provided engineering,
software and testing capabilities for the U.S. Navy's anti-submarine
warfare ("ASW") systems since 1948. Complex systems engineering and
integration are provided for development, operation, quality control
and life cycle maintenance of the newest ASW systems. The Company
performs software engineering and systems integration for surface ship
sonars; tests ASW weapons and combat systems; develops acoustic signal
processing software and test instrumentation and conducts research and
development in ASW sonar systems and related oceanography. The Company
also provides project management, engineering and system assessment
and evaluation for both the U.S. Navy's lightweight and heavyweight
torpedo programs.
U.S. Navy Aircraft. Tracor's systems engineering expertise is being
applied to a program with a new U.S. Navy customer for support of the
U.S. Navy's fighter and attack aircraft, helicopters, maritime
patrol/reconnaissance planes and weapon avionics systems. In this
area, the Company is developing software to support the common
airborne instrumentation system, which is the DOD's standard test and
evaluation data collection system. Tracor won a new design engineering
and software contract in 1995, supporting the entire acquisition life
cycle of various U.S. Navy avionics and electronic systems.
Electronic Warfare. Tracor designed, and is currently the only
manufacturer of, the most advanced and widely used countermeasures
dispenser systems in the United States and is a major supplier of
expendables, which create false targets for hostile radar-guided and
heat-seeking missiles to protect aircraft, land vehicles, naval vessels
and personnel. The acquisition of AEL greatly expanded the Company's
electronic warfare capabilities. Tracor's primary products in this market
include:
Countermeasures Dispensers. The Company has a long history of
developing and producing aircraft countermeasures dispenser systems.
Tracor has developed and manufactured several generations of these
systems during the past 30 years, including the newest system, the
AN/ALE-47, which is an advanced, automatic and integrated dispenser
system for use aboard U.S. Air Force, Navy and Army tactical and
transport aircraft and helicopters, as well as aircraft of other
governments. To date, Tracor has been the sole producer of the
AN/ALE-47 system, and has submitted a bid to produce additional
systems. The winner of this award, which is being openly bid, will be
announced in April 1997. The Company's systems dispense chaff and
flares as decoys against hostile missiles. These systems are also
designed to dispense certain active radio-frequency decoys to counter
advanced anti-aircraft threats.
Countermeasures Expendables. Tracor develops and manufactures chaff
and flare decoys, which are ejected from countermeasures dispenser
systems and provide protection for aircraft, ships and personnel when
operating in a missile threat environment. In 1995, Tracor acquired
the chaff manufacturing business of its only U.S. chaff-producing
competitor, the Lundy Division of TransTechnology Corporation. The
Company is the leading developer of infrared flares in the U.S. and
won a program in 1995 to develop next-generation flare expendables
which decoy infrared-seeking missiles incorporating the latest
counter-countermeasures features.
Communications and Electronic Countermeasures. Through its recent
acquisition of AEL, the Company continues its long and extensive
experience in the development and fielding of electronic
countermeasures systems. The TACJAM-A system provides the DOD with a
common, modular, multiplatform communication electronic attack
capability into the 21st century. AEL's transmitters are key
components of the jamming capability on the U.S. Navy's EA-6B. Their
reliability and effectiveness have been dramatically demonstrated in
operational service. Recently, the Company won the competition to
provide a new low band communications jammer.
Radar Warning Systems. Tracor's systems seek and identify radar
systems across the spectrum of frequency and application. The
Company's integrated front-end technology provides expanded frequency
coverage, improved direction finding accuracy and dual polarization
detection for Radar Warning Receivers and Electronic Warfare Support
Measures systems, which detect, identify and locate hostile radar and
communication transmitters.
Mine Neutralization and Detection Systems. The Company is developing
an Explosive Standoff Minefield Breacher ("ESMB") system prototype for
the U.S. Army and Marine Corps. The prototype features a
Tracor-designed rocket-deployed net which expands to detonate and
neutralize a large area of surface or buried mines, clearing the way
for rapid, safe vehicle and personnel passage. To enhance the
Company's capabilities in this business area, the Company acquired the
shaped-charge munitions business unit of The Titan Corporation in
1995, which provides the explosive shaped-charges used in the ESMB
system and in smaller systems for deactivating mines. Tracor is also
under contract to develop hand-held and vehicular platform mounted
mine detection systems which illuminate the ground with
electromagnetic energy to measure field disturbances, determining mine
presence and location. In addition, Tracor personnel have created
products which work with standard ship navigation devices and use
sonar to identify the presence of mines at sea.
Head-up Displays. The ANVIS Head-up Display provides a
high-resolution, programmable display of critical flight data to the
pilot through night vision goggles, allowing the pilot to concentrate
on the outside environment while maintaining cognizance of the flight
instruments. The system is being installed in the U.S. Army UH-60A/L
Blackhawk and the CH-47D Chinook; the U.S. Marine Corps UH-1N Huey,
CH-46E Sea Knight, KC-130T Hercules and the CH-53E Sea King; and the
U.S. Navy HH-60H Seahawk. It is planned for installation in the
UH-1H/V Huey, OH-58A/C Kiowa Warrior and the AH-1F Cobra.
Information Systems. An increasingly important component of the Company's
focus is now on providing a wide range of information technology
products, systems and services to the DOD, nondefense government agencies
and the commercial market. This includes offering information systems
solutions to customers, such as those in intelligence agencies, the U.S.
Postal Service and the U.S. Department of Justice. The acquisition of
Cordant in September 1996 increased Tracor's number of Indefinite
Delivery, Indefinite Quantity ("IDIQ") information technology contracts.
In these contracts, Tracor provides commercial off-the-shelf ("COTS")
products, custom-tailored and designed to meet specific customer needs.
Tracor can serve a number of government customers under each IDIQ
contract for which it is providing services. Following the Cordant
acquisition, Tracor formed Tracor Information Systems Company by grouping
Cordant, Quality Systems, Inc. and the Software Center of Excellence.
Tracor Information Systems Company business includes:
Intelligence Information Systems. An important component of the
Company's acquisition strategy has been to build a strong
presence in the intelligence information systems market. The
acquisition of Vitro and its subsidiary Quality Systems, Inc.,
was a major penetration into the intelligence market, and the
acquisition of GDE substantially expanded the Company's presence
in a wide range of intelligence areas. Tracor now has a large
employee base with special high-level security clearances, which
are crucial for doing business in this sector. Since the early
1980s, Tracor has provided systems engineering, software
engineering, systems management and training under numerous
classified contracts with U.S. intelligence community customers.
The Company uses state-of-the-art software engineering methods
and has re-engineered specialized intelligence systems to provide
customers with the tools required for on-demand, dynamic and
highly reliable data access and analysis.
Systems Engineering and Design and Products. Cordant provides
systems engineering, design and information technology products
primarily to DOD and other government customers. The primary
focus is to provide integrated systems solutions utilizing COTS
products custom-tailored to a customer's needs.
Software Development. The Software Center of Excellence is a
corporate resource for software development,
engineering/re-engineering and production operations. The primary
goal is to ensure that best practices are developed and uniformly
applied. The Software Engineering Program ("SEP") provides
technology to continuously enhance software engineering standards
and practices, software development facilities, software tools
and reusable application software, software engineering training
and software metrics. The tools developed by SEP enable the
Company to assess diverse user requirements and varied hardware
platforms and customer software environments to provide modern
re-engineered software systems capable of handling large volumes
of dynamic data. Computer-Aided Software Engineering ("CASE")
tools, which are central to the Company's high-productivity
environment, are carefully integrated into this environment
through SEP. This organization is one of only 60 companies which
has achieved Software Engineering Institute's level 3 designation
for the advanced level of capability to design software systems.
Weapons Testing Systems and Support. The DOD is committed to
sustaining the readiness of weapons and adapting current weapons to
counter future threats. Tracor manufactures products for testing
and evaluating weapons systems and supports weapons testing
operations to achieve these objectives. The Company's work in this
area includes:
Drones. The Company has been a major producer of full scale
target drones for the DOD for more than 25 years and is the sole
provider of the current drone (the QF-4) for the U.S. Armed
Forces. The Company designs, manufactures and modifies retired
military aircraft into full scale drones for use as targets in
weapons system testing and evaluation and personnel training.
Tracor is also producing sub-scale target drones for the U.S.
Army and Navy with options for additional targets through the
year 2000. In late 1996, these Tracor-built targets were selected
in an international competition to replace Australia's currently
fielded aerial target. The Company also performs major upgrades
and modifications for military and commercial aircraft.
Range Operations and Instrumentation. For more than 21 years,
Tracor has been a worldwide supplier of precision tracking
radars, optical tracking systems, radar-threat simulators and
range instrumentation control systems. This diverse array of
capabilities for weapons systems test ranges includes logistics
support, on-site depot level maintenance, repair of components
and engineering design and fabrication. For more than 40 years,
the Company has performed operations and maintenance on
high-technology equipment and has supplied logistics and
engineering support for research and development programs for
more than 146 radar systems at 28 test ranges.
Flight Testing and Training. Tracor performs a variety of flight
testing using both military and civilian aircraft. The Company
uses its tactical aircraft, equipped to launch guided and
unguided weapons, to test and evaluate weapons systems and tows
targets for U.S. and foreign tactical air forces to support
air-to-air combat training. The Company's pilots also fly
aircraft for training naval aviation navigators.
Electronic Warfare Simulators. Tracor designs, develops and
certifies a variety of airborne radar threat emitters, simulators
and jammers, both pod and internally mounted. The Company also
develops advanced signal threat generators for laboratory testing
of the defensive avionics systems aboard a variety of U.S.
military aircraft.
Imagery and Information Systems. In another major part of the
Company's overall information technology business, the Company
develops and integrates systems which extract and analyze
information from various types of imagery. Tracor's expertise in
the automation of information extraction satisfies the
sophisticated image-processing requirements of both government and
commercial customers worldwide. Applications for the Company's
software, systems and products include digital mapping, charting
and geodesy ("MC&G"), image-processing ground stations,
interpretation and analysis centers, and other imagery information
systems in which digital image processing is an essential
technology. Currently, Tracor has an installed base of more than
760 MC&G workstations. In 1996, two Tracor subsidiaries became key
participants on the recently awarded U.S. Air Force Electronic
Systems Center Reconnaissance/Intelligence Ground Systems Products
and Services program. This dual-award contract will build imaging
ground stations to new common standards developed by the Defense
Airborne Reconnaissance Office. Other new business activities
include continued development of a front-end processing capability
to allow efficient use of data from a wide variety of imaging
sources; a new digital photo interpretation ground station system
for a foreign customer; and a multi-source intelligence analysis
software system for use by operational forces.
Communication Systems. Tracor provides radio communication
engineering and technical services to the DOD and other government
customers. The Company performs systems and design engineering,
subsystem procurement, systems integration, testing and
installation for these systems. It also provides logistics support,
maintenance and technology upgrades for these high-priority systems
to maintain their operational readiness throughout their service
life. The Company's key systems include:
AEGIS Communication Systems. Tracor is the primary contractor of
turnkey radio communication systems for the U.S. Navy's newest
class of destroyers and cruisers which are equipped with AEGIS
weapon systems. Tracor's cost-effective performance has
contributed to its winning every recompetition for its AEGIS work
over the past 22 years. The most recent award extends Tracor's
participation in this high-priority program through 2001.
Aircraft Carrier Communication Systems. In 1996, Tracor's
shipboard radio communications business was expanded by winning
the first competitive contract to provide these systems for the
Nimitz class aircraft carriers.
Special Forces Communication Systems. The Company has designed,
produced, installed and maintained, for more than 14 years,
communication systems used by U.S. Navy Special Warfare and Joint
Special Operations Forces and various national agencies. Systems
range in size from hand-held communication devices to full-scale
communication suites for special-purpose boats, planes and vans.
Command and Control Systems. For more than 20 years, the Company
has provided systems engineering and test and evaluation systems
in connection with the modernization and upgrading of the U.S.
Navy's command and control systems communication equipment and
for the U.S. Navy's worldwide center for airborne ASW flight
planning and post-mission analysis. In addition, Tracor provides
software and systems engineering, signals intelligence and
electronic warfare engineering, and technical communication
support services for U.S. Army military command and control
systems. In addition, Tracor is providing engineering development
and technical support services to the U.S. Army Communications
- Electronics Command Space and Terrestrial Communications
Directorate.
U.S. Navy Air Traffic Control and Landing Systems. The Company
has provided management, engineering and research and development
for the U.S. Navy's automatic carrier landing systems and U.S.
Marine air traffic control and landing systems for 24 years.
These systems assist naval and marine aviators in achieving safe
landings aboard carriers, shore stations and expeditionary
fields. Tracor expanded its work in this area with the
acquisition of Codar Technology's shelter integration business.
Under contract with the U.S. Air Force, the Company is producing
vehicle-mounted air traffic control towers, which provide a
mobile, deployable, quick-response capability to areas that have
little or no base airport facilities.
Identification Systems. For more than 23 years, the Company has
provided hardware and software design engineering and technical
support for shipboard and shore-based identification systems used
by the U.S. Navy, Marines and Coast Guard.
Mission Planning Systems. The Company provides mission planning
systems for the U.S. Navy, Air Force and Strategic Command as part
of Tracor's broad range of information technology products and
services. Products include specialized software used to plan and
coordinate military aircraft and weapons, imagery systems in
support of targeting, planning and rehearsing military operations,
and government information systems. The Company provides
imagery-based mission planning systems for stealth aircraft and
cruise missiles, which are expected to continue to represent the
U.S. Armed Forces' primary strike capability for the foreseeable
future. Management believes these products and services will
benefit from the DOD's increasing need for precision weapons and
tactical intelligence in diverse areas of the world in order to
efficiently utilize and coordinate its increasingly sophisticated
and costly weapons systems. Tracor's Digital Imagery Workstation
Suite ("DIWS"), is a critical part of the U.S. Navy's Tomahawk
cruise missile planning program. In 1996, Tracor won a program for
the continued development of the DIWS. This Consolidated
Configuration program increases the COTS hardware and software
content of the suite, which reduces the size of the hardware while
improving the suite's performance. Further, in 1996, the Company
continued to deploy these precision targeting systems with two
additional suites going aboard U.S. Navy carriers and two suites
delivered to support rapid deployment forces. These systems are
expected to be installed on all Navy aircraft carriers and
amphibious assault ships by the year 2000. The Company has also
gained prominence in the emerging field of information warfare by
developing the mission planning systems for the Global Hawk and
DarkStar high altitude endurance unmanned aerial vehicles. Under
development for the Defense Advanced Research Projects Agency and
the Defense Airborne Reconnaissance Office, the Global Hawk will
provide a high capacity reconnaissance and surveillance platform
with an endurance of 42 hours and a total range of 14,000 miles.
Automatic Test Systems. The Company has designed and built
automatic test systems ("ATS") for more than 30 years and is a
major supplier of ATS to the U.S. Air Force. Principal ATS products
include avionics test equipment for the U.S. and other air forces
for the F-16 fighter, the C-17 and C-5B transports and the B-1B and
B-2 bombers. The Company produces a new generation of downsized,
mobile testers, supporting the F-16 program as well as munitions
programs. The Company also provides diagnostic systems, test
program sets and operations and logistics for ATS products.
Deliveries of the Company's core F-16 test systems have recently
declined due to reduced production of F-16 aircraft. However, the
F-16 remains the primary U.S. Air Force tactical fighter, and the
Company expects to continue to receive significant orders for
program maintenance and upgrades as well as testers for F-16
international sales and established Air National Guard
requirements. Expanding this product line and the Company's
international presence, Tracor won two contracts in 1995 to supply
avionics test equipment for the new Japanese F-2 fighter. Tracor's
success in the development phase of the F-2 program led to
additional contract awards in 1996 for technical assistance and
software co-development with the Japanese. Tracor also produces
avionics subsystems for the Atlas and Titan launch vehicles. In
1996, Lockheed Martin Astronautics authorized Tracor to proceed
with the development and production of avionics for the
next-generation Atlas launch vehicle with an award of more than $26
million. This long-term contract provides a continuing production
base for work to be performed to the year 2003.
Expansion and Diversification
Tracor has increased its sales to both established and new customers. The
Company has been successful in translating its technologies and products
to other military customers, other governmental agencies, the foreign
marketplace and select commercial customers. See "Core Businesses" and
"Company Strategy." Tracor's other expansion and diversification
initiatives are described below.
U.S. Army Programs. Over the past eight years, Tracor has expanded
its systems, software and technical capabilities to various U.S.
Army areas including the Global Command and Control System, signals
intelligence/electronic warfare, Communications-Electronics Command
and C4I support.
Camouflage, Concealment and Deception. In an extension of its
countermeasures technology, Tracor has developed coatings and
camouflage materials to conceal aircraft, vehicles, ground-based
installations and ships from detection by radar, infrared scanners
and other sensing systems.
Air Transportation Systems. The Company won a $66 million contract
with the FAA in 1993 to provide systems, hardware and software
engineering for the development, testing and operation of new air
traffic control and surveillance systems across the U.S. This
seven-year contract emphasizes Tracor's ability to transfer its
radar engineering expertise to non-DOD governmental agencies. In
1995, Tracor won another FAA contract to provide test and
evaluation engineering services for surveillance and weather radar
systems.
NASA Programs. Since 1988 the Company has provided engineering for
safety, reliability, maintainability and quality assurance for
NASA's manned and unmanned space flights.
Public Information Systems. The Company has successfully translated
certain of its defense related capabilities into business
opportunities with new government and commercial customers. For
example, signal processing expertise developed under U.S. Navy
sonar programs and advanced database systems are the foundation for
a statewide regulatory and compliance system, client/server based
order fulfillment system for Hewlett-Packard, as well as for
aircraft noise monitoring systems sold to 18 major U.S. airports.
Commercial. The Company has successfully applied its technologies
to a number of commercial products and services and continues to
seek new opportunities. Current commercial diversifications
include:
Aircraft Structures. The Company performs major upgrades and
modifications and manufactures structures for commercial
aircraft, including electronics installation and systems
integration. Under two new programs awarded in 1996 by McDonnell
Douglas, Tracor will join the wing halves and manufacture the
y-barrel assembly for the new-generation MD-95 commercial jet.
Photogrammetry. Through its subsidiary, Helava, the Company
provides integrated digital stereo software which operates on
commercial computer hardware, principally in the commercial
photogrammetry market. Helava provides photogrammetric
workstations and high-quality scanners for map compilation,
engineering regional planning, orthophoto production, digital
terrain collection and environmental management. Through a
distributorship agreement with Leica, Inc., a world leader in
surveying and photogrammetric systems, Tracor's systems are now
operational in 48 countries. In addition, in 1996 the Company
acquired Aerial Data Reduction Associates ("ADR"). ADR has a
26-year history of using photogrammetric technology to produce
mapping and geographic information systems database services
primarily for federal, county and municipal governments
throughout the United States. Management believes the acquisition
provides the Company with the nation's largest photogrammetric
map production capacity in private industry.
Remote Sensing. Tracor has entered the growing new market of
commercial remote sensing systems by joining with Boeing,
Farmland Industries and Agrium, Ltd., to develop and operate the
Resource21(TM) imaging satellite system which is planned to
become operational at the turn of the century. This multispectral
satellite system is designed to facilitate agriculture, forestry
and environmental management on a worldwide scale. Employing
technologies developed for military applications, Tracor is
responsible for the ground data processing, image assessment,
archiving and production generation for this commercial system.
With the Company's proprietary technologies in image processing
and manipulation, coupled with the leading edge satellite
technologies provided by its teammates, Tracor management
believes it is well positioned in this emerging market.
Chaff. Tracor is working with the leading manufacturer of direct
broadcast satellite antennae to design a new generation antennae
which uses Tracor's aluminum-coated glass fibers (chaff) in that
firm's molded antennae. The proprietary nature of Tracor's
manufacturing process of chaff, typically used in military
applications, positions the Company to benefit from the
increasing popularity of direct broadcast television.
Telecommunications. The Company is providing automatic test
systems to support the commercial telecommunications and
satellite market, including custom systems to test Motorola's
Iridium R(R) global communications system.
Major Customers
The net sales of Tracor are predominantly derived from contracts with
agencies of, and prime contractors to, the U.S. government. The various
U.S. government customers exercise independent purchasing decisions, and
sales to the U.S. government are generally not regarded as constituting
sales to one customer, but instead, each contracting entity is considered
to be a separate customer. As of December 31, 1996, Tracor was performing
under more than 700 contracts with approximately 100 customers within
various U.S. government agencies. Sales to all such agencies are subject
to conditions unique to sales to the U.S. government.
Research and Development
Tracor employs scientific, engineering and other personnel to improve
existing product lines and to develop new products in the same or related
fields under programs funded by the respective companies or, in the case
of Tracor, under customer contracts through which Tracor is reimbursed
directly for its efforts. Customer-sponsored programs sometimes lead to the
development of products which Tracor has the opportunity to produce for
others.
During the past three fiscal years, Tracor has expended the following
amounts on Company-sponsored and customer-sponsored research and
development activities:
1996 1995 1994
---- ---- ----
(in millions)
Customer-sponsored $ 157.5 $ 132.3 $ 104.9
Company-sponsored 11.1 5.4 4.7
A significant portion of the increase in Tracor's customer-sponsored
research and development costs in 1995 and 1996 is attributable to the
inclusion of GDE and AEL expenditures following their acquisition by the
Company in November 1994 and February 1996, respectively, the award of
several new contracts, and increased research and development efforts under
several existing contracts.
Competition
The Company experiences vigorous competition from industrial firms and U.S.
government agencies, some of which have substantially greater resources.
A majority of the sales of the Company is derived from contracts with the
U.S. government and its prime contractors, and such contracts are awarded
on the basis of negotiations or competitive bids. Management does not
believe any one competitor or a small number of competitors is dominant in
any of the business areas of the Company. Management believes the Company
will continue to be able to compete successfully based upon the quality and
cost competitiveness of its products and services.
Government Contracts
Approximately 86% of the Company's revenues result from contracts with the
U.S. government and its prime contractors. System engineering and
integration, software engineering and other engineering and management
support contracts are generally cost-reimbursement fixed-fee type
contracts. Product engineering and development contracts are either
cost-reimbursement fixed-fee type or fixed-price type contracts. Contracts
for the manufacture of products are usually fixed-price type contracts.
Cost-reimbursement type contracts provide for the payment of actual
allowable costs, plus a fee. Under fixed-price type contracts, the
contractor benefits from or shares in cost savings but generally bears or
shares the risk of cost overruns. Cost-reimbursement type contracts are
normally priced to realize lower margins than fixed-price type contracts.
For the year ended December 31, 1996, approximately 55% of the Company's
revenues were derived from cost-reimbursement type contracts, and
approximately 45% of the Company's revenues were derived from fixed-price
contracts.
Contracts with the U.S. government and its prime contractors contain
standard provisions for termination at the convenience of the U.S.
government or such prime contractor, pursuant to which the Company is
generally entitled to recover costs incurred, settlement expenses and
profit on work completed prior to termination. Contracts with the U.S.
government do not provide for renegotiation of profits.
Companies supplying products and services directly or indirectly to the
U.S. government are subject to other risks such as contract suspensions,
changes in policies or regulations and availability of funds. Any of these
factors could adversely affect the Company's business with the U.S.
government in the future.
Sales to Foreign Customers
For 1996, 1995 and 1994, approximately $104.8 million, $87.0 million and
$63.6 million (representing 10%, 10% and 9%, respectively) of the net sales
of the Company were attributable to sales and services provided to foreign
customers. The principal customers are governments of those countries in
Western Europe, the Middle East and the Pacific Rim region which are
generally deemed to be friendly to the government of the United States and
to have relatively stable governments. Each of the contracts with these
customers is subject to the risks inherent in dealing with foreign
governments (e.g., changes of administration or governmental form, economic
problems). Although the loss of all of the Company's foreign business could
have a materially adverse impact on the Company's results of operations and
financial condition, it is management's opinion that this risk is remote
and that the loss of any single contract with a foreign government would
not be material.
Employees
As of December 31, 1996, the Company had approximately 10,450 employees.
Of this number, approximately 3,950 employees held advanced or bachelor's
degrees in a number of scientific disciplines. Approximately 100 of the
Company's employees are located outside of the United States. Less than
three percent of the Company's U.S. employees are covered by collective
bargaining agreements with labor unions. The Company considers relations
with its employees to be excellent.
Backlog
In each of its major lines of business, the Company has significant firm
backlog and unexercised contract options which may be exercised by the
customer. Firm backlog represents the amount of revenue expected to be
recognized for contractually authorized performance of awarded firm
contractual commitments. Firm backlog may include amounts yet to be fully
funded by the customer or amounts for performance yet to be fully
definitized. Unexercised contract options represent the amount of revenue
which would be recognized from the performance of contract options that may
be exercised by customers under existing contracts and from task orders to
be issued under indefinite quantity contracts or basic ordering agreements.
Amounts included in both firm backlog and unexercised contract options are
based on the contract's total awarded value and the Company's estimates
regarding the amount of the award that will ultimately result in the
recognition of revenue. These estimates are based on the Company's
experience with similar awards and similar customers. Estimates are
reviewed periodically and appropriate adjustments are made to the amounts
included in firm backlog and unexercised contract options. Historically,
these adjustments have not been significant.
The Company's firm backlog at December 31, 1996, was $1.0 billion, compared
with $924 million as of December 31, 1995. The Company's unexercised
contract options as of December 31, 1996, were $1.6 billion, compared with
$949 million at December 31, 1995. This total backlog of $2.6 billion at
December 31, 1996 is the highest in the Company's history and represents
a 40% increase over the total backlog at December 31, 1995. Management does
not believe that the Company's firm backlog is seasonal in any material
respect. Approximately 80% of firm backlog as of December 31, 1996, is
expected to be realized as sales within one year. Approximately 76% of firm
backlog as of December 31, 1996, was comprised of contracts with agencies
of the U.S. government or its prime contractors. See "Major Customers" and
"Government Contracts."
Sources and Availability of Raw Materials
The Company's manufacturing operations require a wide variety of electronic
and mechanical components for which the Company has multiple commercial
sources. The Company's manufacturing operations also require raw materials
which are purchased in the open market and are normally available from a
number of suppliers. The Company has not experienced any significant delays
in obtaining timely deliveries of essential materials.
Compliance with Environmental Controls
There have not been, and the Company does not anticipate, any materially
adverse effects upon the capital expenditures, earnings or competitive
position of the Company resulting from compliance with federal, state and
local provisions regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment.
Patents
There are a total of 110 Company owned patents with 33 patent applications
pending. The Company does not believe that existing patents and licenses
are material in the conduct of its business as a whole and believes that
research, development and engineering skills are more significant. The U.S.
government typically receives royalty-free licenses on inventions arising
from government contracts, with each company retaining all commercial
rights with respect to such inventions. While patents are not material to
the operation of the business, proprietary information of the Company is
adequately protected through the requirement that employees execute
confidentiality agreements as a condition of employment.
Item 2. Properties.
The Company's facilities are located primarily in the United States. The
Company's corporate offices and certain administrative, manufacturing and
engineering facilities are located in Austin, Texas on a 140 acre campus
owned by the Company and contain approximately 612,000 square feet of
offices and engineering and manufacturing facilities. The Company occupies
approximately 1,132,000 square feet of administrative and engineering
facilities in the Washington, D.C. area consisting of multiple facilities
owned and leased by the Company under leases with differing expiration
dates, the latest of which expires in 2004. The Company also owns and
leases approximately 278,000 square feet of administrative and engineering
facilities located in the California, Maryland area. The Company leases
approximately 73,000 square feet of administrative and engineering
facilities in the Poulsbo and Silverdale, Washington area.
The Company owns and leases approximately 142,000 square feet of
administrative, manufacturing and engineering facilities located in Fort
Walton Beach, Florida. The Company leases (under a lease expiring in 1998)
or owns engineering facilities in Groton, Connecticut, containing
approximately 34,000 square feet of space. The Company leases 48,000 square
feet of administrative and engineering facilities in Bloomington, Indiana.
The Company owns approximately 10,000 square feet of administrative and
manufacturing facilities in Butler, Georgia.
The Company occupies approximately 308,000 square feet of administrative,
manufacturing, engineering and aircraft hangar facilities in Mojave,
California, some of which is owned and some of which is leased under a
lease expiring in 2036. This site also includes ramp space associated with
the aircraft hangars. The Company owns approximately 134,000 square feet
of administrative, manufacturing, engineering and aircraft hangar
facilities in East Alton, Illinois which is currently vacant and for sale.
The Company occupies approximately 123,000 square feet of leased space
located in East Camden, Arkansas utilized for administrative and
manufacturing purposes under a lease expiring in 1999 and approximately
117,000 square feet of owned space located in San Ramon, California and
utilized for administrative, manufacturing and engineering. The Company
also utilizes leased space for administrative, engineering and
manufacturing in Lillington, North Carolina (75,000 square feet) and
Jerusalem, Israel (23,000 square feet), under leases expiring in 2000 and
2003, respectively.
The Company leases approximately 450,000 square feet of administrative,
manufacturing and engineering facilities in various locations in San Diego,
California. The Company owns approximately 92,000 square feet of
administrative and engineering space located in Oxnard, California. The
Company owns approximately 370,000 square feet of administrative,
manufacturing and engineering facilities located in Montgomery Township,
Pennsylvania.
The Company's facilities also include certain other leased and owned
facilities at miscellaneous locations, having no more than 20,000 square
feet at any locations and aggregating approximately 180,000 square feet.
Item 3. Legal Proceedings.
Tracor is involved in various lawsuits and is subject to certain
contingencies incidental to its business. While the ultimate results of
these matters cannot be predicted with certainty, management does not
expect them to have a material adverse effect on the consolidated financial
position or results of operations of Tracor.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Trading Market for Tracor Common Stock and Series A Warrants
The Common Stock and Series A Warrants of the Company are listed on the
Nasdaq National Market where they have traded since late 1992 under the
symbols "TTRR" and "TTRRW," respectively. Prior thereto, the Common Stock
and Series A Warrants had a limited trading market and were not listed on
a national securities exchange. The following table sets forth the
reported high and low sales prices of the Common Stock and Series A
Warrants on Nasdaq for the applicable periods:
Common Stock Series A Warrants
1996
-----------------------------------------
High Low High Low
------- ------ ------ ------
Fourth Quarter $24 3/8 $19 3/4 $21 3/4 $17 3/8
Third Quarter 20 5/8 16 5/8 18 1/2 14 7/8
Second Quarter 21 1/8 17 1/8 18 1/2 14 5/8
First Quarter 17 7/16 14 15 11 1/2
1995
-----------------------------------------
High Low High Low
------- ------ ------ ------
Fourth Quarter $16 7/8 $14 1/2 $14 5/8 $11 7/8
Third Quarter 18 1/8 13 5/8 15 5/8 11 1/8
Second Quarter 14 1/4 11 3/8 11 3/4 8 7/8
First Quarter 14 10 11 3/8 7 1/2
1994
-----------------------------------------
High Low High Low
------- ------ ------ ------
Fourth Quarter $12 5/8 $7 1/2 $10 $5 1/2
Third Quarter 8 3/4 7 1/8 7 1/8 5 1/4
Second Quarter 8 1/2 6 15/16 6 1/8 5
First Quarter 10 1/8 7 7/8 7 1/2 5 5/8
As of February 17, 1997, the Company had approximately 7,000 holders of
the Common Stock, of which 292 were stockholders of record. The
approximate number of holders, not of record, was determined by a request
of registered clearing agencies.
Dividend and Dividend Policy
The Company has never paid a cash dividend on its Common Stock, although
the Company's predecessor paid dividends in certain years prior to 1989.
The Company currently intends to retain its earnings to provide funds for
the expansion of its business. The payment of dividends in the future will
be at the sole discretion of the Board of Directors and will depend upon
the Company's profitability, financial condition, capital needs, future
prospects, contractual restrictions and other factors deemed relevant by
the Board of Directors. The Company's current credit facilities impose
certain limitations on the payment of dividends. See Note N to the
Consolidated Financial Statements of Tracor, Inc.
Item 6. Selected Financial Data.
Years Ended December 31
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996(1) 1995 1994(1) 1993(1) 1992
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $1,082,505 $886,920 $694,037 $407,495 $261,835
Cost of sales 866,234 713,802 568,020 333,852 214,070
Selling, administrative, and
general expenses 123,681 104,928 78,201 49,889 36,639
---------- -------- -------- -------- --------
Earnings before interest and
income taxes 92,590 68,190 47,816 23,754 11,126
Interest expense, net 26,470 19,496 16,771 8,277 3,746
---------- -------- -------- -------- --------
Income before income taxes 66,120 48,694 31,045 15,477 7,380
Income taxes 29,506 20,831 12,498 6,200 2,850
---------- -------- -------- -------- --------
Net income $ 36,614 $ 27,863 $ 18,547 $ 9,277 $ 4,530
========== ======== ======== ======== ========
Share Data:
Net income per share:
Primary $1.46 $1.23 $.96 $.56 $.32
Fully diluted $1.46 $1.23 $.93 $.54 $.32
Weighted average common and
common equivalent shares 25,353 24,168 22,113 22,069 21,953
Operating and Other Data:
Capital expenditures $ 19,623 $ 13,676 $ 11,007 $ 8,435 $ 7,360
Depreciation and amortization 30,361 22,854 14,746 9,614 6,814
Firm backlog 1,030,472 923,978 806,228 590,366 301,502
Balance Sheet Data
(at end of period):
Working capital $140,430 $129,129 $ 95,392 $ 87,140 $ 45,977
Total assets 744,954 467,456 444,086 305,733 139,771
Long-term debt 316,884(2)191,175 205,738 144,302 50,194
Shareholders' equity 222,917 136,965 90,592 63,167 52,345
(1) Reflects the acquisitions of Cordant Holdings, Inc. and its
subsidiaries on September 26, 1996, AEL Industries, Inc. and its
subsidiaries on February 22, 1996, GDE Holdings, Inc. and its
subsidiaries on November 17, 1994, and Vitro Corporation and its
subsidiaries on August 25, 1993.
(2) Includes $31.5 million of fully cash collateralized promissory notes
payable issued in conjunction with the acquisition of Cordant.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Business Environment
Approximately 86% of the products, systems, and services of Tracor, Inc.
and its subsidiaries (Tracor or the Company) are sold to the U.S.
government through direct contracts, primarily with agencies of the U.S.
Department of Defense (DOD), or through subcontracts with other U.S.
government contractors. Beginning in the mid-1980s, the defense industry
in general was negatively impacted by the perceived reduction of threats
from the former Soviet Union and eastern European countries and, more
recently, by competing demands upon the federal budget. While this has
resulted in a U.S. defense budget that has decreased in real dollars,
adjusted for inflation, over the last decade, it has recently begun to
stabilize. A major portion of the Company's DOD sales are funded by the
operations and maintenance segment of the defense budget in areas which
are among today's top priorities. This segment has declined less than
other segments of the budget as readiness priorities have emerged. It is
now the largest segment of the defense budget and is projected to comprise
more than one-third of the defense budget over the next decade. The
electronic content of the operations and maintenance segment, as well as
the procurement portion of the budget, is expected to experience a modest
increase over this same time frame. Tracor's ability to benefit from this
upturn is enhanced by its substantial position in the electronic warfare,
mission planning, and imagery markets.
Budget reductions have also driven the DOD and other U.S. government
agencies to pursue products and services which rapidly improve their
operating efficiency. This, in turn, has triggered a substantial increase
in the demand for state-of-the-art computer equipment and software systems
and a major change in the government's method for acquiring information
technology, moving to large government-wide acquisition contract vehicles.
Following the acquisition of Cordant Holdings, Inc. (Cordant), the Company
formed Tracor Information Systems Company, by uniting Cordant, Quality
Systems, Inc., and the Software Center of Excellence. This consolidation
strengthens Tracor's ability to effectively address the rapidly growing
information technology market for both DOD and nondefense customers.
Information systems has been the fastest growing business area within
Tracor.
The contraction of the defense budget in recent years and the resulting
excess capacity and increase in competition for contracts among defense
companies have resulted in a significant consolidation in the industry.
Through internal growth and several acquisitions, the Company has
substantially increased its revenue base. It has also reduced combined
overhead costs through staff reductions, facilities consolidations,
process improvements, and the elimination of certain other duplicative
costs. These efficiencies and increased revenue base have enhanced
Tracor's cost competitiveness in bidding on new contracts and recompetes
of existing contracts. While acquisition price expectations have
increased, management believes the ongoing consolidation within the
defense industry will continue to present opportunities for additional
selected acquisitions at prices which meet the Company's objectives.
While the long-term impact of changes in the defense budget and the
industry consolidation cannot be predicted with certainty, management
believes the Company is well positioned to continue to leverage its
strengths and successes in electronic and information technology products,
systems, and services for the U.S. defense and intelligence marketplaces
and increase its ongoing diversification efforts into foreign defense
markets, nondefense U.S. government markets, and selected commercial
markets.
Results of Operations
The Company's results of operations were affected by major acquisitions
during 1996 and 1994. Each acquired company's results of operations are
included only from its respective date of acquisition. (See Note A to the
Consolidated Financial Statements.)
Year Ended December 31, 1996, Versus Year Ended December 31, 1995
On February 22, 1996, Tracor purchased all of the outstanding common stock
of AEL Industries, Inc. (AEL). AEL designs and manufactures sophisticated
countermeasures, simulation, and radar warning receiver systems; installs
and integrates electronic avionics equipment in military and commercial
aircraft; and provides state-of-the-art antenna, microwave, and integrated
circuit components. The acquisition was accounted for using the purchase
method, and, accordingly, the purchase price ($103.1 million) and the
liabilities assumed ($64 million) were allocated to the assets acquired
($98.1 million) based on their respective fair values on the date of
acquisition. The resulting excess of the purchase price over the fair
value of the net assets acquired ($69 million) is being amortized over 30
years.
On September 26, 1996, Tracor purchased all of the outstanding shares of
Cordant, an employee-owned information systems company. Cordant focuses
on the design, development, and integration of information systems for a
variety of applications, including mail processing, records management,
and CAD/GIS (computer-aided design/geographic information systems). The
purchase price of $65.7 million is subject to a contingent payment of up
to an additional $10 million based upon the potential award of a large
contract. The acquisition was financed by the use of $34.2 million cash
on hand and the issuance of two promissory notes totaling $31.5 million.
The promissory notes are supported by irrevocable standby letters of
credit, which are fully collateralized by cash escrow deposits. The
acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price, including transaction expenses ($66
million), and the liabilities assumed ($39 million) have been allocated
to the assets acquired ($44.9 million) based on a preliminary estimate of
their respective fair values as of the date of acquisition. This
preliminary estimate is subject to change based on finalization of certain
fair value determinations which are not expected to have a material effect
on the consolidated financial position or results of operations of Tracor.
The resulting excess of the purchase price over the preliminary estimate
of the fair value of the net assets acquired ($60.1 million) is being
amortized over 25 years.
Tracor experienced a 22% growth in sales compared to the prior year. AEL
and Cordant contributed 14%, while Tracor companies excluding AEL and
Cordant contributed 8%. The sales increases occurred throughout the
Company in the following business areas and product lines: intelligence
information systems, imagery and mapping products, automatic test
equipment, QF-4 drones, engineering services, mine detection and
neutralization systems, digital imagery workstations, and chaff and flare
expendables.
Selling, general, and administrative (SG&A) expenses decreased as a
percentage of sales from 11.8% in 1995 to 11.4% in 1996. Amortization
expense, included in SG&A expenses, remained constant at approximately 1%
of sales. However, operating expenses, the major component of SG&A
expenses, decreased from 10.8% of sales in 1995 to 10.3% of sales in 1996
due to the increased revenue base and reduced combined overhead costs.
An increase of 36% in earnings before interest and income taxes was
realized in 1996 over 1995. AEL and Cordant contributed 17% with
approximately 5% of the increase resulting from a negotiated increase of
$3.6 million in the price of a U.S. government contract for work performed
prior to 1996. The remaining 19% increase is attributable to the internal
sales growth noted above and improved profits on those sales.
Specifically, intelligence information systems, imagery and mapping
products, and mine detection and neutralization systems realized higher
profits during the year.
Fully diluted earnings per share were $1.46 in 1996, up from $1.23 in
1995. A portion of the increase, $.08, is attributable to a $2.1 million
gain, resulting from a negotiated increase of $3.6 million in the price
of a U.S. government contract for work performed prior to 1996. The
increase in weighted average common and common equivalent shares from 24.2
million in 1995 to 25.4 million in 1996 resulted from the issuance of
shares in a public offering completed in July 1996.
Interest expense increased $7.7 million due primarily to an additional
$108 million of senior term debt borrowed in conjunction with the AEL
acquisition and increased amortization expense of related loan costs. The
increase in investment interest income of $700,000 occurred due to higher
cash balances during 1996 compared to the prior year.
Income taxes were incurred at statutory federal, state, and foreign rates.
The effective tax rate increased to 44.6% in 1996 compared to 42.7% in
1995, due to additional nondeductible amortization expense of goodwill.
The net deferred income tax asset at December 31, 1996, is $17.5 million,
due primarily to acquisitions. Based on the Company's taxable income in
prior carryback years and its forecast of future income, management
believes, it is more likely than not, all net deferred income tax assets
will be realized. The realization of deferred tax assets will be evaluated
periodically.
Year Ended December 31, 1995, Versus Year Ended December 31, 1994
On November 17, 1994, Tracor purchased all of the outstanding common stock
of GDE Holdings, Inc., including its wholly owned subsidiaries
(individually and collectively referred to as GDE). GDE designs,
develops, manufactures, and supports automatic test systems, imagery and
information systems, and mission planning systems. The acquisition was
accounted for using the purchase method, and, accordingly, the purchase
price ($102 million) and the liabilities assumed ($76 million) were
allocated to the assets acquired ($104 million) based on their respective
fair values at the date of the acquisition. The resulting excess of the
purchase price over the fair value of the net assets acquired ($74
million) is being amortized over 30 years.
Sales increased 28% in 1995 due to the acquisition of GDE, while sales
excluding GDE remained relatively constant. Increased revenues from a new
contract for the production of sub-scale drones and the production of
drones under the QF-4 contract were offset by reductions in existing and
newly awarded engineering contracts.
SG&A expenses were 11.8% of sales in 1995, up from 11.3% of sales in 1994.
While total operating expenses included in SG&A expenses remained constant
at 10.8% of sales in 1995 and 1994, operating expenses, excluding the
effect of acquisitions, decreased as a percent of sales from 10.7% in 1994
to 10.0% in 1995. Amortization expense, also included in SG&A expenses,
increased from less than .5% of sales in 1994 to 1% of sales in 1995 due
to additional intangible assets arising from the acquisition of GDE. The
Company's operating profits increased 43% due primarily to the acquisition
of GDE. Excluding GDE's results, earnings increased 2% due to higher
profit margins on engineering contracts and electronic countermeasures
systems.
Fully diluted earnings per share increased from $.93 in 1994 to $1.23 in
1995. A $1.2 million pretax gain on the sale of real estate contributed
$.03 to earnings per share in the third quarter of 1995. Weighted average
common and common equivalent shares used in the computations increased
from 22.1 million in 1994 to 24.2 million in 1995 due primarily to a
public offering of common stock completed in May 1995.
Interest expense increased $4.4 million as a result of the issuance of
$10.9 million of 10 7/8% Senior Subordinated Series A Notes and $55
million additional senior term debt borrowed in conjunction with the GDE
acquisition. This increase was offset by a slight reduction in interest
rates on the senior term debt and by increased investment interest income
of $1.7 million.
Income taxes were incurred at statutory federal, state, and foreign rates,
with an increase in the effective tax rate of 40% in 1994 to 42.7% in
1995. Such increase is primarily the result of increased nondeductible
amortization expense of goodwill. At December 31, 1995, Tracor had a net
deferred income tax asset of $8.6 million, primarily arising from
acquisitions. Based on the Company's taxable income in prior carryback
years and its forecast of future income, management believes, it is more
likely than not, all net deferred income tax assets will be realized. The
realization of deferred tax assets will be evaluated periodically.
Financial Condition and Liquidity
Working capital was $140.4 million at December 31, 1996, up from $129.1
million at December 31, 1995, and the ratio of current assets to current
liabilities was 1.8 at December 31, 1996, compared to 2.3 at December 31,
1995. The decrease in the current ratio is attributable to the decrease
in the cash balance primarily due to the Cordant acquisition and the
increase in the current portion of long-term debt resulting from the
financing of the AEL acquisition. Cash provided by operating activities,
compared to the prior year, was reduced by costs associated with
consolidating AEL facilities and exiting non-strategic activities and
product lines, including the disposal of excess properties, and relocation
of certain operations to other Tracor facilities. Cash provided by
operating activities in 1995 also included a tax refund of $1.5 million
related to the preacquisition period of an acquired company. Normal
capital expenditures of $19.6 million and scheduled long-term debt
payments of $19 million were incurred during the year. Proceeds of
approximately $14.4 million were received from the sale of two properties
and two product lines obtained in the acquisition of AEL. Long-term debt
of $4 million associated with one of the properties was retired with those
proceeds. Proceeds from the amended credit agreement and cash on hand were
used to finance the acquisition of AEL, to retire approximately $10
million of debt assumed in the acquisition, and to pay approximately $5
million of financing costs. Net proceeds of $48 million from the sale of
Tracor common stock were used to complete the acquisition of Cordant.
Three other business acquisitions with a total purchase price of $15.9
million were also completed during 1996 from cash on hand.
At December 31, 1996, Tracor had firm backlog of $1.0 billion, which
includes funded and unfunded contractual commitments. Approximately 76%
of firm backlog represents contracts with agencies of the U.S. government
or its prime contractors, and about 80% is expected to be realized as
sales within one year. In addition, the Company's backlog of unexercised
contract options on U.S. government contracts was $1.6 billion at year
end.
The Company's operations typically do not require large capital
expenditures, and there were no significant capital commitments at
December 31, 1996.
No borrowings were made from Tracor's $60 million revolving loans facility
during the year. At December 31, 1996, the Company had outstanding letters
of credit totaling approximately $32.1 million, leaving $17.9 million
available under its $50 million letters of credit facility. If the letters
of credit facility should become fully utilized, $30 million of the
revolving loans facility, to the extent then available, can be used for
issuance of additional letters of credit. Existing letters of credit
secure performance commitments on certain foreign contracts and serve as
collateral on certain insurance policies.
On February 14, 1997, Tracor commenced a tender offer to purchase for cash
up to the entire outstanding principal amount of its 10 7/8% Senior
Subordinated Notes due 2001 (Old Notes) and a related solicitation of
consent to modify certain other terms of the indentures under which the
Old Notes were issued. On February 17, 1997, the Company also commenced
a private placement offering (Offering) of $250 million aggregate
principal amount of 8 1/2% Senior Subordinated Notes due 2007. The
Offering is conditioned upon receipt of consents and tenders representing
at least a majority in aggregate principal amount of Old Notes
outstanding. Subject to the completion of the Offering, the Company will
also refinance its outstanding indebtedness under its existing bank
agreement and will obtain a new bank credit facility providing for a
five-year revolving credit facility in the initial principal amount of
$200 million. The consummation of these transactions is subject to the
execution and delivery of definitive documentation and the satisfaction
of other customary closing conditions. The financings are expected to
close on or before March 31, 1997, and will result in a one-time
extraordinary charge of approximately $10.4 million, net of an income tax
benefit of $7.3 million, consisting of a $7.5 million premium to retire
the Old Notes and a $10.2 million write-off of unamortized debt issuance
costs.
Management believes existing cash, continuing operations, and the
restructured debt resulting from the transactions described above will
provide sufficient resources to allow the Company to pursue its business
strategy.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements begin on the next page.
Report of Independent Auditors
Shareholders and Board of Directors
Tracor, Inc.
We have audited the consolidated balance sheets of Tracor, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of Tracor'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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Tracor, Inc. and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Austin, Texas
January 27, 1997
except for Note N, as to which the date is
February 17, 1997
TRACOR, INC.
CONSOLIDATED INCOME STATEMENTS
Years Ended December 31, 1996, 1995, and 1994
(in thousands, except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
--------- ------- -------
<S> <C> <C> <C>
Net sales $1,082,505 $886,920 $694,037
Cost of sales 866,234 713,802 568,020
---------- -------- --------
Gross profit 216,271 173,118 126,017
Selling, administrative,
and general expenses 123,681 104,928 78,201
---------- -------- --------
Earnings before interest and
income taxes 92,590 68,190 47,816
Interest expense 30,156 22,440 18,033
Interest income 3,686 2,944 1,262
---------- -------- --------
Income before income taxes 66,120 48,694 31,045
Income taxes 29,506 20,831 12,498
---------- -------- --------
Net income $ 36,614 $ 27,863 $ 18,547
========== ======== ========
Net income per common and common
equivalent share:
Primary $1.46 $1.23 $.96
===== ===== ====
Fully diluted $1.46 $1.23 $.93
===== ===== ====
</TABLE>
See notes to consolidated financial statements.
TRACOR, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995 (in thousands, except share amounts)
<TABLE>
<CAPTION>
1996 1995
ASSETS -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36,758 $ 59,478
Accounts receivable 222,899 141,657
Inventories 12,456 4,695
Prepaid expenses and other 17,542 7,988
Deferred income taxes 26,829 15,916
Net assets held for sale 3,530 -
-------- --------
Total current assets 320,014 229,734
Property, plant, and equipment 165,305 120,333
Less allowances for depreciation and amortization 47,842 34,573
-------- --------
Net property, plant, and equipment 117,463 85,760
Goodwill, net of accumulated amortization of $11,590
in 1996 and $5,219 in 1995 236,047 99,813
Other intangibles, net of accumulated amortization of
$13,517 in 1996 and $7,870 in 1995 12,947 18,385
Restricted cash 30,094 -
Prepaid pension costs 14,980 23,107
Deferred charges and other assets 13,409 10,657
-------- --------
Total assets $744,954 $467,456
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,696 $ 22,981
Accrued liabilities 107,176 66,889
Current portion of long-term debt 24,712 10,735
-------- --------
Total current liabilities 179,584 100,605
Long-term debt, less current portion 292,172 180,440
Deferred revenue 15,625 23,752
Other long-term liabilities 34,656 25,694
Shareholders' equity:
Preferred stock, par value $.01 per share:
1,000,000 shares authorized; no shares
issued or outstanding - -
Common stock, par value $.01 per share: 53,000,000
shares authorized; shares issued and outstanding:
24,754,303 net of 3,411 shares in treasury
in 1996, 13,172,754 in 1995 247 132
Class A common stock, par value $.01 per share:
1,000,000 shares authorized; 978,458 shares issued
and outstanding in 1995 - 10
Additional capital paid in 125,839 76,606
Retained earnings 96,831 60,217
-------- --------
Total shareholders' equity 222,917 136,965
-------- --------
Total liabilities and shareholders' equity $744,954 $467,456
======== ========
</TABLE>
See notes to consolidated financial statements.
TRACOR, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1996, 1995, and 1994
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
---------------- Additional
Par Capital Retained
Shares Value Paid In Earnings Total
---------- ----- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 10,611,965 $106 $49,254 $13,807 $ 63,167
Issuance of common stock
for GDE acquisition 1,928,050 19 16,345 16,364
Exercise of stock options
and Series A Warrants 92,169 1 309 310
Purchase of common stock,
at cost (975,000) (10) (7,786) (7,796)
Net income 18,547 18,547
---------- ---- -------- ------- --------
Balance at December 31, 1994 11,657,184 116 58,122 32,354 90,592
Issuance of common stock,
net of issuance costs 2,216,875 22 17,857 17,879
Exercise of stock options
and Series A Warrants, net
of stock tendered as payment
for options exercised 277,153 4 627 631
Net income 27,863 27,863
---------- ---- -------- ------- --------
Balance at December 31, 1995 14,151,212 142 76,606 60,217 136,965
Issuance of common stock, net
of issuance costs 3,000,000 30 48,014 48,044
Exercise of stock options and
Series A Warrants, net
of stock tendered as payment
for options exercised 308,114 2 798 800
Income tax effect related to
stock options and grants 292 292
Issuance of common stock for
Westmark acquisition 7,288,977 73 24 97
Issuance of common stock
pursuant to board of
director stock plans 6,000 105 105
Net income 36,614 36,614
---------- ---- -------- ------- --------
Balance at December 31, 1996 24,754,303 $247 $125,839 $96,831 $222,917
========== ==== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
TRACOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995, and 1994 (in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Operating activities:
Net income $ 36,614 $27,863 $18,547
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, plant, and equipment 18,319 13,524 12,236
Amortization of goodwill 6,371 3,666 1,204
Amortization of other intangibles 5,671 5,664 1,306
Decrease in prepaid pension costs 8,127 11,686 3,489
Decrease in debt issuance costs 3,237 2,054 2,577
Provision for deferred income taxes 7,778 2,796 2,067
Decrease in deferred revenue (8,127) (11,686) (3,489)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (17,346) (4,085) 9,616
(Increase) decrease in inventories and prepaids (3,390) 3,220 (771)
Increase (decrease) in accounts payable 1,650 6,869 (8,326)
Increase (decrease) in advance payments 6,195 (2,368) (4,788)
Due to Vitro's former parent - - (7,197)
Decrease in accrued expenses (21,770) (4,696) (639)
Increase in other (1,494) (545) (43)
-------- ------- -------
Net cash provided by operating activities 41,835 53,962 25,789
Investing activities:
Purchases of property, plant, and equipment (19,623) (13,676) (11,007)
Proceeds from sale of property, plant, and equipment 14,610 2,382 897
Acquisition of businesses, net of cash acquired (176,948) (15,120) (61,048)
-------- ------- -------
Net cash used in investing activities (181,961) (26,414) (71,158)
Financing activities:
Payments of long-term debt (105,602) (10,732) (38,342)
Purchase of treasury stock - - (7,796)
Proceeds from stock offering, net of stock issuance costs 48,044 17,879 -
Proceeds from issuance of long-term debt 180,000 - 85,000
Payment of debt issuance costs (5,836) - (3,229)
Exercise of stock options and warrants 800 631 310
-------- ------- -------
Net cash provided by financing activities 117,406 7,778 35,943
-------- ------- -------
Increase (decrease) in cash and cash equivalents (22,720) 35,326 (9,426)
Cash and cash equivalents at beginning of period 59,478 24,152 33,578
-------- ------- -------
Cash and cash equivalents at end of period $ 36,758 $59,478 $24,152
======== ======= =======
See notes to consolidated financial statements.
Tracor, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
Note A -- Business and Acquisitions
Business -- Tracor, Inc. and its subsidiaries (individually and
collectively referred to as Tracor or the Company) operate in one business
segment, providing a broad range of sophisticated electronic and
information technology products, systems, and services to its customers
in the U.S. Department of Defense (DOD) as well as in nondefense U.S.
government agencies, other governments, and the commercial marketplace.
Tracor primarily markets and sells its own products, systems, and
services. When marketing and selling to foreign customers, Tracor
frequently engages the assistance of in-country representatives,
distributors, or trading companies.
Sales to agencies of the U.S. government totaled $926 million in 1996,
$773 million in 1995, and $611 million in 1994. The U.S. government,
through more than 700 contracts with approximately 100 separate government
agencies, was the only customer accounting for more than 10% of
consolidated net sales. Sales to the DOD were $845 million in 1996, $717
million in 1995, and $563 million in 1994.
Export sales, principally to Pacific Rim, European, and Middle Eastern
customers, totaled $95 million in 1996, $81 million in 1995, and $59
million in 1994. Income before income taxes from foreign-based operations
was not significant.
Cordant Acquisition -- On September 26, 1996, Tracor purchased all of the
outstanding shares of Cordant Holdings, Inc. (Cordant), an employee-owned
information systems company. Cordant focuses on the design, development,
and integration of information systems for a variety of applications,
including mail processing, records management, and CAD/GIS (computer-aided
design/geographic information systems). The purchase price of $65.7
million is subject to a contingent payment up to an additional $10 million
based upon the potential award of a large contract. The acquisition was
financed by the use of $34.2 million of cash on hand and the issuance of
two promissory notes totaling $31.5 million. One promissory note in the
amount of $5 million, subject to adjustments for indemnification claims,
is payable March 26, 1998. The other note in the amount of $26.5 million
requires a payment of approximately $1.8 million on April 1, 1997, and an
additional payment of $3.5 million on April 1, 1997, if the contingent
payment discussed above does not occur. The remaining balance of this note
is payable upon the resolution of a former Cordant minority shareholder's
lawsuit. Both promissory notes are supported by irrevocable standby
letters of credit which are fully collateralized by cash escrow deposits.
Approximately $1.8 million of the restricted cash and promissory notes is
classified as current and presented with other current assets and current
portion of long-term debt, respectively, in the balance sheet. The
remainder of the restricted cash and promissory notes is classified as
long-term.
The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price including transaction expenses ($66
million) and the liabilities assumed ($39 million) have been allocated to
the assets acquired ($44.9 million) based on a preliminary estimate of
their respective fair values at the date of acquisition. This preliminary
estimate is subject to change based on finalization of certain fair value
determinations which are not expected to have a material effect on the
consolidated financial position or results of operations of Tracor. The
resulting excess of the purchase price over the preliminary estimate of
the fair value of the net assets acquired ($60.1 million) is being
amortized over 25 years.
During the fourth quarter of 1996, Tracor obtained the necessary
information to complete its cost estimates related to the planned
elimination of certain duplicative corporate functions and excess leased
facilities. Estimated liabilities of approximately $1.9 million for
employee severance and excess facilities costs have been established and
are included in the liabilities assumed of $39 million. As a result,
goodwill increased $1.1 million, net of deferred taxes of $747,000, over
the $59 million reported at acquisition date.
The pro forma results for the effect of the Cordant acquisition are not
presented, as such effect is not material to the financial condition or
results of operations of the Company.
AEL Acquisition -- On February 22, 1996, Tracor purchased all of the
outstanding common shares of AEL Industries, Inc. (AEL). AEL designs and
manufactures sophisticated countermeasures, simulation, and radar warning
receiver systems; installs and integrates electronic avionics equipment
in military and commercial aircraft; and provides state-of-the-art
antenna, microwave, and integrated circuit components.
The purchase price, including acquisition expenses, was approximately
$103.1 million. AEL's long-term indebtedness prior to the acquisition
totaled approximately $20 million, of which approximately $10 million was
retired and approximately $10 million was assumed by Tracor. The financing
for the transaction and related expenses was obtained through an increase
of the Company's existing bank term credit facility and from cash on hand.
The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price ($103.1 million) and the liabilities
assumed ($64 million) have been allocated to the assets acquired
($98.1 million) based on their respective fair values at the date of
acquisition. Several changes to initial estimates are described below. The
resulting excess of the purchase price over the fair value of the net
assets acquired ($69 million) is being amortized over 30 years.
In conjunction with the acquisition of AEL, Tracor developed and is
executing a plan to exit certain non-strategic activities and product
lines of AEL, dispose of certain AEL properties which are excess to the
combined company, and to relocate certain AEL operations to other Tracor
facilities. Tracor has completed the sale of AEL's Instruments Services
Division and two excess AEL properties resulting in net proceeds of
approximately $13 million. Based on the completion of a market study
initiated in conjunction with the acquisition, Tracor also decided to exit
AEL's Optical Communications Division product line. The sale of this
product line resulted in proceeds of $1 million. One other facility
remains to be sold at December 31, 1996. Finally, Tracor obtained the
necessary information to finalize its review of AEL's cost estimates to
complete certain contracts which were in loss positions at the date of
acquisition.
The above changes to initial fair value estimates of assets and
liabilities of approximately $14.9 million, offset by a deferred tax asset
increase of approximately $6 million, have resulted in an increase to
goodwill related to the AEL acquisition of approximately $8.9 million.
Such revisions are included in the liabilities assumed of $64 million and
assets acquired of $98.1 million.
As of December 31, 1996, the Company had substantially completed the
relocation and consolidation of certain operations previously performed
at AEL facilities into other Tracor facilities and the elimination of
certain corporate functions at AEL's headquarters. Estimated liabilities
of approximately $6 million for employee severance, relocation costs,
facility closing-related costs, and other miscellaneous liabilities were
established at the date of acquisition. Approximately $4.1 million of
these costs have been incurred through December 31, 1996.
The following unaudited net sales, net income, and net income per share
are presented on a pro forma basis, assuming the acquisition of AEL had
occurred on January 1, 1995 (in thousands, except per share data):
Years Ended December 31,
(unaudited)
------------------------
1996 1995
---------- --------
Net sales $1,097,456 $996,839
Net income 26,801 27,033
Net income per share fully diluted 1.07 1.19
The unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
of AEL occurred on January 1, 1995, nor of future results.
Westmark Acquisition -- On June 13, 1996, Tracor concluded the acquisition
of substantially all the assets of Westmark Systems, Inc. (Westmark),
which primarily consisted of Tracor stock and warrants and certain other
real estate holdings. Westmark held all of Tracor's Class A stock (978,458
shares), a Series B warrant to purchase 5,249,428 shares of Tracor common
stock with an exercise price of $4.42 per share, and a Series C warrant
to purchase 5,455,000 shares of Tracor common stock with an exercise price
of $7.36 per share. Under the agreement, Tracor exchanged 8,267,435 shares
of common stock for the Westmark assets. Westmark liquidated concurrently
with the closing by distributing the Tracor shares to its shareholders.
The agreement provided for a distribution of the Tracor shares through
underwritten secondary offerings of a maximum of one-half of the shares
during the first two years after the closing. Accordingly, 3,567,272
shares were sold in a public offering concluded on July 11, 1996. (See
Note I.)
Other Acquisitions -- During 1996 and 1995, Tracor completed several
business acquisitions, none of which were individually or collectively
material to the financial condition or results of operations of the
Company. These acquisitions included, in 1996, the AEGIS shipbuilding
program support business from Litton Industries, Inc., the Systems
Integration Division of Codar Technology, Inc., and Aerial Data Reduction
Associates, Inc. and, in 1995, the chaff manufacturing business of Lundy
Technical Center (a division of TransTechnology Corporation), the Convair
Twin Engine Program from General Dynamics' Convair Division, and the
shaped-charge munitions business unit of The Titan Corporation. The
aggregate cash purchase price of these acquisitions, including expenses,
was approximately $25.8 million. The acquisitions have been accounted for
using the purchase method, and, accordingly, the purchase price and
liabilities assumed ($5.6 million) have been allocated to the assets
acquired ($11.2 million) based on their respective fair values at the date
of acquisition. The resulting excess of the purchase price over the fair
value of the net assets acquired ($20.2 million) is being amortized over
10 to 20 years.
GDE Acquisition -- On November 17, 1994, Tracor purchased all of the
outstanding common stock of GDE Holdings, Inc. (GDE). GDE designs,
develops, manufactures, and supports automatic test systems, imagery and
information systems, and mission planning systems. The purchase price,
including the effect of a post-closing amendment to the acquisition that
was finalized in March 1995, and related acquisition expenses totaled $102
million. The purchase price was financed by the issuance of approximately
1.9 million shares of Tracor's common stock (recorded at $8.50 per share),
the issuance of approximately $10.9 million of Series A Notes (see Note
G), the borrowing of $55 million under the Company's amended and restated
credit agreement, and approximately $19.9 million of the Company's cash
on hand.
The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price and the liabilities assumed ($76 million)
have been allocated to the assets acquired ($104 million) based on their
respective fair values at the date of acquisition. The resulting excess
of the purchase price over the fair value of the net assets acquired ($74
million) is being amortized over 30 years.
Note B -- Summary of Significant Accounting Policies
Consolidation -- The consolidated financial statements include the
accounts of Tracor, Inc. and its subsidiaries, all of which are wholly
owned. All significant intercompany accounts have been eliminated.
Cash Equivalents -- All highly liquid investments, with a maturity of
three months or less when purchased, are considered to be cash
equivalents.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles (GAAP) requires management
to make estimates and assumptions, in particular, estimates of anticipated
contract costs and revenues used in the earnings recognition process,
which affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Long-term Contracts -- Long-term contracts are accounted for under the
percentage of completion method, wherein revenue is recognized based on
cumulative costs incurred and the estimated cost to complete as such
relates to total contract price. All costs are expensed as incurred, and
losses on contracts are estimated and recognized when it becomes apparent
a loss is to be incurred. The revenue impact of pension costs is
recognized as the pension costs are recognized for GAAP purposes. This
results in the deferral of revenue where allowable pension costs under
government accounting regulations exceed pension costs as prescribed by
GAAP. The entire amount of deferred revenue in the accompanying
consolidated balance sheets results from this accounting methodology.
The progress payment provisions of certain contracts permit Tracor to bill
for a percentage of costs incurred. The remainder of costs incurred and
profit are included in unbilled costs and fees and are billed at the
completion of the contract or upon delivery of the product. (See Note C.)
Inventories -- Inventories, consisting principally of raw materials and
purchased components, are stated at the lower of cost (generally first-in,
first-out method) or market.
Property, Plant, and Equipment -- Property, plant, and equipment are
recorded at cost, and depreciation is calculated on both the straight-line
and accelerated methods over the useful lives of the related assets.
Goodwill, Other Intangibles, and Deferred Charges and Other Assets --
Goodwill, the excess cost over the fair value of net assets acquired, is
amortized using the straight-line method over 10 to 30 years. Other
intangibles are recorded at cost and amortized using the straight-line
method over their economic lives. Deferred debt issuance costs, included
in deferred charges and other assets, are capitalized and amortized to
interest expense using the interest method.
It is Tracor's policy to value goodwill and other intangible assets at the
lower of unamortized cost or fair value. Management reviews the valuation
and amortization of intangible assets on a periodic basis, taking into
consideration any events or circumstances which might result in diminished
fair value. If this review indicates goodwill will not be recoverable, the
carrying value of the goodwill will be reduced in accordance with the
provisions of Financial Accounting Standards Board (FASB) Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.
Research and Development Costs -- Tracor-funded research and development
costs are expensed as incurred. Such costs were $11.1 million in 1996,
$5.4 million in 1995, and $4.7 million in 1994.
Income Taxes -- In accordance with FASB Statement No. 109, Accounting for
Income Taxes, deferred income taxes are provided for temporary differences
between the basis of assets and liabilities for financial reporting
purposes and for income tax return purposes.
Reclassifications -- For comparative purposes, certain reclassifications
have been made to amounts previously reported.
Note C -- Accounts Receivable
The following table shows the components of accounts receivable (in
thousands), which include unbilled costs and fees under fixed-price and
cost-reimbursement type contracts. Billed accounts receivable are shown
net of allowances for doubtful accounts.
1996 1995
Billed: -------- --------
U.S. government, including
Foreign Military Sales (FMS) $105,288 $ 72,338
Foreign 27,909 6,591
Domestic commercial 22,236 13,238
-------- --------
155,433 92,167
Unbilled costs and fees:
U.S. government, including FMS 49,892 41,599
Foreign 6,345 5,266
Domestic commercial 11,229 2,625
-------- --------
67,466 49,490
-------- --------
$222,899 $141,657
======== ========
Amounts included in unbilled costs and fees comprise contract amounts for
which billings have not been presented. The requirements for billing are
those commonly found in contracting situations, such as meeting
contractual milestones and fulfilling retainage provisions. Substantially
all amounts not billed at December 31, 1996, will be billed during 1997.
It is also anticipated that substantially all billed accounts receivable
and unbilled costs and fees will be collected within one year.
The following table summarizes the changes in the allowance for doubtful
accounts for 1994, 1995, and 1996 (in thousands):
Balance at January 1, 1994 $ 78
Additions charged to costs and expenses 2
Additions due to GDE acquisition 804
Write-off of uncollectible accounts (16)
------
Balance at December 31, 1994 868
Additions charged to costs and expenses 285
Write-off of uncollectible accounts (195)
Reduction in allowance (492)
------
Balance at December 31, 1995 466
Additions charged to costs and expenses 223
Additions due to acquisitions 1,508
Write-off of uncollectible accounts (251)
------
Balance at December 31, 1996 $1,946
======
Although Tracor has a concentration of credit risk with the U.S.
government, Tracor has not historically experienced significant collection
losses on U.S. government contracts. Also, Tracor's foreign receivables
are not concentrated within any one geographic region, nor are they
subject to economic conditions that would subject Tracor to unusual risk.
Note D -- Inventories
The components of inventories are as follows (in thousands):
1996 1995
------- ------
Raw materials and
purchased components $ 8,996 $2,824
Work in process 2,859 1,651
Finished goods 601 220
------- ------
$12,456 $4,695
======= ======
Note E -- Property, Plant, and Equipment
The components of property, plant, and equipment are as follows (in
thousands):
1996 1995
------- ------
Land $ 13,644 $ 8,942
Buildings 50,635 34,394
Equipment 94,658 71,179
Leasehold improvements 6,368 5,818
-------- --------
$165,305 $120,333
======== ========
Note F -- Accrued Liabilities
The components of accrued liabilities are as follows (in thousands):
1996 1995
------- ------
Payroll and related items $ 47,553 $44,493
Advance payments from customers 9,519 3,324
Other 50,104 19,072
-------- -------
$107,176 $66,889
======== =======
Note G -- Long-term Debt
The components of long-term debt are as follows (in thousands):
1996 1995
------- ------
Revolving loan $ - $ -
Term loans 163,205 74,550
Senior Subordinated Notes 105,000 105,000
Series A Notes 10,947 10,947
Promissory notes payable to
former Cordant shareholders
(see Note A) 31,500 -
Other 6,232 678
-------- --------
316,884 191,175
Less current maturities 24,712 10,735
-------- --------
$292,172 $180,440
======== ========
Interest paid totaled $25.9 million in 1996, $20.6 million in 1995, and
$13.8 million in 1994.
Amended and Restated Credit Agreement -- Tracor's amended and restated
credit agreement (Amended Credit Agreement) consists of a $180 million
term loan facility, a $60 million revolving loan facility, and a $50
million letters of credit facility. Substantially all assets of Tracor and
certain domestic, wholly owned subsidiaries are pledged or mortgaged under
the Amended Credit Agreement, and all borrowings are guaranteed by such
subsidiaries.
The term loans are comprised of a $64 million A Term Loan, a $49.6 million
B Term Loan, and a $49.6 million C Term Loan. The A Term Loan facility is
evidenced by promissory notes maturing October 31, 1999, requiring
quarterly principal payments of approximately $5.3 million. The B Term
Loan facility is evidenced by promissory notes maturing October 31, 2000,
requiring quarterly payments of $133,333 through and including October 31,
1999, and quarterly payments of $12 million from January 31, 2000, through
October 31, 2000. The C Term Loan facility is evidenced by promissory
notes maturing April 30, 2001, requiring quarterly payments of $131,578
through and including October 31, 2000, and two payments of $23.8 million
on January 31 and April 30, 2001. The revolving loans facility is
evidenced by promissory notes maturing December 31, 2000. The letters of
credit facility provides for the issuance of letters of credit with
expiration dates generally 18 months or less from the date of issuance
(automatically renewable unless a default exists at the expiration date)
but in any event not later than December 31, 2000.
Certain mandatory prepayments may also be required from the net proceeds
of asset or equity sales and annual excess cash flow. Such mandatory
repayments are to be applied to equally and ratably prepay the A, B, and
C Term Loans based on the relative principal amounts outstanding.
Term loans under the A Term Loan facility and the revolving loan bear
interest at Tracor's option at either the lender's base rate plus .75% or
the eurodollar rate plus 1.75% less a reduction ranging from .25% to
1.125% per annum based on Tracor's leverage ratio, as defined. Loans under
the B Term Loan facility bear interest at Tracor's option at either the
lender's base rate plus 1% or the eurodollar rate plus 2%. Loans under the
C Term Loan facility bear interest at Tracor's option at either the
lender's base rate plus 1.25% or the eurodollar rate plus 2.25%. Interest
rates on the A, B, and C Term Loans at December 31, 1996, were 7.3%, 7.8%,
and 8.1% per annum, respectively. Interest on base rate loans is payable
quarterly, and interest on eurodollar loans is payable at the end of the
applicable interest period or every three months in the case of interest
periods in excess of three months. A commitment fee of .5% per annum, less
a reduction ranging from .125% to .25% per annum based on Tracor's
leverage ratio as defined, is charged on the unused revolving loans and
letters of credit facility and is payable quarterly in arrears. The
commitment fee at December 31, 1996, was .375% per annum. Each letter of
credit bears an issuance fee of .125% per annum plus a fee equal to .25%
less than the interest margin in effect for revolving loans maintained as
eurodollar loans. The fee at December 31, 1996, was 1.375%. At December
31, 1996, the Company had outstanding letters of credit totaling $32.1
million relating to commitments for performance on certain contracts with
foreign customers and as collateral on certain insurance policies.
The Amended Credit Agreement contains covenants which, among other things,
impose limitations and restrictions on the incurrence of additional
indebtedness, capital expenditures, future mergers and acquisitions, sales
of assets, payment of dividends and changes in control, as defined. In
addition, Tracor is required to satisfy certain financial covenants and
tests relating to, among other matters, interest coverage, working
capital, leverage, and net worth.
Senior Subordinated Notes -- The acquisition of Vitro Corporation (Vitro)
on August 23, 1993, was financed by the issuance of $105 million aggregate
principal amount of Senior Subordinated Notes due August 15, 2001 (the
Notes). The Notes bear interest at an annual rate of 10 7/8%, payable
semiannually on February 15 and August 15. There is no sinking fund
requirement.
The acquisition of GDE was financed in part by the issuance of
approximately $10.9 million (as adjusted by a post-closing amendment to
the acquisition that was finalized in March 1995) aggregate principal
amount of Series A Notes due August 15, 2001 (Series A Notes), in a
private placement in November 1994. The Series A Notes rank on the same
level as, and are a part of the same series of securities as, the
Company's existing Notes discussed above. The Series A Notes bear interest
at an annual rate of 10 7/8%, payable semiannually on February 15 and
August 15. There is no sinking fund requirement.
The Notes and Series A Notes are redeemable, in whole or in part, at the
option of Tracor, on or after August 15, 1997, at the redemption prices
of 104.661% in 1997, 103.107% in 1998, 101.554% in 1999, and 100%
thereafter. In the event of a change of control, as defined in the
indenture, each holder may require Tracor to repurchase such holder's
Notes or Series A Notes, as applicable, at 101% plus accrued and unpaid
interest. Tracor is also required to offer to repurchase a specified
portion of the Notes and Series A Notes in the event of certain asset
sales.
The Notes and Series A Notes are subordinated to all senior debt,
subordinated on an equal basis with any future senior subordinated
indebtedness, and senior to all other subordinated debt of Tracor.
Substantially all of Tracor's wholly owned subsidiaries have guaranteed
the Notes and Series A Notes on a senior subordinated basis.
The indentures pertaining to the Notes and Series A Notes contain
restrictions on the incurrence of additional indebtedness, dividends on
and redemptions of capital stock, redemptions of certain subordinated
obligations, the making of certain investments, transactions with
affiliates, sales of assets, and mergers or consolidations with or
transfers of assets to other persons.
Aggregate annual long-term debt maturities for each of the next five years
are as follows (in thousands):
1997 $ 24,712
1998 27,692
1999 22,714
2000 48,839
2001 163,777
2002 and thereafter 29,150
--------
Total $316,884
========
Fair Value -- The fair value of Tracor's outstanding debt under the
Amended Credit Agreement approximates its carrying value. This assessment
is based on the fact the debt has a variable interest rate. Based on the
market prices for the Notes, the fair values of Tracor's Notes and Series
A Notes are $111 million and $11.6 million, respectively, at December 31,
1996, and $108.4 million and $11.3 million, respectively, at December 31,
1995.
Subsequent to December 31, 1996, Tracor initiated transactions to
restructure its long-term debt. (See Note N).
Note H -- Retirement Benefit Plans
Tracor provides retirement benefits through contributory and
noncontributory defined benefit and defined contribution plans.
Defined Benefit Pension Plan -- Tracor's defined benefit pension plan
(Pension Plan) covers most of its employees. Retirement benefits are
generally based on years of service and final average compensation.
Tracor's contributions are made in amounts sufficient to satisfy funding
requirements under the Employee Retirement Income Security Act of 1974
(ERISA). Significant amendments include the merger of GDE's defined
benefit plan with the Pension Plan on December 31, 1994.
Assumptions used in accounting for the Pension Plan were:
1996 1995 1994
Weighted-average discount rate: ---- ---- ----
January 1 7.25% 8.75% 7.50%
December 31 7.75% 7.25% 8.75%
Rate of increase in compensation levels:
January 1 4.00% 5.00% 4.00%
December 31 4.00% 4.00% 5.00%
Expected long-term rate of
return on assets 9.50% 9.50% 9.50%
Substantially all Pension Plan assets are invested in publicly traded
stocks and bonds. The funded status and the amount recognized in the
consolidated balance sheets are as follows (in thousands):
1996 1995
Actuarial present value of benefit -------- --------
obligations:
Vested benefit obligation $296,648 $304,687
======== ========
Accumulated benefit obligation $306,739 $315,351
======== ========
Projected benefit obligation $353,421 $365,648
Pension Plan assets at fair value 370,422 350,570
-------- --------
Pension Plan assets in excess of (less
than) the projected benefit obligation 17,001 (15,078)
Unrecognized prior service cost 6,668 7,394
Unrecognized net loss (gain) (8,689) 30,791
-------- --------
Net prepaid pension costs
recognized $ 14,980 $ 23,107
======== ========
The components of pension expense are as follows (in thousands):
1996 1995 1994
---- ---- ----
Service cost, benefits
earned during the year $14,487 $12,458 $ 7,877
Interest cost on projected
benefit obligation 25,149 25,891 13,221
Actual return on Pension
Plan assets (42,961) (73,856) 7,200
Net amortization and
deferral 11,452 47,193 (24,367)
------- ------- -------
$ 8,127 $11,686 $ 3,931
======= ======= =======
Defined Contribution Retirement Plans -- Tracor's contributions under its
defined contribution plans, which together cover substantially all
employees, are generally based upon a percentage of an eligible employee's
covered compensation or employee contributions. Expenses recorded under
defined contribution plans were $10 million in 1996, $9.2 million in 1995,
and $7.2 million in 1994.
Effective December 1, 1996, the Company established the Tracor Deferred
Compensation Plan for eligible employees. The plan is a nonqualified
deferred compensation plan pursuant to which certain eligible employees
of the Company may elect to defer compensation. The plan is maintained
primarily for the purpose of providing deferred compensation for highly
compensated employees, within the meaning of Section 201(2), 301(3), and
401(a)(1) of ERISA, as amended. The Company will match contributions up
to the extent of the allowable scheduled match under the Defined
Contribution Retirement Plan. Expenses under this plan were approximately
$88,000 in 1996.
Postretirement Health Care Plans -- Tracor, principally through Vitro and
GDE, provides postretirement health care and life insurance benefits to
certain retired employees who meet minimum age and service requirements.
The health care and life insurance plans are contributory and contain
other cost-sharing features such as deductibles and coinsurance. Tracor's
policy is to fund the cost of medical benefits in amounts determined at
the discretion of management.
Upon Tracor's acquisition of Vitro, the postretirement health care plans
for Vitro employees were discontinued, leaving only the obligation that
existed at the acquisition date for eligible employees and retirees.
Accordingly, the cost of providing these benefits under the Tracor and
Vitro plans is not significant to the consolidated financial statements,
and information regarding actuarial methods and assumptions, health care
cost assumptions, and components of the obligation and annual expense is
not provided. Other long-term liabilities include $5 million at December
31, 1996, and $5.5 million at December 31, 1995, for such benefits.
The defined benefit health care and life insurance plans sponsored by GDE
currently provide postretirement benefits; however, the salaried retiree
medical plans will terminate effective July 1, 2008. The current GDE
retiree plans will continue until that time with the premium capped at the
rate in effect July 1, 1993, plus an escalation of 5% per year through
1997.
The following table (in thousands) presents the GDE plans' funded status
and the amounts recognized in the consolidated balance sheets:
1996 1995
---- ----
Accumulated postretirement benefit
obligation:
Retirees $7,000 $ 8,149
Fully eligible active plan
participants 840 1,596
Other active plan participants 466 842
------ -------
8,306 10,587
Plan assets at fair value - -
------ -------
Accrued postretirement obligation,
included in other long-term
liabilities $8,306 $10,587
====== =======
Net periodic postretirement benefit cost for the GDE plans was
approximately $610,000 in 1996 and $961,000 in 1995.
For measurement of the GDE plans, 9% to 11% annual rates of increase,
depending on participant criteria, in the per capita cost of covered
benefits (i.e., health care cost trend rate), were assumed for 1996 and
1995. The rates were assumed to decrease gradually to 6% for most
participants by the year 2001 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care trend
rate by one percentage point would increase the accumulated postretirement
benefit obligation at December 31, 1996, by $130,000 and the net periodic
postretirement benefit cost for 1996 by $67,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation for the GDE plans was 7.75% at December
31, 1996, and 7.25% at December 31, 1995.
Note I -- Shareholders' Equity
Common Stock -- Under certain conditions, as set forth in a registration
rights agreement, the initial holders of common stock may request Tracor
to register its securities with the Securities and Exchange Commission
(SEC) for resale. This registration right is generally not transferable
to subsequent shareholders. Tracor must bear the cost of any registration,
except for underwriting commissions, sellers' counsel fees, and other
selling expenses. Tracor may include in any registration shares of common
stock to be sold for its own account, subject to certain limitations.
The acquisition of Westmark (see Note A), completed on June 13, 1996,
resulted in the issuance of 8,267,435 shares of Tracor common stock, the
retirement of the Company's Class A common stock (978,458 shares) and two
series of warrants to purchase a total of 10,704,428 shares of the
Company's common stock. Subsequent to the Westmark acquisition, Tracor
concluded a public offering on July 11, 1996, of 6,567,272 shares of
common stock at a price of $17.50 per share. Of the shares sold, the
Company sold 3,000,000 shares and certain former shareholders of Westmark
sold 3,567,272 shares. The net proceeds to the Company from the primary
shares sold in the offering totaled approximately $48 million.
On May 2, 1995, Tracor concluded a public offering of 4,600,000 shares of
common stock at a price of $11.50 per share. Of the 4,600,000 shares,
Tracor sold 1,600,000 shares and a selling stockholder sold 3,000,000
shares. Included in shares sold by the stockholder were 616,875 shares
obtained upon the exercise of Series A Warrants. The net proceeds to
Tracor from the exercise of Series A Warrants and the primary shares sold
in the offering totaled approximately $18 million.
During 1994, Tracor purchased from a major shareholder 975,000 shares of
its common stock for $7.8 million. These shares were classified as
treasury shares. In November 1995, Tracor's board of directors retired all
982,653 shares of common stock held as treasury stock. The shares returned
to the status of authorized but unissued shares.
Common Stock Purchase Warrants -- At December 31, 1996, there were
outstanding 1,227,788 Series A Warrants, which entitle the holders to
purchase shares of common stock at an exercise price of $2.54. The
warrants are exercisable at the option of the holder at any time prior to
December 27, 2001, and are not callable by Tracor. Under certain
conditions, as defined in the warrant agreement, the number of shares
purchasable and the exercise price may be adjusted. The holders may also
request Tracor to register the underlying securities with the SEC under
substantially the same terms described above for holders of common stock,
except that the registration rights are generally transferable to
subsequent warrant holders. Series A Warrants exercised totaled 122,900
shares in 1996; 829,175 shares in 1995; and 46,472 shares in 1994.
Common Stock Option Plan -- Tracor's stock option plans provide for the
grant of restricted stock, stock appreciation rights, and both incentive
and non-qualified options to employees. The exercise price of each
currently outstanding option is the fair value of a share of Tracor's
common stock on the date of grant. Up to 30% of each option is exercisable
one year after the grant, up to an additional 30% is exercisable two years
after the grant, and the remainder is exercisable three years after the
grant. The term of each option is 10 years from the date of grant.
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, Accounting for Stock-Based Compensation (FAS 123),
requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is
required by FAS 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994, under the fair value method
prescribed by FAS 123. The fair value for these options was estimated at
the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1996 and 1995, respectively:
1996 1995
---- ----
Risk-free interest rate 5.8% 6.3%
Dividend yield 0% 0%
Volatility factor of the expected market
price of Tracor's common stock .576 .576
Weighted-average expected life
of the options 5 years 5 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, this option
valuation model requires the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the Black-Scholes model does not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma information follows (in thousands, except for earnings
per share information):
1996 1995
---- ----
Pro forma stock-based
compensation expense $ 2,021 $ 773
Pro forma net income 34,593 27,090
Pro forma earnings per share:
Primary 1.39 1.20
Fully diluted 1.39 1.20
Because FAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
1997.
The effects of applying FAS 123 for pro forma disclosures are not likely
to be representative of the effects on reported net income for future
years.
A summary of changes in common stock options during 1994, 1995, and 1996
is as follows:
Weighted
Range of Average
Exercise Exercise
Shares Prices Price
-------- ---------- --------
Options outstanding,
January 1, 1994 914,200 $ 1.75-$ 8.13 $ 3.09
Granted 71,700 7.88- 12.25 11.83
Exercised (48,500) 1.75- 3.63 2.46
Surrendered (4,200) 3.13 3.13
--------- ------------- ------
Options outstanding,
December 31, 1994 933,200 1.75- 12.25 3.60
Granted 487,500 13.00- 15.25 13.02
Exercised (69,703) 1.75- 8.13 2.22
Surrendered - - -
--------- ------------- ------
Options outstanding,
December 31, 1995 1,350,997 1.75- 15.25 7.07
Granted 374,600 16.13- 21.88 16.96
Exercised (188,625) 2.00- 13.00 2.90
Surrendered (5,399) 8.13- 13.00 10.84
--------- ------------- ------
Options outstanding,
December 31, 1996 1,531,573 $ 1.75-$21.88 $10.00
========= ============= ======
Options outstanding at December 31, 1996, are comprised of the following:
Range of
Exercise
Options Prices
------- --------
548,773 $ 1.75-$ 3.50
80,000 7.88- 8.13
842,100 12.25- 16.13
60,700 19.13- 21.88
--------- -------------
1,531,573 $ 1.75-$21.88
========= =============
Options exercisable, December 31,
1996 797,143 $1.75-$15.25
1995 653,400 1.75- 12.25
1994 376,600 1.75- 8.13
1996 1995
---- ----
Weighted-average fair value of
options granted during the year $9.39 $7.28
Weighted-average remaining
contractual life of options at
December 31 7.5 years 7.8 years
Common stock reserved at December 31, 1996, consists of the following:
For exercise of outstanding warrants 1,227,788
For exercise of stock options 1,668,872
---------
2,896,660
=========
Note J -- Income Taxes
Income before income taxes consists of the following (in thousands):
1996 1995 1994
---- ---- ----
Domestic $64,990 $48,212 $31,111
Foreign 1,130 482 (66)
------- ------- -------
$66,120 $48,694 $31,045
======= ======= =======
The provision for income taxes consists of the following (in thousands):
1996 1995 1994
---- ---- ----
Current:
Federal $17,442 $14,887 $ 8,708
State 4,269 3,308 1,723
Foreign 17 (160) -
------- ------- -------
21,728 18,035 10,431
Deferred:
Federal 6,995 2,309 1,978
State 528 487 218
Foreign 255 - (129)
------- ------- -------
7,778 2,796 2,067
------- ------- -------
$29,506 $20,831 $12,498
======= ======= =======
A reconciliation between income taxes computed on income before taxes at
the statutory federal rate (35% in 1996, 1995, and 1994) and the provision
for income taxes is as follows (in thousands):
1996 1995 1994
---- ---- ----
Income taxes at the
statutory federal rate $23,142 $17,043 $10,866
Goodwill 2,115 1,240 553
State income taxes, net
of federal tax benefits 3,118 2,467 1,262
Other 1,131 81 (183)
------- ------- -------
$29,506 $20,831 $12,498
======= ======= =======
A summary of the tax effects of temporary differences comprising deferred
income tax assets and liabilities is as follows (in thousands):
1996 1995
------ ------
Deferred income tax assets:
Contracts $13,383 $ 6,509
Postretirement medical obligation 1,942 1,982
Accrued vacation/employee benefits 8,834 8,332
Expense accruals not yet deductible 4,612 820
Deferred compensation 6,894 3,426
Pension 6,891 9,243
Other 2,242 783
------- -------
Total deferred tax assets 44,798 31,095
Valuation allowance for
deferred tax assets - -
------- -------
Net deferred tax assets 44,798 31,095
Deferred income tax liabilities:
Depreciation/amortization 11,055 11,083
Pension 6,257 9,501
Other 9,941 1,921
------- -------
Total deferred tax liabilities 27,253 22,505
------- -------
Net deferred income taxes $17,545 $ 8,590
======= =======
Net deferred income taxes are reflected on the consolidated balance sheet
as follows (in thousands):
1996 1995
---- ----
Current deferred income taxes $26,829 $15,916
Other long-term liabilities (9,284) (7,326)
------- -------
Net deferred income taxes $17,545 $ 8,590
======= =======
Based on Tracor's taxable income in prior carryback years and forecast of
future income, management believes, it is more likely than not, all net
deferred tax assets will be realized. The valuation allowance for capital
losses was eliminated in 1995 as a result of realized capital gains, and
the related tax benefit reduced the goodwill of GDE.
For tax purposes, the acquisitions of GDE, AEL, and Cordant were accounted
for using their carryover tax basis, which resulted in the recording of
significant deferred income tax assets.
By a letter dated January 23, 1997, the Internal Revenue Service (IRS)
notified the Company of various proposed adjustments to the federal income
tax returns of GDE for its tax periods beginning November 20, 1992, and
ending November 17, 1994 (the date the Company acquired GDE). The proposed
adjustments relate primarily to GDE's acquisition of its business from
General Dynamics in 1992. The Company plans to contest the proposed
adjustments through the IRS's administrative appeals process. While it is
not possible to determine the final adjustments resulting from this
matter, management believes the ultimate resolution will have no material
adverse effect on the financial position or results of operations of the
Company.
Income taxes paid, net of refunds, totaled $17.4 million in 1996, $20
million in 1995, and $8.6 million in 1994.
Note K -- Lease Commitments
Tracor leases office space under various operating leases, which generally
contain renewal options and are subject to increases based on formulas
such as changes in the Consumer Price Index. Future minimum payments at
December 31, 1996, for all noncancelable operating leases with initial
terms of one year or more are as follows (in thousands):
1997 $16,882
1998 13,878
1999 11,946
2000 10,082
2001 6,351
2002 and thereafter 25,074
-------
$84,213
=======
Rental expense for all operating leases was $16.6 million in 1996, $17.4
million in 1995, and $15.8 million in 1994.
Note L -- Contingencies
Tracor is involved in various lawsuits and is subject to certain
contingencies incidental to its business. While the ultimate results of
these matters cannot be predicted with certainty, management does not
expect them to have a material adverse effect on the consolidated
financial position of Tracor.
Note M -- Net Income Per Common and Common Equivalent Share
Beginning in the second quarter of 1996, both primary and fully diluted
net income per share amounts are computed in accordance with the treasury
stock method using the weighted average common shares outstanding and
equivalents assuming the exercise of all outstanding warrants and options
for common shares.
Prior to the second quarter of 1996, both primary and fully diluted net
income per share amounts were computed in accordance with the modified
treasury stock method using the weighted average common shares outstanding
and equivalents assuming the exercise of all outstanding warrants and
options for common shares. For purposes of net income per share
computations, net income is adjusted for the pro forma reduction of
interest expense, net of investment income (where applicable) and income
taxes, resulting from the assumed use of warrant and option exercise
proceeds to reduce outstanding debt.
The weighted average common and common equivalent shares used in the fully
diluted calculation were 25,353,000 in 1996; 24,168,000 in 1995; and
22,113,000 in 1994.
Note N -- Subsequent Events
On February 14, 1997, Tracor commenced a tender offer to purchase for cash
up to the entire outstanding principal amount of its 10 7/8% Senior
Subordinated Notes due 2001 (Old Notes) and a related solicitation of
consent to modify certain other terms of the indentures under which the
Old Notes were issued. On February 17, 1997, the Company also commenced
a private placement offering (Offering) of $250 million aggregate
principal amount of 8 1/2% Senior Subordinated Notes due 2007 (New Notes).
The Offering is conditioned upon receipt of consents and tenders
representing at least a majority in aggregate principal amount of Old
Notes outstanding. Subject to the completion of the Offering, the Company
will also refinance its outstanding indebtedness under its existing bank
agreement and will obtain a new bank credit facility (New Bank Credit
Facility) providing for a five-year revolving credit facility in the
initial principal amount of $200 million. The consummation of these
transactions is subject to the execution and delivery of definitive
documentation and the satisfaction of other customary closing conditions.
The financings are expected to close on or before March 31, 1997.
Interest on the New Notes will be payable semiannually commencing
September 1997. The New Notes will be redeemable in whole or in part at
the option of the Company in or after March 2002, at specified redemption
prices. In addition, prior to March 2000, the Company, at its option, may
redeem certain percentages of the aggregate principal amount of the New
Notes with the net cash proceeds of one or more public equity offerings
at specified redemption prices. The New Notes will be general unsecured
obligations of the Company and will be subordinated in right of payment
to all existing and future senior indebtedness of the Company. The New
Notes will be subject to a registration rights agreement, pursuant to
which Tracor has agreed to file a registration statement with respect to
an offer to exchange the New Notes for registered identical senior
subordinated notes of the Company.
The New Bank Credit Facility shall be subject to commitment reductions of
$25 million on February 28, 2000, and $50 million on February 28, 2001.
Certain mandatory prepayments will also be required. All of Tracor's stock
in its subsidiaries will be pledged under the New Bank Credit Facility,
and all borrowings will be guaranteed by such subsidiaries.
The New Bank Credit Facility will bear interest at Tracor's option at
either the lender's base rate plus up to .75% or the euro-dollar rate plus
.625% to 1.75%, in each case based on certain financial ratios, as
defined. Interest on base rate loans will be payable quarterly, and
interest on eurodollar loans will be payable at the end of the applicable
interest period or every three months in the case of interest periods in
excess of three months. A commitment fee ranging from .25% to .375% per
annum will be charged on the unused revolving loans and will be payable
quarterly in arrears. Each letter of credit will bear customary fees and
administrative charges.
The New Bank Credit Facility and New Notes will contain convenants which,
among other things, impose limitations and restrictions on the incurrence
of additional indebtedness, capital expenditures, future mergers and
acquisitions, sales of assets, and payment of dividends. In addition,
Tracor will be required to satisfy certain financial covenants relating
to, among other matters, interest coverage, working capital, leverage, and
net worth.
The above transactions will result in a one-time extraordinary charge of
approximately $10.4 million, net of an income tax benefit of $7.3 million,
consisting of a $7.5 million premium to retire the Old Notes and a $10.2
million write-off of unamortized debt issuance costs.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Company
Pursuant to the Delaware General Corporation Law, as implemented by
Tracor's Certificate of Incorporation and Bylaws, all corporate powers are
exercised by or under the direction of the Board of Directors. The Board
of Directors has created committees with responsibility for audits,
compensation and ethical issues. Each director who is not an employee of
Tracor serves on one or more committees. Officers of the Company serve at
the discretion of the Board of Directors. The Board of Directors and
executive officers of the Company consist of the persons named in the
table below. Additional information with respect to those persons who
serve as directors and executive officers is set forth below the table.
Name Age Position(s) with the Company
- ------------------- --- -----------------------------------
James B. Skaggs 59 Chairman of the Board and President
Robert K. Floyd 61 Vice President and Chief Financial
Officer
Barry G. Campbell 55 Vice President; President of Vitro
Corporation
K. Bruce Hamilton 55 Vice President; President of Tracor
Applied Sciences, Inc.
David L. Lawrence 54 Vice President; President of Tracor
Flight Systems, Inc.
George R. Melton 50 Vice President; President of Tracor
Aerospace, Inc.
Dr. Terry A. Straeter 54 Vice President; President of GDE
Systems, Inc.
Woody Endsley 44 Vice President and Treasurer
Robert J. Fitch 48 Vice President - Government Relations
Leroy J. Kana 64 Vice President - Quality, Safety and
Environmental Programs
Russell E. Painton 56 Vice President, General Counsel and
Corporate Secretary
John M. Rock, III 57 Vice President - Corporate Technology
and Information Systems
Roger W. Sadler 59 Vice President - Business Development
Thomas V. Talbott 60 Vice President and Controller
Kathy Thompson 49 Vice President - Human Resources
William E. Conway, Jr 47 Director
Dr. Julian Davidson 69 Director
Anthony Grillo 41 Director
Bob Marbut 61 Director
Elvis L. Mason 63 Director
Lt. Gen. Thomas P.
Stafford (Ret.) 66 Director
James B. Skaggs has been a director of the Company since March 1990. He has
also served as the president and CEO of the Company since November 1991.
Mr. Skaggs also served as president, CEO, and a director of Westmark
Systems, Inc. from March 1990 through December 1991, and is currently a
director of Alamo Group, Inc. Mr. Skaggs' term expires in 1998.
Robert K. Floyd has been Vice President and Chief Financial Officer of the
Company since December 1990.
Barry G. Campbell has been Vice President of the Company and President and
CEO of Vitro Corporation since October 1993. He has held various positions
with Vitro Corporation since 1970.
K. Bruce Hamilton has been Vice President of the Company and President of
Tracor Applied Sciences, Inc. since 1989.
David L. Lawrence has been Vice President of the Company and President of
Tracor Flight Systems, Inc. since November 1996.
George R. Melton has been Vice President of the Company since March 1990
and President of Tracor Aerospace, Inc. since September 1990.
Dr. Terry A. Straeter has been Vice President of the Company since December
1994 and President and Chief Executive Officer of GDE since November 1992.
From February 1991 until November 1992, he served as Corporate Vice
President and General Manager of the Electronics Division of General
Dynamics Corporation.
Woody Endsley has been Vice President and Treasurer of the Company since
April 1991. He served as Corporate Controller of the Company from January
1988 through April 1991.
Robert J. Fitch has been Vice President - Government Relations since August
1995. From April 1993 to July 1995, he served as Vice President, Corporate
Strategic Development for GDE. Between 1984 and 1993, he was the senior
staff member of the Program and Budget Authorization staff of the House
Permanent Select Committee on Intelligence.
Leroy J. Kana has been Vice President - Quality, Safety and Environmental
Programs of the Company since December 1992 and has been associated with
the Company and its subsidiaries in various capacities since 1969.
Russell E. Painton has been Vice President and General Counsel of the
Company since April 1983. He has also been Secretary of the Company since
January 1991.
John M. Rock, III has been Vice President - Technology and Information
Systems of the Company since September 1991. From January 1990 through
September 1991, he was President of Eagle GT, Inc.
Roger W. Sadler has been Vice President - Business Development of the
Company since August 1991. From 1988 through August 1991, he worked as a
private consultant.
Kathy Thompson has been Vice President - Human Resources of the Company
since October 1996. Prior to that, she was Director of Human Resources for
Tracor Applied Sciences, Inc., and has worked for Tracor since 1971.
Thomas V. Talbott has been Vice President and Controller of the Company
since April 1991.
William E. Conway, Jr. has been a director since April 25, 1995.
Mr. Conway joined The Carlyle Group in August 1987 and is a managing
director. He serves on the boards of directors of BDM International, Inc.
(October 1990 to present); GTS Duratek, Inc. (January 1995 to present); and
Nextel Communications, Inc. (February 1997 to present). He also serves on
the boards of several private companies in which Carlyle has invested.
Prior to the acquisition of GDE Systems, Inc. ("GDE"), he served as
chairman of the board of GDE. Mr. Conway's term expires in 1997.
Dr. Julian Davidson has been a director of the Company since November 1991.
He is chairman of the Compensation/Stock Option Committee. Dr. Davidson is
president and CEO of Davidson Enterprises, LLC, a commercial and defense
consulting firm since April 1, 1996. Before that, he was a senior vice
president of Booz, Allen and Hamilton from May 1984 to April 1996. He also
serves as a director on the boards of several privately held companies.
Dr. Davidson's term expires in 1999.
Anthony Grillo has been a director of the Company since December 1991. He
is chairman of the Audit/Ethics Committee. Mr. Grillo is a senior managing
director of The Blackstone Group, L.P., an investment banking firm. Prior
to May 1991, he was a managing director with the corporate finance
division, Restructuring and Reorganization Group of Chemical Bank (November
1989 through May 1991). Mr. Grillo currently serves as a member of the
board of directors of Littelfuse, Inc. (since November 1991), a former
affiliate of Tracor's predecessor, and of Joule, Inc., as well as a member
of the board of directors of several privately held companies. He is also
a Trustee of the Academy of Political Science. Mr. Grillo's term expires
in 1999.
Bob Marbut has been a director of the Company since November 1991. He is
a member of the Compensation/Stock Option Committee. Mr. Marbut is chairman
and CEO of Argyle Television, Inc., which he helped found in 1994 and which
now owns and operates television stations in the United States. He is also
chairman and CEO of Argyle Communications, Inc. (founded in January 1992),
which is the managing general partner of Argyle Communications Partners,
L.P., a limited partnership involved in the acquisition and operation of
television stations, and successor to The Argyle Group, of which he has
been chairman and CEO since January 1992. Mr. Marbut founded Argyle
Television Holdings, Inc., a television station group in 1993, and was its
CEO until it was sold in April 1995. He serves on the boards of directors
of Tupperware Corporation (1996 to present); Ultramar Diamond Shamrock,
Inc. (December 1996 to present); Argyle Communications, Inc. (January 1992
to present); Argyle Television, Inc. (August 1994 to present); and Katz
Media Group, Inc. (August 1994 to present). Mr. Marbut's term expires in
1997.
Elvis L. Mason has been a director of the Company since November 1991. He
is a member of the Compensation/Stock Option Committee. Since August 1984,
he has served as managing partner of Mason Best Company, L.P. ("Mason
Best"), a merchant banking firm, and on the boards of several privately
held companies in which Mason Best was a significant shareholder. He also
has served, since December 1991, as a director and, since February 1992,
as chairman of the Board of Safeguard Business Systems, Inc., a
supplier of office management products and services for small businesses,
and its parent, San Jacinto Holdings. Mr. Mason also serves as a director
of United Meridian Corporation and American Eagle Group, Inc. Mr. Mason's
term expires in 1999.
Lt. Gen. Thomas P. Stafford (Retired) has been a director of the Company
since April 1994. He is a member of the Audit and Ethics Committee. Lt.
Gen. Stafford is a co-founder of the technical consulting firm of Stafford,
Burke, and Hecker, Inc. (1983). He serves on the boards of directors of
AlliedSignal Corporation (March 1981 to present); CMI, Inc. (1983 to
present); Fisher Scientific, Inc. (December 1991 to present); Pacific
Scientific, Inc. (February 1987 to present); Seagate Technologies, Inc.
(March 1988 to present); Tremont, Inc. (October 1990 to present);
Wackenhut, Inc. (October 1991 to present); and Wheelabrator Technologies,
Inc. (September 1987 to present), all of which are listed on the New York
Stock Exchange (NYSE). Lt. Gen. Stafford also served on the board of
directors for Gulf USA, Inc. (NYSE) from 1992 to 1993. Lt. Gen. Stafford's
term expires in 1998.
Meetings of the Board of Directors
During 1996, the Board of Directors met six times. Each director attended
more than 75% of the aggregate of (a) the total number of meetings held
during 1996 and (b) the total number of meetings held by all committees of
the Board of Directors on which each served.
Item 11. Executive Compensation
The following Summary Compensation Table shows the compensation of the
Company's five most highly compensated executive officers, including the
chief executive officer, for the three most recent fiscal years:
Summary Compensation Table
</TABLE>
<TABLE>
<CAPTION>
NAME AND LONG-TERM ALL OTHER
PRINCIPAL POSITION ANNUAL COMPENSATION COMPENSATION COMPENSATION(1)
- ------------------ --------------------------- -------------------------------------- ---------------
AWARDS PAYOUTS
--------------------------- -------
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS/ LTIP
YEAR SALARY BONUS AWARDS SAR (#)2 PAYOUTS
---- ------ ----- ------ -------- -------
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
James B. Skaggs, 1996 $577,533 $490,445 - 0 - 100,000 - 0 - $39,281
President & CEO 1995 523,921 410,987 - 0 - 200,000 - 0 - 28,687
1994 494,884 398,687 - 0 - 9,200 - 0 - 14,916
Terry A. Straeter(3) 1996 $226,900 $174,177 - 0 - 12,000 - 0 - $50,605
Vice President 1995 212,019 138,273 - 0 - 15,000 $243,132 24,296
1994 205,769 265,000 - 0 - 5,000 - 0 - 8,015
Barry G. Campbell, 1996 $235,885 $129,938 - 0 - 12,000 - 0 - $11,865
Vice President 1995 209,244 105,074 - 0 - 20,000 - 0 - 9,699
1994 197,627 81,113 - 0 - - 0 - $212,400 549
Robert K. Floyd, 1996 $230,568 $149,446 - 0 - 12,000 - 0 - $22,585
Vice President & CFO 1995 216,448 126,703 - 0 - 20,000 - 0 - 17,592
1994 189,017 112,933 - 0 - 7,500 - 0 - 4,939
George R. Melton, 1996 $200,366 $133,502 - 0 - 12,000 - 0 - $16,803
Vice President 1995 166,675 88,069 - 0 - 18,000 - 0 - 10,973
1995 167,638 53,093 - 0 - - 0 - - 0 - 9,727
</TABLE>
- ----------
1. Includes term life insurance premiums paid by the Company on
behalf of each named individual.
2. No SARs have been issued as of the dates indicated.
3. During the majority of 1994, Dr. Straeter was employed by
GDE Systems, Inc. when it was a subsidiary of GDE Holdings, Inc.
Option Grants in Fiscal Year 1996(1)
<TABLE>
<CAPTION> Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Full Option Term
---------------------------------------------- ----------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal or Expiration
Name Granted 1996 Base Price Date 5% ($) 10% ($)
- -------------------- ---------- ---------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James B. Skaggs 100,000 26.27% 16.13 02/27/2006 $1,014,407.03 $2,570,706.59
Barry G. Campbell 12,000 3.15% 16.13 02/27/2006 121,728.84 308,484.79
Robert K. Floyd 12,000 3.15% 16.13 02/27/2006 121,728.84 308,484.79
George R. Melton 12,000 3.15% 16.13 02/27/2006 121,728.84 308,484.79
Terry A. Straeter 12,000 3.15% 16.13 02/27/2006 121,728.84 308,484.79
- --------------------------------------------------------------------------------------------------
</TABLE>
_____________
1. The per share option exercise prices are the fair market value of the
Company's common stock on the date of the grant, and the term of each
option is 10 years. 30% of each option is exercisable one year after
the date of grant, an additional 30% is exercisable two years after
the grant, and the remainder is exercisable three years after the grant.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End(1)
Number of --------------------------- --------------------------
Shares Exercisable
Acquired Value at
Name on Exercise Realized 12/31/96 Unexercisable Exercisable Unexercisable
- ------------------ ----------- -------- ----------- ------------- ----------- -------------
<S>
<C> <C> <C> <C> <C> <C> <C>
James B. Skaggs 15,000 $331,875 250,520 243,680 $3,992,930 $1,700,120
Barry G. Campbell -0- -0- 31,000 26,000 377,500 176,940
Robert K. Floyd 1,000 21,630 64,500 29,000 1,101,250 203,940
George R. Melton 3,800 81,592 56,600 24,600 1,001,900 165,390
Terry A. Straeter -0- -0- 7,500 24,500 64,125 166,065
- ------------------------------------------------------------------------------------------------------
</TABLE>
_____________
1. The last sale price of the Common Stock on December 31, 1996 was
$21.25 per share.
Employment Agreements
Effective as of November 22, 1996, the Company entered into employment
agreements with certain of its officers who had not previously entered into
employment agreements with the Company and, further, entered into amended
and restated employment agreements with certain of its officers who had
previously entered into employment agreements with the Company. Each of
the above-named officers has executed employment agreements with the
Company, except for Dr. Straeter, whose employment agreement is with GDE
Holdings, Inc., a subsidiary of the Company. All of the agreements provide
for a termination date of the earlier of December 31, 1999, or the first
day of the year following the year in which the officer reaches his/her
65th birthday. The agreements also provide for automatic renewals unless
terminated earlier by the officer or the Board of Directors.
Among other things, the employment agreements assure the continuation of
each such officer's base salary and his/her continued participation in the
Company incentive and other welfare and benefit plans, as well as
continuation of his/her then current level of job position and
responsibilities, failing which such officer may terminate his/her
employment with the Company and receive, as termination pay, stipulated
amounts equal to up to two times such officer's base salary then in effect
and other benefits. Under each employment agreement, the Company has the
right to terminate an officer for cause, under which circumstances the
officer would not be entitled to termination pay. Each agreement provides
that upon termination the officer will not compete with the Company for a
period of six months after the date of termination nor will the officer
divulge confidential information or trade secrets to third parties.
Retirement Benefits and Related Information
The Company has a Defined Benefit Retirement Plan (the "Retirement Plan")
which provides retirement benefits for its employees and employees of
participating affiliates. The plan has three benefit formulas as described
below for Tracor, Vitro, and GDE employees. Employees covered under the
Tracor formula become vested in the Retirement Plan upon the completion of
five years of vesting service. Monthly benefits, payable at normal
retirement age, are based upon an amount equal to one percent of final
"average monthly compensation" up to "covered compensation" plus one and
one-half percent of final average monthly compensation in excess of covered
compensation, multiplied by the years of credited service with the Company,
less one year. Average monthly compensation is defined as the average
monthly compensation actually paid, including bonuses and overtime pay for
the five highest successive calendar years. Covered compensation is defined
as the average of the maximum wages subject to social security taxes for
the 35 years ending in the calendar year before the employee reached Social
Security retirement age. Credited service is the period of the employee's
total employment with the Company. The monthly benefits are not subject to
deductions for Social Security or other offset amounts.
Employees covered under the Vitro formula are provided monthly benefits,
payable at normal retirement age, which are based on the amount equal to
one and one-tenth percent of average annual compensation up to covered
compensation plus one and three-quarters percent of average annual
compensation in excess of covered compensation, multiplied by the years of
credited service. Average annual compensation means the average of annual
earnings during the employee's five consecutive highest paid years with
Vitro. Credited service generally means all the employee's years of service
with Vitro. The monthly benefits are not subject to deductions for Social
Security or other offset amounts.
Employees covered under the GDE formula are provided monthly benefits,
payable at normal retirement age, which are based on the amount equal to
approximately one and three-tenths percent of average annual compensation,
multiplied by the years of credited service. Average annual compensation
means the average of annual earnings during the employee's five consecutive
highest paid years with GDE. Credited service generally means all the
employee's years of service with GDE. The monthly benefits are not subject
to deductions for Social Security or other amounts.
The following tables show the estimated annual benefits payable upon
retirement to persons in specified remuneration and years of service
classifications who would retire in 1997 at age 65. The amounts shown in
the tables were determined as normal retirement benefits at December 31,
1996, and were based on pay limited by Section 401(a)(17) of the Internal
Revenue Code (the "Code"). Benefits are limited by Section 415 of the Code
without regard to combined plan limitations.
Retirement Plan Benefits
Tracor, Inc.
<TABLE>
<CAPTION>
Years of
Service
--------------------------------------------------
Final Average
Annual Compensation 15 20 25 30 35
- ------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000 24,320 33,005 41,691 50,376 59,062
$150,000 29,570 40,130 50,691 61,251 71,812
$175,000 33,726 46,176 58,626 71,076 83,526
$200,000 37,852 52,176 66,502 80,826 95,152
$225,000 41,976 58,176 74,376 90,576 106,776
$250,000 43,766 60,778 77,792 94,804 111,818
$300,000 43,766 60,778 77,792 94,804 111,818
$350,000 43,766 60,778 77,792 94,804 111,818
$400,000 43,766 60,778 77,792 94,804 111,818
$450,000 43,766 60,778 77,792 94,804 111,818
$500,000 43,766 60,778 77,792 94,804 111,818
$1,281,573(1) 43,766 60,778 77,792 94,804 111,818
</TABLE>
Vitro Corporation(2)
<TABLE>
<CAPTION>
Years of
Service
--------------------------------------------------
Final Average
Annual Compensation 15 20 25 30 35
- ------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000 30,124 40,165 50,206 60,248 70,289
$150,000 36,686 48,915 61,144 73,373 85,602
$175,000 41,963 56,390 70,817 85,244 99,671
$200,000 47,213 63,827 80,442 97,057 113,671
$225,000 52,463 71,265 90,067 108,869 120,000
$250,000 54,739 74,490 94,240 113,991 120,000
$300,000 54,739 74,490 94,240 113,991 120,000
$350,000 54,739 74,490 94,240 113,991 120,000
$400,000 54,739 74,490 94,240 113,991 120,000
$438,987(1) 54,739 74,490 94,240 113,991 120,000
</TABLE>
___________
1. Represents 120% of covered compensation for the most highly compensated
individual who would be entitled to benefits under this particular plan.
2. Employees of Vitro Corporation and Vitro Services Corporation whose
credited service begins on or after January 1, 1996, are covered under
the Tracor benefit formula. Benefits based on $150,000 pay are limited
with a minimum benefit, as of December 31, 1993, under prior pay plan.
GDE Systems, Inc.
<TABLE>
<CAPTION>
Years of
Service
--------------------------------------------------
Final Average
Annual Compensation 15 20 25 30 35
- ------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000 25,000 33,333 41,667 50,000 58,333
$150,000 30,000 40,000 50,000 60,000 70,000
$175,000 34,000 45,667 57,333 69,000 80,666
$200,000 38,000 51,333 64,667 78,000 91,333
$225,000 42,000 57,000 72,000 87,000 102,000
$250,000 43,734 59,457 75,180 90,902 106,625
$300,000 43,734 59,457 75,180 90,902 106,625
$350,000 43,734 59,457 75,180 90,902 106,625
$400,000 43,734 59,457 75,180 90,902 106,625
$450,000 43,734 59,457 75,180 90,902 106,625
$481,292(1) 43,734 59,457 75,180 90,902 106,625
</TABLE>
___________
1. Represents 120% of covered compensation for the most highly compensated
individual who would be entitled to benefits under this particular plan.
Benefits under the Retirement Plan are computed based on a straight-life
annuity, and monthly benefits are not subject to deductions for social
security or other offset amounts.
As of December 31, 1996, the persons named in the Summary Compensation
Table were credited with the following years of service under the
Retirement Plan: Mr. Floyd, 6.6; Mr. Skaggs, 6.8; Mr. Melton, 6.8; Dr.
Straeter, 16.8; and Mr. Campbell, 26.6.
The remuneration covered by the Retirement Plan for the named executive
officer generally corresponds with the salary amounts set forth in the
Summary Compensation Table.
Non-Qualified Supplemental Retirement Benefit. During 1993, the Company
established a Non-Qualified Supplemental Retirement Program for certain of
its officers, which was amended and restated effective as of January 30,
1997 (hereafter, the "Program"). The Program provides that upon normal
retirement or termination not for cause, Company officers covered by the
Program will receive a monthly income of up to 50% of the
average compensation for the 36 months immediately prior to the date of
retirement or termination, less the amount of retirement benefits which the
officer would otherwise be entitled to under the Retirement Plan. The
actual amount the participant would be entitled to receive is determined
by the participant's total number of years of service to the Company after
December 21, 1991. The Program further provides that upon the death of the
participant, his or her spouse would also be entitled to receive a monthly
income equal to one-half of the benefit which would otherwise be payable
to the officer. Currently, Messrs. Skaggs, Floyd, and Melton are
participants in the Program. The Program additionally provides that if any
of the participants are terminated without cause, they shall become
immediately 100% vested in the Program, and in the case of Messrs. Skaggs
and Floyd, they may elect to receive the benefits payable to them under the
Program in a lump sum. Assuming the individuals remain in the employ of the
Company until their normal retirement age, each of the following executives
will receive an annuity, as described above, which, on an actuarial basis,
is equal to the following annual payments: Mr. Skaggs, $465,487; Mr.
Floyd, $166,014; and Mr. Melton, $221,943.
Dr. Straeter is eligible to receive benefits from the GDE Systems, Inc.
Supplemental Retirement Plan. This plan is designed to replace any pension
benefit lost to Dr. Straeter if his final average covered compensation is
in excess of the limitations for eligible compensation contained
in Sections 415 or 401(a)17 of the Code. Assuming Dr. Straeter remains
employed by the Company until his normal retirement age, he will receive
an annuity with an estimated annual payment of $141,282.
Mr. Campbell is eligible to receive benefits from the Tracor Benefit
Restoration Plan. This plan, adopted October 1, 1996, is designed to
replace any pension benefit lost to Mr. Campbell if his final average
monthly covered compensation is in excess of the limitations for eligible
compensation contained in Sections 415 or 401(a)17 of the Code. Assuming
Mr. Campbell remains with the Company until his normal retirement age, he
will receive an estimated lump sum payment of $1,635,681
Effective December 1, 1996, Tracor adopted the Tracor Deferred Compensation
Plan designed primarily to replace 401(k) Plan benefits lost due to the
Code limitations on employee deferrals and covered compensation used to
determine benefits from the qualified Tracor, Inc. 401(k) Plan. For 1996
matching contributions were credited in the amount of $6,612 to Mr. Skaggs;
$1,756 to Mr. Campbell; $2,036 to Mr. Floyd; and $1,670 to Mr. Melton.
Outside (non-employee) directors of the Company receive annual Board
retainers of $20,650, plus travel and allowances where appropriate.
Attendance fees of $1,000 per meeting are also paid. Directors who also
serve on a committee of the Board of Directors receive $950 for each
committee meeting attended. Directors who chair committees receive an
additional $950 per meeting attended. Directors who are currently on the
board at the first of each year receive 1,000 shares of common stock and
are granted 2,000 shares of stock options at the current market price.
COMMITTEES OF THE BOARD
Audit/Ethics Committee
The Committee met three times in 1996. The duties of the Audit/Ethics
Committee are to:
a. recommend to the Board of Directors a firm of independent auditors to
perform the audit of the annual financial statements of the Company;
b. review with the independent auditors and with financial management the
proposed scope of the annual audit, past audit experience, the
Company's internal audit program, recently completed internal audits,
and other matters bearing upon the scope of the audit;
c. review with the independent auditors and with financial management
significant matters revealed in the course of the audit of the annual
financial statements of the Company;
d. review on an annual basis whether the Company's ethics policies have
been communicated by the Company to all key employees of the Company
and its subsidiaries;
e. review with financial management any suggestions and recommendations
of the independent auditors of the Company;
f. meet on a regular basis with a representative or representatives of
the Internal Audit Department of the Company and to review the
Internal Audit Department's Reports of Operations; and
g. report its activities and actions to the Board at least once each
fiscal year.
Members of the Audit/Ethics Committee are Anthony Grillo, chairman; William
E. Conway; and Lt. Gen. Thomas P. Stafford.
The independent auditors and Tracor's internal auditor have direct access
to the Committee and may discuss with it any matters which may arise in
connection with audits, the maintenance of internal accounting controls,
or any other matter relating to Tracor's financial affairs. Furthermore,
the Committee may authorize the independent auditors to investigate any
matters which the Committee deems appropriate and may present its
recommendations and conclusions to the Board.
Compensation/Stock Option Committee
The Committee met four times in 1996. The duties of the Compensation/Stock
Option Committee are to:
a. administer the Tracor stock option plan;
b. recommend policies dealing with compensation, position evaluations,
and personnel engagements, transfers, and terminations, including the
Company's annual incentive program;
c. review and recommend major compensation plans;
d. recommend the Company's management development programs and
procedures;
e. approve and recommend to the Board of Directors compensation for
corporate officers; and
f. review the administration of the Company's Retirement Plan.
Members of the Compensation/Stock Option Committee are Julian Davidson,
chairman; Bob Marbut; and Elvis L. Mason.
COMPENSATION/STOCK OPTION COMMITTEE REPORT
Executive Compensation Principles
The Company's Executive Compensation Program is based on guiding principles
designed to align executive compensation with Company values and
objectives, business strategy, management initiative, and business
financial performance. In applying these principles, the
Compensation/Stock Option Committee (the "Committee") has established a
program to:
a. attract and retain key executives critical to the long-term success
of the Company and each of its business groups;
b. reward executives for long-term strategic management and enhancement
of stockholder values;
c. integrate compensation programs with both the Company's annual and
long-term strategic planning and measuring processes; and
d. support a performance-oriented environment that rewards performance
not only with respect to Company goals but also Company performance
as compared to that of industry performance levels.
Executive Compensation Program
The total compensation program consists of both cash and equity-based
compensation. The annual compensation consists of a base salary and an
annual incentive. The Committee determines the level of salary for key
executive officers and a salary range for other executive officers. Actual
salary changes are based upon performance and upon national industry salary
surveys in related industries, depending on the areas in which the
particular executive is employed, and supplemented by other surveys which
are used to enhance the analysis. These surveys covered essentially the
same companies that are included in the table comparing the cumulative
total returns of the Company, set forth below. The salary levels are
targeted to the median of such surveys, with variations based upon the
experience of each officer and the complexity of his/her particular
responsibilities. In considering the salary increases from 1996 to 1997,
the Committee also evaluated each executive's performance in several areas,
including increases in sales and revenue from the preceding year, increases
in profits in the executive's area of responsibility, and the success of
his/her budgetary controls. No increases were required, or given, pursuant
to the terms of any employment agreements.
Incentive Compensation Program
Effective in December 1991, the Company adopted a performance incentive
plan under which executive officers and other high-level employees may
receive compensation based on the achievement of individual and Company
objectives. Eligible participants include officers and other key employees
of the Company who are in a position to make substantial contributions to
the management, growth, and success of the Company. Payment of an award is
contingent upon the achievement of specified levels of earnings, bookings,
revenue, and cash generation of the Company or the employee's unit
("performance goals") each year based upon the annual operating plan of the
Company. A smaller portion of each person's incentive payment is based on
individual and organizational goals such as increases in efficiency of the
executive's area of responsibility, adherence to budgetary plans, and
implementation of new operating procedures and programs. At the close of
each fiscal year, the performance of the operating unit in which the
employee participates is reviewed against the performance goals, division
objectives are evaluated, and awards are issued. In the event the
performance goals are not achieved, the awards are reduced or eliminated
entirely. If performance goals are exceeded, the amount of an award may
be increased. In reviewing the performance of the named executives for
1996, the Committee determined each individual and Tracor exceeded their
respective goals for the year. Executive officers as a group were awarded
payments totaling $1,749,151.19, and all employees as a group received
payments totaling $7,360,905.42 under this plan in 1996.
Stock Plan
The Company adopted, in December 1991, the Stock Plan for Employees of
Tracor, Inc. and its Subsidiaries (the "1991 Plan"). In April 1995, the
Company adopted the 1995 Stock Plan for Employees of Tracor, Inc. and its
Subsidiaries (the "1995 Plan" or, collectively, the "Stock Plans") pursuant
to which options to purchase common stock of the Company, stock
appreciation rights ("SARs") (rights, granted in tandem with an option (or
alone), to receive cash payments equal to any appreciation in value of the
shares subject to option from the date of the option grant to the date of
exercise in lieu of the exercise of an option), and/or shares of restricted
stock may be granted to officers and other key employees of the Company and
its subsidiaries. The plans are administered by the Committee which has
authority to determine the individuals to whom and the terms pursuant to
which grants shall be made. Per share option prices are not less than the
fair market value of the Company's common stock on the date of the option
grant, and the term of the options cannot exceed 10 years. The two plans
are identical in all material respects, except that outside directors
participate in the 1995 Plan.
Under the Stock Plans, the Committee grants stock options, restricted
shares, and/or SARs based upon its review of surveys and publicly available
information relating to the amount and type of awards granted to executives
in the aerospace and defense industry, as well as its review of each
executive's performance, evaluated as described above. Through the award
of options, the objective of aligning executive officers' long-range
interests with those of the shareholders are met by providing the executive
officers with the opportunity to build a meaningful stake in the Company.
Officer Compensation
The Compensation Committee of the Board of Directors met for the purpose
of evaluating the performance of the Company's CEO. In accordance with the
Company's Executive Compensation Program, the Committee evaluated Mr.
Skaggs' performance for the year based on both objectively evaluated
quantitative criteria and on subjectively evaluated qualitative criteria.
Mr. Skaggs' base salary and total compensation were also evaluated with
respect to similar positions in the industry using a number of compensation
surveys. The goal of the Committee was to determine whether an increase
in his base salary was merited, and, if so, how much of an increase should
be recommended to the Board. The Committee additionally determined the
amount of incentive compensation and stock options to recommend that the
Board award to Mr. Skaggs.
At the beginning of each fiscal year, the Board of Directors establishes
quantitative and qualitative goals or "targets" for the CEO of the Company.
Results are evaluated at the end of the fiscal year.
Quantitative Goals
For 1996, the Committee evaluated the results of three quantitative
criteria. They were:
Target Actual
(In Millions) (In Millions) % of Target
------------- ------------- -----------
Earnings(1) $ 88.8 $ 104.6 118%
Net Cash Activity 52.5 60.9 116%
Bookings 940.2 1,112.5 118%
________________
1. Before interest, taxes, depreciation, and other deductions.
Qualitative Goals
In addition, the Committee subjectively evaluated the results of
qualitative criteria. The qualitative criteria include:
a. Return on shareholders' equity;
b. Share price increase;
c. Shareholders' equity increase;
d. Achievement of strategic business goals;
e. The conduct of business operations;
f. Board communications;
g. Equity restructuring to reduce warrants; and
h. Maintain outstanding corporate team
Base Salary and Annual Incentive Compensation
Based upon its review of Mr. Skaggs' overall 1996 performance for base
salary and annual incentive purposes, the Committee determined Mr. Skaggs
significantly exceeded both quantitative and qualitative target measures.
The Committee also considered the Company's 1996 performance improvements
over 1995 in determining the base salary increase. These improvements
included a 22% increase in sales, a 36% increase in earnings before
interest and taxes, a 31% increase in net income, a 12% increase in firm
backlog, and a 41% increase in total backlog. As a result, the Committee
recommended that Mr. Skaggs should receive a base salary increase of
approximately ten percent (10%) effective for the 1997 year.
Mr. Skaggs' annual incentive compensation for 1996 was calculated using a
mathematical equation which took into account quantitative performance
results related to earnings, net cash, and bookings plus the achievement
of qualitative goals as evaluated by the Committee. Using the mathematical
equation and the evaluated incentive results described above, Mr. Skaggs'
recommended annual incentive bonus is 83.13% of his 1996 base salary.
Stock Option Grants
The stock option grants made to Mr. Skaggs under the Company's Stock Plan
were determined using the criteria described under the Stock Plan
referenced previously. Option grants received by Mr. Skaggs in fiscal year
1996 are noted under the Executive Compensation section showing the five
most highly compensated officers.
Compensation/Stock Option Committee
Dr. Julian Davidson, chairman
Bob Marbut
Elvis L. Mason
Comparison of Cumulative Total Return1
Among the Nasdaq Market Index,
Dow Jones Defense & Aerospace Index,
and Tracor, Inc.
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's common stock, based on the market price of the
common stock and assuming reinvestment of dividends, with the cumulative
total return of companies on the Nasdaq Market Index and the Dow Jones
Defense & Aerospace Index.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
Among Dow Jones Aerospace and Defense, Nasdaq Market Index, and Tracor, Inc.
<CAPTION>
DJ Aerospace & Nasdaq Market Tracor,
Measurement Period Defense Index Inc.
------------------ -------------- --------------- -------
<S> <C> <C> <C>
1st Quarter '92 100.00 100.00 100.00
2nd Quarter '92 95.30 92.57 103.23
3rd Quarter '92 90.83 92.15 83.76
4th Quarter '92 94.94 101.03 125.33
1st Quarter '93 103.61 110.72 166.36
2nd Quarter '93 113.23 110.03 177.98
3rd Quarter '93 121.61 116.88 287.22
4th Quarter '93 127.97 123.14 378.23
1st Quarter '94 140.81 126.40 419.29
2nd Quarter '94 141.60 117.15 352.43
3rd Quarter '94 146.19 119.20 349.76
4th Quarter '94 148.84 121.86 479.42
1st Quarter '95 160.25 128.00 526.66
2nd Quarter '95 194.82 141.28 591.26
3rd Quarter '95 222.32 166.23 729.96
4th Quarter '95 243.11 170.81 699.72
1st Quarter '96 275.53 176.17 706.47
2nd Quarter '96 288.63 196.24 858.46
3rd Quarter '96 306.39 189.15 849.45
4th Quarter '96 329.92 208.51 1,005.75
</TABLE>
- ---------------
1. Assumes $100.00 invested on January 1, 1992, in the Nasdaq
Market Index, Dow Jones Defense & Aerospace Index, and Tracor, Inc.
Item 12. Ownership of Management and Principal Stockholders
The following tables set forth as of March 17, 1997, certain information
known to the Company with respect to the beneficial ownership (as defined
in the rules of the Commission) of Tracor Common Stock by all directors,
the chief executive officer and the other executive officers named on the
summary compensation table, all directors and executive officers as a group
and any person who is known by the Company to be the beneficial owner of
more than five percent of the Tracor Common Stock. The percentages are
calculated including shares which are subject to outstanding warrants and
options held by directors and officers.
<TABLE>
<CAPTION>
Name and Address of Number of Percent(1)
Beneficial Owner Shares
------------------- --------- ----------
<S> <C> <C> <C>
Dr. Julian Davidson 6,000(2) *
1240 Deborah Drive, S.E.
Huntsville, AL 35801
Anthony Grillo 16,000(3) *
358 Oxford Drive
Short Hills, NJ 07078
Bob Marbut 30,500(4) *
511 Argyle
San Antonio, TX 78209
Elvis L. Mason 1,416,871(5) 5.7%
3716 Maplewood
Dallas, TX 75205
Lt. Gen. Thomas P.
Stafford (Retired) 10,000(6) *
Coral Harbor Club
Unit C-44
88181 Old Highway-MM88
Islamorada, FL 33036
James B. Skaggs 287,849(7) 1.2%
Tracor, Inc.
6500 Tracor Lane
Austin, TX 78725-2000
Barry G. Campbell 32,583(8) *
16327 Bawtry Court
Bowie, MD 20715
Robert K. Floyd 68,911(9) *
Tracor, Inc.
6500 Tracor Lane
Austin, TX 78725-2000
George R. Melton 63,400(10) *
Tracor, Inc.
6500 Tracor Lane
Austin, TX 78725-2000
Dr. Terry A. Straeter 190,833(11) *
GDE Systems, Inc.
16550 West Bernardo Drive
San Diego, CA 92127
William E. Conway 18,046(12) *
The Carlyle Group
1001 Pennsylvania Avenue, NW
Suite 220 South
Washington, DC 20004
Gerald B. Unterman 2,038,474(13) 8.0%
70 E. 55th Street
New York, NY 10022
Edward C. Johnson 1,481,700(14) 6.0%
82 Devonshire Street
Boston, MA 02109
Warburg, Pincus 1,464,200 5.9%
Counsellors, Inc.
446 Lexington Avenue
New York, NY 10017
All directors and 2,454,616(15) 9.7%
executive officers as a
group, including those
names above.
</TABLE>
1 * = less than 1%.
2 2,000 shares are held directly by Dr. Davidson;
4,000 shares are held pursuant to stock options,
none of which are currently exercisable.
3 12,000 shares are held directly by Mr. Grillo;
4,000 shares are held pursuant to stock options,
none of which are currently exercisable.
4 26,500 shares are held directly by Mr. Marbut;
4,000 shares are held pursuant to stock options,
none of which are currently exercisable.
5 6,000 shares of common stock are held directly by Mr. Mason.
Mr. Mason is the president of E. L. Mason Corporation,
which is the general partner of MB Partners, Ltd. ("MB Partners"),
which is the general partner of the Mason Best Company, L.P.
("Mason Best"). Mason Best directly owns 1,398,067 shares of
common stock. Mr. Mason owns 50% of the general partner of Mason
Best, MB Partners; however, Mr. Mason holds 100% of the voting
rights in the general partner of Mason Best. In addition,
Mr. Mason is the managing partner of Mason Best. As a result,
Mr. Mason may be deemed to beneficially own 100% of the shares
held by Mason Best. MB Partners directly owns 8,804 shares of
common stock, and Mr. Mason owns 100% of E.L. Mason
Corporation, which is the general partner of MB Partners, and
may be deemed to beneficially own 100% of the shares held by
MB Partners. 4,000 shares are held pursuant to stock options,
none of which are currently exercisable.
6 6,000 shares are held directly by Lt. Gen. Stafford;
4,000 shares are held pursuant to stock options,
none of which are currently exercisable.
7 250,520 shares are held pursuant to currently exercisable stock
options. In addition, 5,000 shares are held pursuant to Series
A Warrants which are convertible into common stock, and 32,329
shares are held directly.
8 1,583 shares are held directly, and 31,000 shares are held
pursuant to currently exercisable stock options.
9 3,411 shares are held directly, and 64,500 shares are held
pursuant to currently exercisable stock options. In addition,
1,000 shares are held pursuant to Series A Warrants which are
convertible into common stock.
10 9,800 shares are held directly, and 53,600 shares are pursuant
to currently exercisable stock options.
11 18,000 shares are owned directly by Dr. Straeter, and 160,333
shares are held by a family trust over which Dr. Straeter has
control. In addition, 7,500 shares are held pursuant to
currently exercisable stock options, and 5,000 shares are
issuable upon exercise of Series A Warrants.
12 14,046 shares are held directly, and 4,000 shares are held
pursuant to stock options, none of which are currently exercisable.
13 GBU, Inc. is the sole general partner of Oak Tree Partners, L.P.
and GEM Convertible Securities Partners, L.P. GBU beneficially
owns 1,177,599 shares of Tracor common stock (which are directly
owned by Oak Tree Partners, L.P.) and 152,500 Series A
Warrants (which are directly owned by GEM Convertible Securities
Partners, L.P.) to purchase Tracor common stock. Mr. Unterman
is the president, majority shareholder, and a director of
GBU, Inc. He is also the president, sole shareholder, and a
director of GEM Capital Management, Inc. GEM Capital Management,
Inc. is a registered investment advisor whose accounts own 60,001
shares of Tracor common stock which Mr. Unterman may be deemed to
beneficially own. Mr. Unterman is the trustee of a profit sharing
plan which owns 34,000 shares of Tracor common stock.
In addition, Mr. Unterman owns directly 100,000 shares of Tracor
common stock and 514,375 Series A Warrants.
With respect to the 1,177,599 shares owned by Oak Tree Partners,
L.P., GBU owns a 9.9% interest in that partnership and Gerald B.
Unterman owns 83% of GBU, Inc. Therefore, Mr. Unterman claims
beneficial ownership of only 97,740 of those shares.
With respect to the 152,500 shares which may be acquired upon
the exercise of the 152,500 Series A Warrants owned by GEM
Convertible Securities Partners, L.P., GBU, Inc. owns a 1%
interest in that partnership, and Mr. Unterman owns 83% of
GBU, Inc. Therefore, Mr. Unterman claims beneficial ownership
of only 1,266 of those shares.
14 Mr. Johnson is the chairman of FMR Corp. which beneficially
owns 1,481,700 shares of Tracor common stock. Fidelity
Management and Research Company, a wholly owned subsidiary of
FMR Corp., is the beneficial owner of 1,396,700 shares of Tracor
common stock. Mr. Johnson through his control of Fidelity
Management and Research Company has sole dispositive power over
1,396,700 shares. Mr. Johnson and FMR Corp., through its control
of Fidelity Management Trust Company, each have sole dispositive
power over 85,000 and sole power to vote or to direct the voting
of 82,300 shares, and no power to vote or to direct the voting
of 2,700 shares of Tracor common stock.
15 Includes shares subject to outstanding warrants and options held
by directors and officers.
Item 13. Certain Relationships and Related Transactions.
On June 13, 1996, the Company consummated the acquisition (the "Westmark
Acquisition") of substantially all of the assets of Westmark Systems, Inc.
("Westmark"), which had the effect of simplifying the Company's capital
structure. The purchase consideration paid by Tracor to Westmark in the
Westmark Acquisition included 8,267,435 shares of Tracor common stock.
Shortly after its acquisition of the shares of Tracor common stock,
Westmark dissolved and distributed all of such shares to its shareholders
in a complete liquidation. The principal assets of Westmark acquired by
Tracor in the Westmark Acquisition were 978,458 shares of Class A Common
Stock of Tracor (the "Class A Common Stock"), a Series B Warrant to
purchase 5,249,428 shares of Tracor common stock (the "Series B Warrant"),
and a Series C Warrant to purchase 5,455,000 shares of Tracor common stock
(the "Series C Warrant" and, together with the Series B Warrant, the
"Tracor Warrants"). The shares of the Class A Common Stock and the Tracor
Warrants were cancelled and will not be reissued.
Elvis Mason, a director of the Company, through his ownership in Mason Best
Company, received an indirect benefit from this transaction. See footnote
12 to Item 12. "Ownership of Management and Principal Shareholders."
Recent Developments.
On February 12, 1997, the Board of Directors of the Company adopted a
preferred share purchase rights plan (the "Rights Plan"), exercisable only
if a person or group acquires 20% or more of Tracor's common stock or
announces a tender offer which would result in ownership by a person or
group of 20% or more of Tracor's common stock. The Rights Plan is designed
to deter coercive or abusive takeovers, and ensure fair and equal treatment
of all shareholders in the event of any proposed takeover of the Company.
The Rights Plan may have an effect on the Change of Control provisions in
the Indenture, to the extent that the Rights Plan could make a Change of
Control less likely to occur.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a)(1) Financial Statements. The following financial statements and
supplementary data of Tracor are presented in a separate section of
this Form 10-K.
Report of Independent Auditors.
Consolidated Income Statements.
Consolidated Balance Sheets.
Consolidated Statements of Shareholders' Equity.
Consolidated Statements of Cash Flows.
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules. All schedules are omitted because
the required information is included elsewhere in the financial
statements or is otherwise inapplicable.
(a)(3) Exhibits.
2.1 Agreement and Plan of GDE Acquisition, dated October 10,
1994, among the Company, Tracor Newco, Inc. ("GDE Acquisition
Sub"), The Carlyle Group, L.P. ("Carlyle") and GDE relating to
the merger of Tracor Newco, Inc. with and into GDE. Exhibit A to
8-K, File Number 0-20227, filed December 1, 1994, is incorporated
herein by reference.
2.2 Amendment No. 1 to Agreement and Plan of GDE Acquisition,
dated as of October 31, 1994, among the Company, the GDE
Acquisition Sub, Carlyle and GDE. Exhibit 2.2 to Form S-1, File
Number 33-67562, filed February 17, 1995, is incorporated herein
by reference.
2.3 Amendment No. 2 to Agreement and Plan of GDE Acquisition,
dated as of November 17, 1994, among the Company, the GDE
Acquisition Sub, Carlyle and GDE. Exhibit 2.3 to Form S-1, File
Number 33-67562, filed February 17, 1995, is incorporated herein
by reference.
2.4 Agreement and Plan of Merger between Tracor, Inc. and
Cordant Holdings, Inc., dated as of September 26, 1996. Exhibit
2.1 to Form 8-K, File Number 0-20227, filed September 26, 1996,
is incorporated herein by reference.
2.5 Agreement and Plan of Reorganization among Tracor, Inc.,
AEL Industries, Inc., and Tracor AEL, Inc., dated as of October
2, 1995, and amended as of January 10, 1996, is incorporated by
reference to Exhibit 2..1 in AEL Industries, Inc.'s Form 8-K
reports dated October 2, 1995 and January 10, 1996.
2.6 Acquisition Agreement dated March 9, 1996, by and among
Tracor, Inc. and Westmark Systems, Inc. Exhibit 2.1 to Form 8-K,
File number 0-20227, filed March 22, 1996, is incorporated herein
by reference.
3.1 Restated Certificate of Incorporation, as amended
(incorporated by reference to the Company's Registration
Statement Number 333-03330 filed with the Securities and Exchange
Commission on April 10, 1996).
3.2 Bylaws of the Company, as amended and restated
(incorporated by reference to the Company's Registration
Statement Number 333-03330 filed with the Securities and Exchange
Commission on April 10, 1996).
4.1 Registration Rights Agreement, dated as of March 14, 1997,
among the Company, the Subsidiary Guarantors named therein and BT
Securities Corporation. Filed herewith.
4.2 Indenture, dated as of March 14, 1997, among the Company
and U.S. Trust Company of Texas, N.A. relating to the 8 1/2%
Senior Subordinated Notes Due 2007. Filed herewith.
4.3 Form of Exchange Notes (included in Exhibit 4.2).
4.4 Series A Indenture, dated as of November 17, 1994, among
the Company, each Subsidiary Guarantor, and U.S. Trust Company of
Texas, N.A., as Trustee, relating to the Series A Notes (the
"Series A Indenture"). Previously filed with the Commission as
an exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-89578) on February 17, 1995 and incorporated herein by
reference.
4.5 First Supplemental Indenture, dated as of April 11, 1995,
to the Series A Indenture. Previously filed with the Commission
as an exhibit to the Registrant's Registration Statement on Form
S-4/S-3 (No. 333-03330) on April 10, 1996 and incorporated herein
by reference.
4.6 Second Supplemental Indenture, dated as of February 2,
1996, to the Series A Indenture. Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-4/S-3 (No. 333-03330) on April 10, 1996 and
incorporated herein by reference.
4.7 Third Supplemental Indenture, dated September 26, 1996, to
the Series A Indenture. Filed herewith.
4.8 Fourth Supplemental Indenture, dated March 14, 1997, to
the Series A Indenture. Filed herewith.
4.9 Specimen Series A Note. Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-89578) on February 17, 1995 and
incorporated herein.
4.10 Indenture, dated as of August 15, 1993, among the Company,
each Subsidiary Guarantor, and U.S. Trust Company of Texas, N.A.,
as Trustee, relating to the Existing Notes (the "Existing Note
Indenture"). Previously filed with the Commission as an exhibit
to the Registrant's Registration Statement on Form S-1 (No. 33-
67562) on August 18, 1993 and incorporated herein by reference.
4.11 First Supplemental Indenture, dated as of November 17,
1994, to the Existing Note Indenture. Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-89578) on February 17, 1995 and
incorporated herein by reference.
4.12 Second Supplemental Indenture, dated as of February 22,
1996, to the Existing Note Indenture. Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-4/S-3 (No. 333-03330) on April 10, 1996 and
incorporated herein by reference.
4.13 Third Supplemental Indenture, dated September 26, 1996, to
the Existing Note Indenture. Filed herewith.
4.14 Fourth Supplemental Indenture, dated March 14, 1997, to
the Existing Note Indenture. Filed herewith.
4.15 Credit Agreement among Tracor, the lending institutions
party to the Credit Agreement, Credit Lyonais, The First National
Bank of Chicago and Wells Fargo (Texas), National Association, as
Co-Agents and Bankers Trust Company, as Agent, dated as of March
14, 1997. Filed herewith.
4.16 1995 Stock Plan for Employees of Tracor, Inc. and
Subsidiaries. Previously filed with the Commission as an exhibit
to the Registrant's Registration Statement on Form S-8 (No.
33-93186) on June 2, 1995 and incorporated herein by reference.
4.17 Specimen Certificate representing Common Stock of Tracor,
Inc. Previously filed with the Commission as an exhibit to the
Registrant's Registration Statement on Form S-10 (No. 0-20227) on
July 17, 1992 and incorporated herein by reference.
10.1 Form of Employment Agreement. Filed herewith.
10.2 Form of Employment Agreement and Executive Stock
Agreement, dated November 20, 1995 between GDE Systems and Dr.
Terry A. Straeter. Filed herewith.
11.1 Statement regarding computation of income per share.
21.0 Subsidiaries of the Registrant.
23.0 Consent of Independent Auditors.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Tracor, Inc.
Date: March 28, 1997
By: /s/ James B. Skaggs
---------------------
James B. Skaggs,
President and
Chief Executive Officer
Tracor, Inc.
Date: March 28, 1997
By: /s/ Robert K. Floyd
---------------------
Robert K. Floyd,
Vice President,
Chief Financial Officer,
and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: March 28, 1997
By: /s/ William E. Conway, Jr.
--------------------------
William E. Conway, Jr., Director
Date: March 28, 1997
By: /s/ Julian Davidson
--------------------------
Julian Davidson, Director
Date: March 28, 1997
By: /s/ Anthony Grillo
--------------------------
Anthony Grillo, Director
Date: March 28, 1997
By: /s/ Bob Marbut
-------------------------
Bob Marbut, Director
Date: March 28, 1997
By: /s/ Elvis L. Mason
------------------------
Elvis L. Mason, Director
Date: March 28, 1997
By: /s/ James B. Skaggs
------------------------
James B. Skaggs, Director
Date: March 28, 1997
By: /s/ Thomas P. Stafford
------------------------
Lt. Gen. Thomas P. Stafford, Director
EXHIBIT 4.1
________________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of March 14, 1997
by and among
TRACOR, INC.,
THE SUBSIDIARY GUARANTORS NAMED HEREIN,
BT SECURITIES CORPORATION
and
BANKERS TRUST INTERNATIONAL PLC
________________________________________________________________________________
$250,000,000
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
This Registration Rights Agreement is dated as of March 14, 1997,
by and among Tracor, Inc., a Delaware corporation (the "Company"), each of the
subsidiaries of the Company listed on the signature pages hereto as a Guarantor
(collectively, the "Subsidiary Guarantors" and, together with the Company, the
"Issuers") and BT Securities Corporation and Bankers Trust International plc
(collectively, the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated
February 28, 1997, among the Company, the Subsidiary Guarantors and Initial
Purchaser (the "Purchase Agreement"). In order to induce the Initial Purchaser
to enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights provided for in this Agreement to the Initial Purchaser and
their respective direct and indirect transferees and assigns. The execution
and delivery of this Agreement is a condition to the closing of the
transactions contemplated by 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: As defined in Section 4(a) hereof.
Affiliate: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise and the terms "affiliated," controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same may
be amended, supplemented or modified from time to time in accordance with the
terms hereof.
Business Day: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York generally are required or
authorized by law or other government action to be closed.
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the term
"Exchange Offer", shall mean validly and lawfully to issue and deliver the
Exchange Notes pursuant to the Exchange Offer for
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all Notes validly tendered and not validly withdrawn pursuant thereto in
accordance with the terms of this Agreement.
Consummation Date: The date that is 20 Business Days immediately
following the date that the Exchange Registration Statement shall have been
declared effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 8 1/2% Senior Subordinated Notes due 2007 of
the Company, guaranteed on a senior subordinated unsecured basis by each of the
Subsidiary Guarantors, that are identical to the Notes in all material
respects, except that the provisions regarding restrictions on transfer shall
be modified, as provided in the Indenture (or the indenture pursuant to which
the Exchange Notes are issued), and the issuance thereof pursuant to the
Exchange Offer shall have been registered pursuant to an effective Registration
Statement in compliance with the Securities Act.
Exchange Offer: An offer to issue, in exchange for any and all
of the Notes, a like aggregate principal amount of Exchange Notes, which offer
shall be made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a)
hereof.
Filing Date: As defined in Section 2(a) hereof.
Indemnified Person: As defined in Section 7(a) hereof.
Indenture: The Indenture, dated as of March 1, 1997, among the
Issuers and U.S. Trust Company of Texas, N.A., as trustee thereunder, pursuant
to which the Notes are issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchaser: As defined in the preamble hereof.
Issue Date: As defined in Section 2(a) hereof.
Issuers: As defined in the preamble hereof.
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Notes: The 8 1/2% Senior Subordinated Notes due 2007 of the
Company, guaranteed on a senior subordinated unsecured basis by each of the
Subsidiary Guarantors, issued pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(e) hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Notes, Exchange
Notes or Private Exchange Notes covered by such Registration Statement, and all
other amendments and supplements to any such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference, if any, in such prospectus.
Registration Default: As defined in Section 4(b) hereof.
Registration Statement: Any registration statement of the
Company and the Subsidiary Guarantors that covers any of the Notes, Exchange
Notes or Private Exchange Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such registration statement.
Rule 144(k): Rule 144(k) promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
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Rule 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Shelf Filing Event: As defined in Section 3(a) hereof.
Shelf Registration: As defined in Section 3(a) hereof.
Shelf Registration Statement: As defined in Section 3(a) hereof.
Special Counsel: Cahill Gordon & Reindel, special counsel to the
holders of Transfer Restricted Notes, or such other counsel as shall be agreed
upon by the Issuers and holders of a majority in aggregate principal amount of
Transfer Restricted Notes, the reasonable expenses of which holders of Transfer
Restricted Notes will be reimbursed by the Issuers pursuant to Section 6
hereof.
Subsidiary Guarantors: As defined in the preamble hereof.
TIA: The Trust Indenture Act of 1939, as amended.
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Transfer Restricted Note: Each Note, upon original issuance
thereof, and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(ii) 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 in the case of any such
Note, Exchange Note or Private Exchange Note, as the case may be, the earliest
to occur of (i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(ii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer
by means of the Prospectus contained in the Exchange Registration Statement and
(y) the date on which the Exchange Registration Statement has been effective
under the Securities Act for a period of six months after the Consummation
Date, (iii) a Shelf Registration Statement covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed
of in accordance with such effective Shelf Registration Statement, (iv) the
date on which such Note, Exchange Note or Private Exchange Note, as the case
may be, is eligible for distribution to the public without volume or manner of
sale restrictions pursuant to Rule 144(k) or (v) the date on which such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other indenture under which
such Exchange Note or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
underwritten registration or underwritten offering: A
registration in connection with which securities are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
2. Exchange Offer.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Issuers shall (A)
prepare and, on or prior to 45 days (the "Filing Date") after the date of
original issuance of the Notes (the "Issue Date"), file with the SEC a
Registration Statement under the Securities Act with respect to an offer by the
Company to the holders of the Notes to issue and deliver to such holders, in
exchange for Notes, a like principal amount of Exchange Notes, (B) use their
best efforts to cause the Registration Statement relating to the Exchange Offer
to be declared effective by the
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SEC under the Securities Act on or prior to 135 days after the Issue Date, and
(C) commence the Exchange Offer and use their best efforts to issue, on or
prior to the Consummation Date, the Exchange Notes. The offer and sale of the
Exchange Notes pursuant to the Exchange Offer shall be registered pursuant to
the Securities Act on an appropriate form (the "Exchange Registration
Statement") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws. The Exchange Offer shall not be subject to any condition, other than
that the Exchange Offer does not violate any applicable law or interpretation
of the staff of the SEC. Upon consummation of the Exchange Offer in accordance
with this Section 2, the Issuers shall have no further registration obligations
other than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held
by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which
Section 3(a)(iii) hereof applies. No securities shall be included in the
Exchange Registration Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes, as a
condition to its participation in the Exchange Offer, to represent to the
Issuers and their counsel in writing (which may be contained in the applicable
letter of transmittal) that at the time of the consummation of the Exchange
Offer (i) any Exchange Notes received by such holder will be acquired in the
ordinary course of its business, (ii) such holder will have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and (iii) such holder is
not an Affiliate of an Issuer, or if it is an Affiliate of an Issuer, it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, the
Initial Purchaser holds any Notes acquired by it and having, or which are
reasonably likely to be determined to have, the status of an unsold allotment
in the initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company, upon the request of the Initial
Purchaser or any such holder, shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to the Initial
Purchaser and any such holder, in exchange (the "Private Exchange") for such
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Subsidiary
Guarantors on a senior basis, that are identical in all material respects to
the Exchange Notes (the "Private Exchange Notes") (and which are issued
pursuant to the same indenture as the
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Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number
as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the staff of the SEC, the Company shall
mail the Exchange Offer Prospectus and appropriate accompanying documents,
including appropriate letters of transmittal, to each holder of Notes
providing, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the date of acceptance for exchange (the "Exchange Date"),
which date shall in no event be later than the Consummation Date (unless
otherwise required by applicable law);
(iii) that a holder of a Note electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such Note,
together with the enclosed letters of transmittal, to the institution
and at the address (located in the Borough of Manhattan, The City of New
York) specified in the notice prior to the close of business on the
Exchange Date; and
(iv) that holders of Notes that do not tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by
the Company, and issue, cause the Trustee under the Indenture (or the
indenture pursuant to which the Exchange Notes are issued) to
authenticate, and mail to each holder of Notes, Exchange Notes equal in
principal amount to the principal amount of the Notes surrendered by
such holder.
(e) The Issuers and the Initial Purchaser acknowledge that the
staff of the SEC has taken the position that any broker-dealer that owns
Exchange Notes that were received by such broker-dealer for its own account in
the Exchange Offer (a
-8-
"Participating Broker-Dealer") may be deemed to be an "underwriter" within the
meaning of the Securities Act and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes (other than a resale of an unsold allotment resulting from the
original offering of the Notes).
The Issuers and the Initial Purchaser also acknowledge that it is
the SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement
to the above effect and the means by which Participating Broker-Dealers may
resell the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up to
six months after the Consummation Date or such earlier date as each
Participating Broker-Dealer shall have notified the Company in writing that
such Participating Broker-Dealer has resold all Exchange Notes acquired in the
Exchange Offer, (y) to comply with the provisions of Section 5 of this
Agreement, as they relate to the Exchange Offer and the Exchange Registration
Statement, and (z) to deliver to such Participating Broker-Dealer a "cold
comfort" letter of the independent public accountants of the Issuers and a
legal opinion as to matters reasonably requested by such Participating
Broker-Dealer relating to the Exchange Registration Statement and the related
Prospectus and any amendments or supplements thereto.
(f) The Initial Purchaser shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to
Section 2(e).
(g) Interest on the Exchange Notes and the Private Exchange
Notes will accrue from the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor or, if no interest has been
paid on the Notes, from the date of the original issuance of the Notes.
(h) The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture.
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The Indenture or such 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 neither the Exchange Notes, the Private Exchange
Notes nor the Notes will have the right to vote or consent as a separate class
on any matter.
3. Shelf Registration
(a) If (i) the Company is not permitted to file the Exchange
Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by any applicable law or applicable
interpretation of the staff of the SEC or (ii) any holder of a Note notifies
the Company on or prior to the 30th day following the Issue Date that (A) due
to a change in law or policy it is not entitled to participate in the Exchange
Offer, (B) due to a change in law or policy it may not resell Exchange Notes
acquired by it in the Exchange offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Registration Statement
is not appropriate or available for such resales by such holder or (C) it owns
Notes (including any Initial Purchaser that holds Notes as part of an unsold
allotment from the original offering of the Notes) acquired directly from an
Issuer or an Affiliate of an Issuer or (iii) any holder of Private Exchange
Notes so requests after the consummation of the Private Exchange or (iv) the
Company has not consummated the Exchange Offer within 180 days after the Issue
Date (each such event referred to in clauses (i) through (iv), a "Shelf Filing
Event"), the Issuers shall (i) promptly deliver to the holders and the Trustee
notice thereof and (ii) at their own expense cause to be filed with the SEC
pursuant to Rule 415 a shelf registration statement (the "Shelf Registration
Statement") as promptly as practicable relating to all Transfer Restricted
Notes (the "Shelf Registration") the holders of which have provided the
information required pursuant to Section 3(b) hereof (provided that if the
Shelf Filing Event arises pursuant to clause (iv) above, the Issuers shall file
the Shelf Registration Statement on the 181st day after the Issue Date), and
shall use their best efforts to have the Shelf Registration Statement declared
effective by the SEC after the filing of such Shelf Filing Event. In such
circumstances, the Issuers shall use their best efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act, until
(A) 36 months following the Issue Date or (B) if sooner, the date immediately
following the date that all Transfer Restricted Notes covered by the Shelf
Registration Statement have been sold pursuant thereto or otherwise cease to be
Transfer Restricted Notes (the "Effectiveness Period"); provided that the
Effectiveness Period shall be extended to the extent required to permit dealers
to comply with the applicable prospectus delivery requirements of Rule 174.
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(b) No holder of Transfer Restricted Notes may include any of
its Transfer Restricted Notes in any Shelf Registration Statement pursuant to
this Agreement unless and until such holder furnishes to the Company in
writing, within 15 days after receipt of a request therefor, such information
as the Company may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary prospectus included
therein. No holder of Transfer Restricted Notes shall be entitled to
Additional Interest pursuant to Section 4 hereof unless and until such holder
shall have provided all such reasonably requested information. Each holder of
Transfer Restricted Notes as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such holder not materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of Transfer
Restricted Notes will suffer damages if the Issuers fail to fulfill their
obligations pursuant to Section 2 or Section 3, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, in
the event that
(i) if (A) neither the Exchange Offer Registration Statement
nor Shelf Registration Statement is filed with the Commission on or prior to
the Filing Date or (B) notwithstanding that the Company and the Subsidiary
Guarantors have consummated or will consummate an Exchange Offer, the Company
and the Subsidiary Guarantors are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not filed on or prior to the
date required by this Registration Rights Agreement, then commencing on the day
after either such required filing date, Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.5% per annum for the first 90 days
immediately following each such filing date, such Additional Interest rate
increasing by an additional 0.5% per annum at the beginning of each subsequent
90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement
nor Shelf Registration Statement is declared effective by the Commission on or
prior to 90 days after the applicable filing date or (B) notwithstanding that
the Company and the Subsidiary Guarantors have consummated or will consummate
an Exchange Offer, the Company and the Subsidiary Guarantors are required to
file a Shelf Registration Statement and such Shelf Registration Statement is
not declared effective by the Commission on or prior to the 90th day following
the date such Shelf Registration Statement was filed, then commencing on the
day after the 90th day following the applicable filing date,
-11-
Additional Interest shall accrue on the principal amount of the Notes at a rate
of 0.5% per annum for the first 90 days immediately following such date, such
Additional Interest rate increasing by an additional 0.5% per annum at the
beginning of each subsequent 90-day period; or
(iii) if (A) the Company and the Subsidiary Guarantors have not
exchanged Exchange Notes for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the 60th day after the date on which
the Exchange Offer Registration Statement was 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 third anniversary of its effective date (other than after such time as all
Notes have been disposed of thereunder), then Additional Interest shall accrue
on the principal amount of the Notes at a rate of 0.5% per annum for the first
90 days commencing on (x) the 60th 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 0.5% per annum at the beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not
exceed in the aggregate 1.50% per annum; provided, further, however, that (1)
upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) above), or upon the effectiveness of the Shelf Registration Statement
which had ceased to remain effective (in the case of clause (iii)(B) above),
Additional Interest on the Notes as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i),
(ii) or (iii) above will be payable in cash on _______________ and
_____________ of each year to the holders of record on the preceding
_____________ or _____________ respectively.
(b) The Company shall notify the Trustee and paying agent
under the Indenture (or the trustee and paying agent under such other indenture
under which any Transfer Restricted Notes are issued) immediately upon the
happening of each and every event described in clauses (a)(i), (a)(ii) or
(a)(iii) above (each a Registration Default). The Company shall pay the
Additional Interest due on the Transfer Restricted Notes by depositing with the
paying agent (which shall not be the Company for these purposes) for the
Transfer Restricted Notes, in trust,
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for the benefit of the holders thereof, prior to 11:00 A.M. on the next
interest payment date specified by the Indenture (or such other indenture),
sums sufficient to pay the Additional Interest then due. The Additional
Interest due shall be payable on each interest payment date specified by the
Indenture (or such other indenture) to the record holders entitled to receive
the interest payment to be made on such date. Each obligation to pay
Additional Interest shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the Additional Interest
provided for in this Section 4 constitutes a reasonable estimate of the damages
that will be suffered by holders of Transfer Restricted Notes by reason of the
happening of any Registration Default.
5. Registration Procedures
In connection with the Issuers' registration obligations
hereunder, the Issuers shall effect such registrations on the appropriate form
available for the sale of the Notes, the Exchange Notes or Private Exchange
Notes, as applicable, to (i) in the case of the Exchange offer, permit the
exchange of Exchange Notes for Notes in the Exchange Offer and, if applicable,
resales of Exchange Notes by Participating Broker-Dealers and (ii) in the case
of a Shelf Registration, permit the sale of the applicable Transfer Restricted
Notes in accordance with the method or methods of disposition thereof specified
by the holders of such Transfer Restricted Notes, and pursuant thereto the
Issuers shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reasonable
period of time prior to the initial filing of a Shelf
Registration Statement or Prospectus and a reasonable period of
time prior to the filing of any amendment or supplement thereto
(including any document that would be incorporated or deemed to
be incorporated therein by reference), furnish to the holders of
the Transfer Restricted Notes included in such Shelf Registration
Statement, their Special Counsel and the managing underwriters,
if any, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
holders, their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Issuers, counsel to the
Issuers and independent certified public accountants to the
Issuers to respond to such reasonable inquiries as shall be
necessary, in the opinion of respective counsel to such holders
and such underwriters, to conduct a reasonable
-13-
investigation within the meaning of the Securities Act; provided
that the foregoing inspection and information gathering shall be
conducted by the Initial Purchaser and on behalf of any other
persons, by one counsel designated by and on behalf of such other
persons; provided, however, that the Issuers shall not be deemed
to have kept a Shelf Registration Statement effective during the
applicable period if any of them voluntarily takes any
unreasonable action or voluntarily fails to take any reasonable
action that results in holders of the Transfer Restricted Notes
covered thereby not being able to sell such Transfer Restricted
Notes pursuant to federal securities laws during that period.
The Issuers shall not file any such Shelf Registration Statement
or related Prospectus or any amendments or supplements thereto
which the holders of a majority in principal amount of the
Transfer Restricted Notes included in such Shelf Registration
Statement shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable time period required
hereunder; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration
Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
Registration Statement as so amended or in such Prospectus as so
supplemented;
(c) Notify the holders of Transfer Restricted Notes to
be sold or, in the case of an Exchange Offer, tendered for, their
Special Counsel and the managing underwriters, if any, promptly,
and (if requested by any such person), confirm such notice in
writing, (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment is proposed to be filed, and (B) with
respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental
authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any
stop
-14-
order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification
of any of the Notes, Exchange Notes or Private Exchange Notes for
sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any
event or information becoming known to any Issuer that makes any
statement made in a 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 such Registration Statement, Prospectus
or documents so that 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 a 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;
(d) Use their best efforts to avoid the issuance of or,
if issued, obtain the withdrawal of any order enjoining or
suspending the use of a Prospectus or the effectiveness of a
Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Notes, Exchange Notes or Private Exchange Notes for sale in any
jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant
to Section 3 hereof and if requested by the managing
underwriters, if any, or the holders of a majority in aggregate
principal amount of the Transfer Restricted Notes being sold
pursuant to such Shelf Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any,
and such holders reasonably believe should be included therein,
and (ii) make all required filings of such Prospectus supplement
or such post-effective amendment under the Securities Act as soon
as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the
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Issuers shall not be required to take any action pursuant to this
Section 5(e) that would, in the opinion of counsel for the
Issuers, violate applicable law;
(f) Upon written request to the Company by a holder of
Notes, Exchange Notes or Private Exchange Notes to be exchanged
or sold pursuant to a Registration Statement, their Special
Counsel and each managing underwriter, if any, without charge,
furnish at least one conformed copy of such Registration
Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference, and all exhibits to the
extent requested (including those previously furnished or
incorporated by reference) as soon as practicable after the
filing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or
Private Exchange Notes to be exchanged or sold pursuant to a
Registration Statement, their Special Counsel, and the
underwriters, if any, without charge, as many copies of the
Prospectus (including each form of prospectus) and each amendment
or supplement thereto as such persons reasonably request; and the
Issuers hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling holders of
Transfer Restricted Notes and the underwriters, if any, in
connection with the offering and sale of the Transfer Restricted
Notes in accordance with the terms thereof and with U.S. federal
securities laws and Blue Sky laws covered by such Prospectus and
any amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange
Notes or Private Exchange Notes, use their best efforts to
register or qualify or cooperate with the holders of Notes,
Exchange Notes or Private Exchange Notes to be sold or tendered
for, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Notes, Exchange
Notes or Private Exchange Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the
United States as any such holder or underwriter reasonably
requests in writing; keep each such registration or qualification
(or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder
and do any and all other acts or
-16-
things necessary or advisable to enable the disposition in such
jurisdictions of the Notes, Exchange Notes or Private Exchange
Notes covered by the applicable Registration Statement; provided,
however, that the Issuers shall not be required to (i) qualify
generally to do business in any jurisdiction where they are not
then so qualified or (ii) take any action which would subject
them to general service of process or to taxation in any
jurisdiction where they are not so subject;
(i) In connection with any sale or transfer of Transfer
Restricted Notes that will result in such securities no longer
being Transfer Restricted Notes, cooperate with the holders
thereof and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Transfer Restricted 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 to enable such
Transfer Restricted Notes to be in such denominations and
registered in such names as the managing underwriters, if any, or
such holders may request at least two Business Days prior to any
sale of Transfer Restricted Notes;
(j) Upon the occurrence of any event contemplated by
Section 5(c)(v) hereof, as promptly as practicable, prepare a
supplement or amendment, including, if appropriate, a
post-effective amendment, to each Registration Statement or a
supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, 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;
(k) Prior to the effective date of the Exchange
Registration Statement, to provide a CUSIP number for the
Exchange Notes (and Private Exchange Notes, if applicable);
(l) If a Shelf Registration Statement is filed pursuant
to Section 3 hereof, enter into such agreements (including an
underwriting agreement in form, scope and substance as is
customary in underwritten offerings) and take all such other
-17-
reasonable actions in connection therewith (including those
reasonably requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the
Transfer Restricted Notes being sold) in order to expedite or
facilitate the disposition of such Transfer Restricted Notes,
and, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration,
(i) make such representations and warranties to the holders of
such Transfer Restricted Notes and the underwriters, if any, with
respect to the business of the Issuers and their subsidiaries
(including with respect to businesses or assets acquired or to be
acquired by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if
and when customarily requested; (ii) obtain opinions of counsel
to the Issuers and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory
to the managing underwriters, if any, and Special Counsel to the
holders of the Transfer Restricted Notes being sold), addressed
to each selling holder of Transfer Restricted Notes and each of
the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Special
Counsel and the managing underwriters, if any; (iii) use their
best efforts to obtain customary "cold comfort" letters and
updates thereof from the independent certified public accountants
of the Issuers (and, if necessary, any other independent
certified public accountants of any subsidiary of the Issuers or
of any business acquired by an Issuer or any such subsidiary for
which financial statements and financial data is, or is required
to be, included in the Shelf Registration Statement), addressed
(where reasonably possible) to each selling holder of Transfer
Restricted Notes and each of the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions
and procedures no less favorable to the selling holders and the
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
-18-
principal amount of Transfer Restricted Notes covered by such
Shelf Registration Statement and the managing underwriters, if
any); and (v) deliver such documents and certificates as may be
reasonably requested by the holders of a majority in aggregate
principal amount of the Transfer Restricted Notes being sold,
their Special Counsel and the managing underwriters, if any, to
evidence the continued validity of the representations and
warranties made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Issuers;
(m) In the case of a Shelf Registration, make available
for inspection by a representative of the holders of Transfer
Restricted Notes being sold, any underwriter participating in any
such disposition of Transfer Restricted Notes, and any attorney,
consultant or accountant retained by such selling holders or
underwriter, at the offices where normally kept, during
reasonable business hours, all relevant financial and other
records, pertinent corporate documents and properties of the
Issuers and their subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent
that such information is available to the Issuers), and cause the
officers, directors, agents and employees of the Issuers and
their subsidiaries (including with respect to businesses and
assets acquired or to be acquired to the extent that such
information is available to the Issuers) to supply all
information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant
in connection with such Shelf Registration; provided, however,
that such persons shall first agree in writing with the Company
that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time
of delivery of such information shall be kept confidential by
such persons, unless and to the extent that (i) disclosure of
such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities,
(ii) disclosure of such information is required by law (including
any disclosure requirements pursuant to Federal securities laws
in connection with the filing of the Shelf Registration Statement
or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such
person or (iv) such information becomes available to such person
-19-
from a source other than the Issuers and their subsidiaries and
such source is not bound by a confidentiality agreement; and
provided, further, that the foregoing inspection and information
gathering shall be conducted by the Initial Purchaser and on
behalf of any other persons, by one counsel designated by and on
behalf of such other persons;
(n) Provide an indenture trustee for the Notes and/or
the Exchange Notes and Private Exchange Notes, as the case may
be, and cause an indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
relating to the Notes and/or the Exchange Notes and Private
Exchange Notes, as the case may be; and if such indenture shall
be the Indenture, in connection therewith, cooperate with the
Trustee and the holders of the Notes and/or the Exchange Notes
and Private Exchange Notes, to effect such changes to the
Indenture, if any, as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA; and execute,
and use its reasonable efforts to cause the Trustee to execute,
all customary documents as may be required to effect such
changes, and all other forms and documents required to be filed
with the SEC to enable the Indenture to be so qualified in a
timely manner;
(o) Comply with all applicable rules and regulations of
the SEC and make generally available to their securityholders
earning statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158, no later than 45 days after the
end of any 12-month period (or 90 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 Transfer Restricted
Notes are sold to underwriters in a firm commitment or reasonable
efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of
the first fiscal quarter after the effective date of a
Registration Statement, which statement shall cover said period,
consistent with the requirements of Rule 158;
(p) Cooperate with each seller of Transfer Restricted
Notes covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Transfer
Restricted Notes and their respective counsel in connection with
any filings
-20-
required to be made with the National Association of Securities
Dealers, Inc.; and
(q) Use their best efforts to take all other steps
reasonably necessary to effect the registration of the Transfer
Restricted Notes covered by a Registration Statement contemplated
hereby.
The Issuers may require a holder of Transfer Restricted Notes to
be included in a Registration Statement to furnish to the Issuers such
information regarding the distribution of such Transfer Restricted Notes as is
required by law to be disclosed in such Registration Statement and the Issuers
may exclude from such Registration Statement the Transfer Restricted Notes of
any holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If any such Registration Statement refers to any holder by name
or otherwise as the holder of any securities of an Issuer, then such holder
shall have the right to require (i) the insertion therein of language, in form
and substance reasonably satisfactory to 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 Issuers'
securities covered thereby and that such holding does not imply that such
holder will assist in meeting any future financial requirements of the Issuers,
or (ii) in the event that such reference to such holder by name or otherwise is
not required by the Securities Act, 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.
In the case of a Shelf Registration pursuant to Section 3 hereof,
each holder of Transfer Restricted Notes agrees by acquisition of such Transfer
Restricted Notes 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)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue disposition
of such Transfer Restricted Notes covered by such Registration Statement or
Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
-21-
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not any Registration Statement is filed or becomes effective and
whether or not any Notes, Exchange Notes or Private Exchange Notes are issued
or sold pursuant to any Registration Statement. The fees and expenses referred
to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the National Association
of Securities Dealers, Inc. and (B) in compliance with securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Notes, Exchange Notes and Private Exchange Notes in a
form eligible for deposit with The Depository Trust Company and of printing
Prospectuses), (iii) reasonable fees and disbursements of counsel for the
Issuers and the Special Counsel (not to exceed one firm or counsel), (iv) fees
and disbursements of all independent certified public accountants referred to
in Section 2(e) and Section 5(l)(iii) hereof (including, without limitation,
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance), (v) if required, the reasonable fees and
expenses of any "qualified independent underwriter" and its counsel as may be
required by the rules and regulations of the National Association of Securities
Dealers, Inc., and (vi) fees and expenses of all other persons retained by the
Issuers. In addition, the Issuers shall pay their internal expenses
(including, without limitation, all salaries and expenses of their respective
officers and employees performing legal or accounting duties), the expense of
any annual audit, and the fees and expenses incurred in connection with the
listing of the Notes, Exchange Notes or Private Exchange Notes to be registered
on any securities exchange. Notwithstanding the foregoing or anything in this
Agreement to the contrary, each holder of Transfer Restricted Notes shall pay
all underwriting discounts and commissions of any underwriters with respect to
any Notes, Exchange Notes or Private Exchange Notes sold by or on behalf of it.
7. Indemnification
(a) The Issuers agree, jointly and severally, to indemnify and
hold harmless (i) the Initial Purchaser, each holder of Notes, Exchange Notes
and Private Exchange Notes and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees,
representatives and
-22-
agents of the Initial Purchaser, each holder of Notes, Exchange Notes and
Private Exchange Notes, each Participating Broker-Dealer and any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person"), from and against any and all losses,
claims, damages, liabilities and judgments arising out of or relating to any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement, Prospectus or preliminary prospectus or in any
amendment or supplement thereto, or arising out of or relating to 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 any
Prospectus or preliminary prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Issuers by or on behalf of such Indemnified Person expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Person from whom
the person asserting such losses, claims, damages, liabilities and judgments
purchased securities if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary prospectus is eliminated or
remedied in the Prospectus and a copy of the Prospectus shall not have been
furnished to such person in a timely manner due to the wrongful action or
wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such
Prospectus or preliminary prospectus or any amendment or supplement thereto and
with respect to which indemnity may be sought against the Issuers hereunder,
such Indemnified Person shall promptly notify the Issuers in writing and the
Company shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Indemnified Person and payment of all fees and
expenses. Any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified
Person, unless (i) the employment of such counsel shall have been specifically
authorized in writing by the Issuers, (ii) the Company shall have failed to
assume the defense and employ counsel or pay all such fees and expenses or
(iii) the named parties to any such action (including any impleaded parties)
include both such Indemnified Person and an Issuer and such Indemnified Person
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
any such
-23-
Issuer (in which case the Company shall not have the right to assume the
defense of such action on behalf of such Indemnified Person, it being
understood, however, that the Issuers shall not, in connection with any one
such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such Indemnified Persons,
and that all such reasonable fees and expenses shall be reimbursed as they are
incurred). The Issuers shall not be liable for any settlement of any such
action effected without their written consent but if settled with the written
consent of the Issuers, the Issuers agree, jointly and severally, to indemnify
and hold harmless each Indemnified Person from and against any loss or
liability by reason of such settlement. No Issuer shall, without the prior
written consent of each Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding.
(c) In connection with any Registration Statement pursuant to
which a holder of Transfer Restricted Notes offers or sells Transfer Restricted
Notes, such holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuers, their respective directors and officers and any person
controlling an Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Issuers to each Indemnified Person but only with respect to
information relating to such holder furnished in writing by or on behalf of
such holder expressly for use in such Registration Statement. In any such case
in which any action shall be brought against an Issuer, any director or officer
of an Issuer or any person controlling an Issuer based on such Registration
Statement and in respect of which indemnity may be sought against a holder of
Transfer Restricted Notes, such holder shall have the rights and duties given
to the Issuers (except that if an Issuer shall have assumed the defense
thereof, such holder shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such holder), and the
Issuers, their respective directors and officers and any person controlling an
Issuer shall have the rights and duties given to the Indemnified Persons by
Section 7(b) hereof.
-24-
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments in such proportion as is appropriate to
reflect the relative fault of each indemnifying party on the one hand and the
indemnified party on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of each indemnifying party on the one hand and the indemnified
party on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by an
indemnifying party or such indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if all Indemnified Persons were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Indemnified Person shall be required to contribute any amount in excess of the
amount by which the net proceeds received by it in connection with the sale of
the Notes, Exchange Notes or Private Exchange Notes contemplated by this
Agreement (or, in the case of an underwriter that is an Indemnified Person, the
total underwriting discounts received by such underwriter) exceeds the amount
of any damages which such Indemnified Person has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Indemnified Person's obligations to contribute pursuant to this Section 7(d)
are several in proportion to the respective amount of Notes, Exchange Notes or
Private Exchange Notes included in
-25-
any such Registration Statement by each Indemnified Person and not joint.
8. Rule 144A
Each of Issuers shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time it is not required to file such reports but
in the past had been required to or did file such reports, it will, upon the
request of any holder of Transfer Restricted Notes, make available other
information as required by, and so long as necessary to permit sales of
Transfer Restricted Notes pursuant to Rule 144A. Notwithstanding the
foregoing, nothing in this Section 8 shall be deemed to require an Issuer to
register any of its securities pursuant to the Exchange Act.
9. Underwritten Registrations
If any of the Transfer Restricted 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 administer the offering
will be selected by the holders of a majority in aggregate principal amount of
the Transfer Restricted Notes included in such offering, subject to the consent
of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such Transfer Restricted Notes
on the basis reasonably provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (ii) 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) Remedies. In the event of a breach by an Issuer or by a
holder of Notes, Exchange Notes or Private Exchange Notes of any of its
obligations under this Agreement, each holder of Notes, Exchange Notes or
Private Exchange Notes and each Issuer, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
Notwithstanding the provisions of Section 4 hereof, the Issuers and each holder
of Notes, Exchange Notes and Private Exchange Notes agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
of any of the provisions of this Agreement and each hereby further agrees that,
in the event of
-26-
any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers will not enter
into any agreement with respect to their securities that is inconsistent with
the rights granted to the holders of Notes, Exchange Notes and Private Exchange
Notes and Indemnified Persons in this Agreement or otherwise conflicts with the
provisions hereof. Without the written consent of the holders of a majority in
aggregate principal amount of the outstanding Transfer Restricted Notes, the
Issuers shall not grant to any person any rights which conflict with or are
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. The Issuers shall not
grant to any of their securityholders (other than the holders of Transfer
Restricted Notes in such capacity) the right to include any of their securities
in any Registration Statement other than Transfer Restricted Notes.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, 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 the holders
of not less than a majority of the then outstanding aggregate principal amount
of Transfer Restricted Notes; provided, however, that, for the purposes of this
Agreement, Transfer Restricted Notes that are owned, directly or indirectly, by
the Issuers or any of their Affiliates are not deemed outstanding.
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 Transfer Restricted Notes whose securities are being sold
or tendered pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other holders of Transfer Restricted Notes may
be given by holders of a majority in aggregate principal amount of the Transfer
Restricted Notes being sold or tendered by such holders pursuant to such
Registration Statement; provided, however, that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 7 shall be made or given otherwise than with the prior
written consent of each Indemnified Person affected thereby.
(e) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
-27-
(i) if to the Issuers, as provided in the Purchase Agreement,
(ii) if to the Initial Purchaser, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder of
Notes, Exchange Notes or Private Exchange Notes, to the address of such holder
as it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each holder of Notes, Exchange
Notes and Private Exchange Notes and each Indemnified Person. The Issuers may
not assign any of their rights or obligations hereunder without the prior
written consent of each holder of Transfer Restricted Notes and each
Indemnified Person. Notwithstanding the foregoing, no successor or assignee of
an Issuer shall have any of the rights granted under this Agreement until such
person shall acknowledge its rights and obligations hereunder by a signed
written statement of such person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction. 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 WITHIN THE STATE OF NEW
YORK. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR
ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY,
-28-
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. 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 reasonable 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) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Issuers with respect to the Notes, the Exchange Notes and the Private Exchange
Notes. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
-29-
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
TRACOR, INC.
By: /S/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORATION
By: /s/ Joseph E. Lipscomb
-----------------------------------
Name: Joseph E. Lipscomb
Title: Vice President
BANKERS TRUST INTERNATIONAL PLC
By: /s/ Kenneth McGoin
-----------------------------------
Name: Kenneth McGoin
Title:
-30-
Each of the Subsidiaries specified below agrees to become a party to
this Agreement as a Subsidiary Guarantor as of the date hereof:
TRACOR INFORMATION SYSTEMS COMPANY
(a Delaware Corporation)
CORDANT, INC.
(a Maryland Corporation)
CORDANT FEDERAL SERVICES CORPORATION
(a Maryland Corporation)
GDE HOLDINGS, INC.
(a Delaware Corporation)
GDE SYSTEMS, INC.
(a Delaware Corporation)
GDE SYSTEMS IMAGING, INC.
(a Delaware Corporation)
HEALTHCOM, INC.
(a Delaware Corporation)
HELAVA ASSOCIATES, INC.
(a Delaware Corporation)
TRACOR AEROSPACE ELECTRONIC SYSTEMS,
INC.
(a Pennsylvania Corporation)
TRACOR AEROSPACE, INC.
(a Delaware Corporation)
TRACOR APPLIED SCIENCES, INC.
(a Delaware Corporation)
-31-
TRACOR FLIGHT SYSTEMS, INC.
(a Delaware Corporation)
TRACOR HOLDINGS, INC.
(a Delaware Corporation)
TRACOR MARINE, INC.
(a Florida Corporation)
VITRO CORPORATION
(a Delaware Corporation)
QUALITY SYSTEMS, INC.
(a Virginia Corporation)
VITRO SYSTEMS INTERNATIONAL
CORPORATION
(a Delaware Corporation)
VITRO SCIENCES INTERNATIONAL, INC.
(a Delaware Corporation)
VITRO SERVICES CORPORATION
(a Delaware Corporation)
VITRO TECHNICAL SERVICES, INC.
(a Delaware Corporation)
WESTMARK SERVICES COMPANY, INC.
(a Delaware Corporation)
By: Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
-32-
The Subsidiary specified below agrees to
become a party to this Agreement as a
Subsidiary Guarantor as of the date
hereof.
AERIAL DATA REDUCTION ASSOCIATES,
INC.
(a Pennsylvania Corporation)
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
The Subsidiary specified below agrees to
become a party to this Agreement as a
Subsidiary Guarantor as of the date
hereof.
GDESI, INC.
(a Delaware Corporation)
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
EXHIBIT 4.2
TRACOR, INC.,
as Issuer,
and
THE SUBSIDIARY GUARANTORS
(defined herein)
and
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
INDENTURE
Dated as of March 1, 1997
up to $355,000,000
8 1/2% Senior Subordinated Notes due 2007
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
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; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . 4.06; 4.08; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
(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) . . . . . . . . . . . . . . . . . . . . . . . 9.05
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . 12.01
(c) . . . . . . . . . . . . . . . . . . . . . . . 12.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . . . . 22
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . 23
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount. . . 24
SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . 26
SECTION 2.04. Paying Agent To Hold Assets in Trust. . . . . . . . . . . . . 26
SECTION 2.05. Noteholder Lists. . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . 27
SECTION 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.09. Treasury Notes. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.14. Deposit of Moneys. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.15. Book-Entry Provisions for Global Note. . . . . . . . . . . . 31
SECTION 2.16. Special Transfer Provisions. . . . . . . . . . . . . . . . . 32
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.02. Selection of Notes To Be Redeemed. . . . . . . . . . . . . . 35
SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . 37
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . . 37
SECTION 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . . . 37
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . 38
SECTION 4.03. Corporate Existence. . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.04. Payment of Taxes and Other Claims. . . . . . . . . . . . . . 39
SECTION 4.05. Maintenance of Properties and Insurance. . . . . . . . . . . 39
SECTION 4.06. Compliance Certificate; Notice of Default. . . . . . . . . . 40
SECTION 4.07. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.08. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.09. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . 42
SECTION 4.10. Limitation on Restricted Payments. . . . . . . . . . . . . . 43
SECTION 4.11. Limitation on Transactions with Affiliates. . . . . . . . . . 44
SECTION 4.12. Limitation on Indebtedness. . . . . . . . . . . . . . . . . . 45
SECTION 4.13. Limitation on Payment Restrictions Affecting Subsidiaries. . 48
SECTION 4.14. Limitation on Additional Senior Subordinated Indebtedness. . 49
SECTION 4.15. Limitation on Change of Control. . . . . . . . . . . . . . . 49
SECTION 4.16. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . 51
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries. . . 53
SECTION 4.18. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.19. Limitation on Transfer of Assets to Certain Subsidiaries. . . 54
SECTION 4.20. Guarantees of Certain Indebtedness . . . . . . . . . . . . . 54
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . . 55
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . 56
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . 60
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.07. Rights of Holders To Receive Payment. . . . . . . . . . . . . 61
SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . . . 61
SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . 62
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . 63
SECTION 6.12. Restoration of Rights and Remedies. . . . . . . . . . . . . . 63
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . 66
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . . 67
SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . 68
SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . 69
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . 70
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . 70
SECTION 7.11. Preferential Collection of Claims Against Company. . . . . . 71
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations. . . . . . . . . . . 71
SECTION 8.02. Legal Defeasance and Covenant Defeasance. . . . . . . . . . . 73
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. . . . 74
SECTION 8.04. Application of Trust Money. . . . . . . . . . . . . . . . . . 76
SECTION 8.05. Repayment to the Company or the Subsidiary Guarantors. . . . 77
SECTION 8.06. Satisfaction and Discharge. . . . . . . . . . . . . . . . . . 77
SECTION 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . 78
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . 79
SECTION 9.03. Effect on Senior Indebtedness. . . . . . . . . . . . . . . . 80
SECTION 9.04. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.05. Revocation and Effect of Consents. . . . . . . . . . . . . . 81
SECTION 9.06. Notation on or Exchange of Notes. . . . . . . . . . . . . . . 82
SECTION 9.07. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . 82
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness. . . . . . . . . . 83
SECTION 10.02. No Payment on Notes in Certain Circumstances. . . . . . . . 83
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . 85
SECTION 10.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . 86
SECTION 10.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.06. Obligations of the Company Unconditional. . . . . . . . . . 88
SECTION 10.07. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.08. Reliance on Judicial Order or Certificate of
Liquidating Agent. . . . . . . . . . . . . . . . . . . . . 89
SECTION 10.09. Trustee's Relation to Senior Indebtedness. . . . . . . . . . 89
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Indebtedness. . . . . . 90
SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes. . . . . . . . . . . . . . . . . . . 91
SECTION 10.12. This Article Ten Not To Prevent Events of Default. . . . . . 91
SECTION 10.13. Trustee's Compensation Not Prejudiced. . . . . . . . . . . . 92
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . 92
SECTION 11.02. Subordination of Guarantee. . . . . . . . . . . . . . . . . 93
SECTION 11.03. Severability. . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 11.04. Release of a Subsidiary Guarantor. . . . . . . . . . . . . . 93
SECTION 11.05. Limitation of Subsidiary Guarantor's Liability. . . . . . . 94
SECTION 11.06. Subsidiary Guarantors May Consolidate, Etc.,
on Certain Terms. . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.07. Contribution. . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 11.08. Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . 96
SECTION 11.09. Execution of Guarantee. . . . . . . . . . . . . . . . . . 97
SECTION 11.10. No Payment on Guarantees in Certain Circumstances. . . . . 97
SECTION 11.11. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . 99
SECTION 11.12. Payments May Be Paid Prior to Dissolution. . . . . . . . . 101
SECTION 11.13. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 11.14. Obligations of Each Guarantor Unconditional. . . . . . . . 102
SECTION 11.15. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.16. Reliance on Judicial Order or Certificate of
Liquidating Agent. . . . . . . . . . . . . . . . . . . . 103
SECTION 11.17. Trustee's Relation to Guarantor Senior Indebtedness. . . . 104
SECTION 11.18. Subordination Rights Not Impaired by Acts or
Omissions of a Subsidiary Guarantor or Holders of
Guarantor Senior Indebtedness. . . . . . . . . . . . . . 104
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees. . . . . . . . . . . . . . . 105
SECTION 11.20. This Article Eleven Not To Prevent Events of Default. . . 105
SECTION 11.21. Trustee's Compensation Not Prejudiced. . . . . . . . . . . 106
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 12.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 12.03. Communications by Holders with Other Holders. . . . . . . 108
SECTION 12.04. Certificate and Opinion as to Conditions Precedent. . . . 108
SECTION 12.05. Statements Required in Certificate or Opinion. . . . . . . 109
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . 109
SECTION 12.07. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . 110
SECTION 12.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 12.09. No Adverse Interpretation of Other Agreements. . . . . . . 110
SECTION 12.10. No Recourse Against Others. . . . . . . . . . . . . . . . 110
SECTION 12.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 12.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . 111
SECTION 12.13. Severability. . . . . . . . . . . . . . . . . . . . . . . 111
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Exhibit A(1) - Form of Initial Note with Guarantee . . . . . . . . . . . A.1-1
Exhibit A(2) - Form of Exchange Note with Guarantee . . . . . . . . . . . A.2-1
Exhibit B - Form of Legend for Global Notes . . . . . . . . . . . . . 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
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
INDENTURE, dated as of March 1, 1997, among Tracor, Inc., a Delaware
corporation (the "Company"), the Subsidiary Guarantors (as hereinafter defined)
and U.S. Trust Company of Texas, N.A., as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 8 1/2%
Senior Subordinated Notes due 2007 (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 parties
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.
"Acquired Indebtedness" means (i) with respect to any person that
becomes a Restricted Subsidiary, Indebtedness of such person at the time such
person becomes a Restricted Subsidiary and not incurred in connection with, or
in contemplation of, such person becoming a Restricted Subsidiary, treating for
purposes of this definition as Indebtedness the unused portion of any revolving
loan commitments provided in agreements to which such person is a party as
borrower or guarantor and (ii) with respect to the Company or any of its
Restricted Subsidiaries, any Indebtedness assumed by the Company or any of its
Restricted Subsidiaries in connection with the acquisition of any assets from
another person (other than the Company or any of its Restricted Subsidiaries),
and which was not incurred by such other person in connection with or, in
contemplation of, such acquisition.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the lesser of the amount by which (i) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date), but
excluding liabilities under the Guarantee, of such Subsidiary Guarantor at such
date and (ii) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on
such date and after giving effect
to any collection from any Subsidiary of such Subsidiary Guarantor in respect
of the obligations of such Subsidiary under the Guarantee), excluding debt in
respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated,"controlling" and "controlled" have meanings correlative to the
foregoing.
"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 2.15.
"Applicable Premium" means, with respect to a Note at any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note and (H) the
excess of (A) the present value at such time of (1) the redemption price of
such Note at March 1, 2002 (such redemption price being described in Section
6(a) of the Note) plus (2) all required interest payments due on such Note
through March 1, 2002, computed using a discount rate equal to the Treasury
Rate plus 100 basis points, over (B) the principal amount of such Note.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value (including any sale and
leaseback transaction) by the Company or any of its Restricted Subsidiaries to
any person other than the Company or any Wholly Owned Restricted Subsidiary of
(i) any Capital Stock of any Restricted Subsidiary; or (ii) any other property
or assets of the Company or any Restricted Subsidiary other than in the
ordinary course of business, in each case, resulting in Net Cash Proceeds to
the Company and its Restricted Subsidiaries of $500,000 or more, provided that
the sale, conveyance, transfer, assignment or other transfer of substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole will be governed by the terms of Section 5.01 of this Indenture.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02(a).
"Board of Directors" means, as to any person, the board of directors of
such person or any duly authorized committee thereof.
2
"Board Resolution" means, with respect to any person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such person
to have been duly adopted by the Board of Directors of such person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means, with respect to any person, 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.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or
obligations issued by any agency or instrumentality thereof and backed by the
full faith and credit of the United States of America, (ii) commercial paper
rated the highest grade by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services and maturing not more than one year from the date of
creation thereof, (iii) demand and time deposits with, and certificates of
deposit and banker's acceptances issued by, any bank having capital surplus and
undivided profits aggregating at least $500 million and maturing not more than
one year from the date of creation thereof, provided that instruments issued by
banks not having one of the two highest ratings obtainable from either Standard
& Poor's Ratings Services or Moody's Investors Services, Inc. shall not
constitute "Cash Equivalents" for purposes of the subordination provisions of
this Indenture, (iv) repurchase agreements that are secured by a perfected
security interest in an obligation described in clause (i) above and are with
any bank described in clause (iii) above, and (v) readily marketable direct
obligations issued by any state of the United States of America or any
political subdivision thereof having one of the two highest rating categories
obtainable from either Moody's Investors Service, Inc. or Standard & Poor's
Ratings Services.
"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); or (iii) the
3
acquisition in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) by (x) any person or entity or
(y) any group of persons or entities who constitute a Group, in either case, of
any securities of the Company such that, as a result of such acquisition, such
person, entity or Group either (A) beneficially owns (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, at least 35% of the
Company's then outstanding voting securities entitled to vote on a regular
basis for the Board of Directors of the Company, or (B) otherwise has the
ability to elect, directly or indirectly, a majority of the members of the
Company's Board of Directors, including without limitation by the acquisition
of revocable proxies for the election of 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.
"Common Stock" of any person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" of the Company means, for any period, the sum
(without duplication) of (i) Consolidated Net Income, (ii) to the extent
Consolidated Net Income has been reduced thereby, all income taxes of the
Company and its Restricted Subsidiaries paid or accrued in accordance with GAAP
for such period, Consolidated Interest Expense, amortization expense (including
write-off of intangible assets and deferred financing costs), depreciation
expense, and any restructuring reserve or charge recorded during such period in
accordance with GAAP, (iii) LIFO charges (credit) of the Company and its
Restricted Subsidiaries for such period and (iv) other non-cash items reducing
Consolidated Net Income (excluding any such charge which requires an accrual of
or a cash reserve for cash charges for any future period) less (x) other non-
cash items increasing Consolidated Net Income and (y) the amount of all cash
payments made by such person or its subsidiaries during such period to the
extent that such cash payment has been provided for in a reserve or charge
referred to (and previously added back to such Consolidated Net Income) in
clause (ii) or (iv) above (and were not otherwise deducted in the computation
of Consolidated Net Income of such person for such period), all as
4
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" of the Company means the aggregate of
(i) all cash and non-cash interest expense (minus amortization or write-off of
deferred financing costs included in cash or non-cash interest expense and
minus interest income and capitalized interest) with respect to all outstanding
Indebtedness of the Company and its Restricted Subsidiaries for such period
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of the Company and the Restricted Subsidiaries (other than
dividends paid in Qualified Capital Stock) paid, accrued (other than to or for
the benefit of the Company or a Restricted Subsidiary) or scheduled to be paid
or accrued during such period times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of the Company expressed as a
decimal.
"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 (i) gains and losses from Asset
Sales or abandonments or reserves relating thereto and the related tax effects,
(ii) items classified as extraordinary, nonrecurring or unusual gains and
losses, and the related tax effects, each determined in accordance with GAAP,
(iii) the net income 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, (iv) the net income of any Restricted Subsidiary to the extent that
the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income was actually prevented by contract, operation of law
or otherwise and (v) the net income of any person, other than a Restricted
Subsidiary, except to the extent of the lesser of (x) cash dividends or
distributions paid to the Company or a Restricted Subsidiary of the Company by
such person and (y) the net income of such person (but in no event less than
zero).
"Consolidated Net Worth" of any person means the consolidated
stockholders' equity of such person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such person; provided that the Consolidated Net
Worth of any person shall exclude the effect of any non-cash charges relating
to the acceleration of stock options or similar securities of such person or
another person with which such person is merged or consolidated.
"Covenant Defeasance" has the meaning provided in Section 8.02(c).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
5
the Company or any Restricted Subsidiary 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.
"Default Notice" has the meaning provided in Section 10.02(a).
"Depository" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means any Indebtedness under or in
respect of the New Bank Credit Facility.
"Disqualified Capital Stock" means, with respect to any person, 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, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Net Proceeds" shall mean Net Cash Proceeds of any Asset Sale not
applied in accordance with clause (iii)(x) or (y) of the first paragraph of
Section 4.16.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the 8 1/2% Senior Subordinated Notes due 2007 to
be issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement or, with respect to Initial Notes issued under this Indenture
subsequent to the Issue Date pursuant to Section 2.02, a registration rights
agreement substantially identical to the Registration Rights Agreement.
"Exchange Offer" has the meaning assigned to such term in the
Registration Rights Agreement, dated as of March 14, 1997, by and among the
Company, the Subsidiary Guarantors and BT Securities Corporation as Initial
Purchaser (the "Registration Rights Agreement").
"fair market value" means, 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
6
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 Board Resolution of the Board of
Directors of the Company delivered to the Trustee (provided that no
determination shall be required in connection with any Asset Sale of less than
$1,000,000).
"Funding Guarantor" has the meaning provided in Section 11.07.
"GAAP" or "generally accepted accounting principles" means generally
accepted accounting principles in the United States as in effect from time to
time, 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.
"Global Note" has the meaning provided in Section 2.01.
"Guarantee" means the guarantee of any Subsidiary Guarantor set forth in
Article Eleven as and when executed by any Subsidiary of the Company.
"Guarantor Blockage Period" has the meaning provided in Section
11.10(a).
"Guarantor Default Notice" has the meaning provided in Section 11.10(a).
"Guarantor Senior Indebtedness" means (i) indebtedness of a Subsidiary
Guarantor for money borrowed and all obligations, whether direct or indirect,
under guarantees, letters of credit, foreign currency or interest rate swaps,
foreign exchange contracts, caps, collars, options, hedges or other agreements
or arrangements designed to protect against fluctuations in currency values or
interest rates, other extensions of credit, expenses, fees, reimbursements,
indemnities and all other amounts (including interest at the contract rate
accruing on or after the filing of any petition in bankruptcy or reorganization
relating to such Subsidiary Guarantor whether or not a claim for post-filing
interest is allowed in such proceeding) owed by such Subsidiary Guarantor
under, or with respect to, the New Bank Credit Facility, (ii) the principal of
and premium, if any, and accrued and unpaid interest (including interest at the
contract rate accruing on or after the filing of any petition in bankruptcy or
for reorganization relating to a Subsidiary Guarantor whether or not a claim
for post-filing interest is allowed in such proceeding), whether existing on
the date hereof or hereafter incurred, in respect of (A) indebtedness of such
Subsidiary Guarantor for money borrowed, (B) express written guarantees by such
Subsidiary Guarantor of indebtedness for money borrowed by any other person,
(C) indebtedness evidenced by notes, debentures, bonds, or other instruments of
indebtedness for the payment of which such Subsidiary Guarantor is responsible
or liable, by
7
guarantees or otherwise, (D) obligations of such Subsidiary Guarantor for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (E) obligations of such Subsidiary Guarantor under
any agreement to lease, or any lease of, any real or personal property which,
in accordance with GAAP, is classified upon such Subsidiary Guarantor's
consolidated balance sheet as a liability, and (F) obligations of such
Subsidiary Guarantor under or guaranteeing interest rate swaps, caps, collars,
options and similar arrangements and foreign currency hedges and (iii)
modifications, renewals, extensions, replacements, refinancings, and refundings
of any such indebtedness, obligations or guarantees, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is expressly provided that such indebtedness, obligations or guarantees, or
such modifications, renewals, extensions, replacements, refinancings, or
refundings thereof, are not superior in right of payment to the Guarantee of
such Subsidiary Guarantor; provided, that Guarantor Senior Indebtedness will
not be deemed to include (a) any liability for Federal, state, local or other
taxes owed or owing by a Subsidiary Guarantor, (b) any accounts payable or
other liability to trade creditors arising in the ordinary course of business,
(c) any Indebtedness, guarantee or obligation of a Subsidiary Guarantor which
is subordinate or junior by its terms in any respect to any other Indebtedness,
guarantee or obligations of such Subsidiary Guarantor or (d) that portion of
any Indebtedness incurred in violation of Section 4.12 of this Indenture.
"Hedging Obligations" means, with respect to the Company or a Restricted
Subsidiary, (i) the obligations of such person under Interest Rate Agreements,
(ii) the obligations of such person under Currency Agreements and (iii)
obligations under agreements or arrangements designed to protect such person
against fluctuations in the value of commodities entered into in such person's
business.
"Holder" or "Noteholder" means the person in whose name a Note is
registered on the Registrar's books.
"Indebtedness" of any person means, at any time, without duplication:
(i) the principal of and, if any is due and payable at such time, premium in
respect of (A) indebtedness of such person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds, or other similar
instruments for the payment of which such person is responsible or liable; (ii)
all Capitalized Lease Obligations of such person; (iii) all obligations of such
person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such person and all obligations of such person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such
person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect
to letters of credit securing obligations (other than obligations described in
(i) through (iii) above) entered into in the ordinary course of business of
such person, provided that, for the purpose of determining
8
Events of Default referred to in clause (4) under Section 6.01, obligations
with respect to letters of credit securing obligations entered into in the
ordinary course of business shall be excluded only to the extent such letters
of credit are not drawn upon or, if and to the extent drawn upon, such drawing
is reimbursed no later than the third Business Day following receipt by such
person of a demand for reimbursement following payment on the letter of
credit); (v) the principal amount of all obligations of such person with
respect to the redemption, repayment or other purchase of any Disqualified
Capital Stock, (vi) in the case of the Company, any Preferred Stock of a
Restricted Subsidiary, valued at the aggregate liquidation preference thereof
plus accrued and unpaid dividends thereon; (vii) all obligations of the type
referred to in clauses (i) through (vi) above of other persons and all
dividends of other persons for the payment of which, in either case, such
person is responsible or liable as obligor, guarantor or otherwise; and (viii)
all obligations of the type referred to in clauses (i) through (vii) above of
other persons secured by a lien, mortgage, pledge or encumbrance of any kind on
any property or asset of such person (whether or not such obligation is assumed
by such person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets or the amount of the obligation so
secured; provided, however, that Indebtedness shall not include any interest,
commitment or other fees.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Independent" means with respect to the Company and its Subsidiaries,
any person who (i) is in fact independent, (ii) does not have any direct
financial interest or any material indirect financial interest in the Company
or any of its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries (other than as a result of holding securities of the Company in
trading accounts) and (iii) is not an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions for the
Company or any of its Subsidiaries or any Affiliate of the Company or any of
its Subsidiaries.
"Independent Financial Advisor" means a reputable accounting, appraisal
or investment banking firm that is, in the reasonable judgment of the Board of
Directors of the Company, qualified to perform the task for which such firm has
been engaged hereunder and disinterested and Independent with respect to the
Company and its Affiliates.
"Initial Notes" means, collectively, (i) the 8 1/2% Senior Subordinated
Notes due 2007 of the Company issued on the Issue Date and (ii) one or more
series of 8 1/2% Senior Subordinated Notes due 2007 that are issued under this
Indenture subsequent to the Issue Date pursuant to Section 2.02, in each case
for so long as such securities constitute Restricted Securities.
9
"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.
"Interest Payment Date" when used with respect to any Note, means the
stated maturity of an installment of interest specified in such Note.
"Interest Rate Agreements" means, with respect to the Company and the
Restricted Subsidiaries, any arrangements 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 floating rate of interest
on the same notional amount and shall include, without limitation, interest
rate swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any person, all investments by such
person in other persons (including Affiliates of such person) in the form of
loans, guarantees, advances of assets or capital contributions (excluding
commission, travel and similar advances to, and compensation and benefits of,
officers and employees of such person made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Capital
Stock or other securities and all other items that are or would be classified
as investments on a balance sheet prepared in accordance with GAAP. In
addition, the fair market value (as determined by the Board of Directors of the
Company in good faith) of the assets of any Subsidiary of the Company at the
time that such Subsidiary is designated as an Unrestricted Subsidiary shall be
deemed to be an Investment made by the Company in such Unrestricted Subsidiary
at such time. "Investment" shall exclude (i) extensions of trade credit by the
Company and the Restricted Subsidiaries on commercially reasonable terms in
accordance with such person's normal trade practices and (ii) sales,
assignments, transfers, contributions, licenses or other dispositions of
patents, copyrights, applications with respect thereto, and other trademarks,
intellectual property and other technological "know-how" (collectively,
"Intellectual Property") to joint ventures in which the Company or a Wholly
Owned Restricted Subsidiary owns at least 50% of the equity interests
(provided, that if the equity interest of the Company or such Restricted
Subsidiary, as the case may be, in such joint venture is reduced below 50%, the
Company shall have been deemed to make an Investment in such joint venture in
an amount equal to the fair market value (as determined by the Board of
Directors of the Company in good faith) of such Intellectual Property).
"issue" has the meaning provided in Section 4.12.
"Issue Date" means March 14, 1997.
"Legal Defeasance" has the meaning provided in Section 8.02(b).
10
"Legal Holiday" has the meaning provided in Section 12.07.
"Lien" means with respect to any Property or assets of any person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such Property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same
economic effect as any of the foregoing).
"Maturity Date" means March 1, 2007.
"Net Cash Proceeds" means cash payments received (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received) from any
sale, lease, transfer or other disposition of Capital Stock of the Company or a
Restricted Subsidiary or Property or other assets of the Company or a
Restricted Subsidiary, in each case net of (i) any reserve for adjustment in
respect of the sale price of such asset or assets as required by GAAP
(provided, that upon the payment of such adjustment amount the excess, if any,
of the amount so reserved over the amount so paid shall be deemed "Net Cash
Proceeds"), (ii) repayment of any Purchase Money Indebtedness secured by a Lien
on the sold asset or assets and (iii) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and any taxes
payable and reasonably estimated income taxes, as a consequence of such sale,
lease, transfer or other disposition.
"Net Proceeds Offer" has the meaning provided in Section 4.16.
"New Bank Credit Facility" means the Credit Agreement, to be entered
into by and among the Company, the lenders referred to therein, and Bankers
Trust Company, as Agent, together with the related documents thereto
(including, without limitation, any guarantees and security documents), as
amended, extended, renewed, restated, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement (and
related documents) governing Indebtedness incurred to refund or refinance the
entirety of the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or a successor New Bank Credit
Facility, whether by the same or any other agent, lender or group of lenders.
The Company shall promptly notify the Trustee in writing of any such refunding
or refinancing of the New Bank Credit Facility.
"Non-U.S. person" means a person who is not a U.S. person, as defined in
Regulation S.
11
"Notes" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, 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, expenses, damages and other
liabilities payable under, or with respect to, the documentation governing any
Indebtedness.
"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 12.04 and 12.05, as they relate to the making of an
Officers' Certificate.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Old Notes" means the Company's 10 7/8% Senior Subordinated Notes due
2001.
"Operating Coverage Ratio" means the ratio of Consolidated EBITDA of the
Company and the Restricted Subsidiaries during the four most recent full fiscal
quarters for which financial information is available (the "Four Quarter
Period") ending not more than 135 days prior to the date of the transaction
giving rise to the need to calculate the Operating Coverage Ratio (the
"Transaction Date") of the Company and the Restricted Subsidiaries for the Four
Quarter Period to Consolidated Interest Expense of the Company and the
Restricted Subsidiaries for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Interest Expense" shall be calculated after giving
effect on a pro forma (including any pro forma expense and cost reductions
calculated on a basis consistent with Regulation S-X under the Act) basis for
the Four Quarter Period to (i) the incurrence or repayment of any Indebtedness
(excluding the incurrence of Indebtedness under any revolving credit facility
and including repayments of Indebtedness under any revolving credit facility
only to the extent that such repayment effects, or is accompanied by, a
permanent reduction in the availability thereunder) of the Company and the
Restricted Subsidiaries 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, 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
(and the application
12
of proceeds thereof) or asset acquisitions outside the ordinary course of
business in excess of $100,000 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 (and the application of proceeds
thereof) or asset acquisition occurred on the first day of the Four Quarter
Period. If the Company or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third person (other than the Company or
any of its Restricted Subsidiaries), the preceding sentence shall give effect
to the incurrence of such guaranteed Indebtedness as if such person or any
subsidiary (other than an Unrestricted Subsidiary) of such person had directly
incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Interest Expense," (A) interest on 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, (B) 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, (C) notwithstanding clause (A) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
Interest Rate Agreements, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such Interest Rate Agreements
and (D) the permanent retirement of any Indebtedness 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 shall be given effect as if it occurred at
the beginning of such Four Quarter Period.
"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 12.04 and 12.05, as they relate to
the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Investment" means (i) cash and Cash Equivalents, (ii) any
Investment in the Company or in a Wholly Owned Restricted Subsidiary of the
Company, (iii) any Investment by the Company or any Subsidiary existing on the
Issue Date, (iv) any Investment by the Company or any Subsidiary of the Company
in a person, if as a result of such Investment (A) such person becomes a Wholly
Owned Restricted Subsidiary of the Company or (B) such person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Restricted Subsidiary of the Company (subject in each case to the restrictions
described in Sections 4.12 and 5.01 of this Indenture), (v) loans made from
time to time to its 401 (k) Savings Plan in accordance with Prohibited
Transaction Class Exemption 80-26 so long as the aggregate amount
13
of such loans outstanding at any time does not exceed $1,000,000, (vi)
guarantees to the extent that the same are otherwise permitted by this
Indenture, (vii) loans and advances to employees and officers of the Company
and the Restricted Subsidiaries in the ordinary course of business for bona
fide business purposes not in excess of $3,000,000 at any one time outstanding,
(viii) Currency Agreements and Interest Rate Agreements entered into in the
ordinary course of the Company's or a Restricted Subsidiary's businesses and
otherwise in compliance with this Indenture, (ix) 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, and (x) Investments made by the Company or its Restricted
Subsidiaries as a result of non-cash consideration received in connection with
an Asset Sale made in compliance with Section 4.16.
"Permitted Liens" means:
(i) Liens on property or assets of, or any shares of stock of
or secured debt of, any corporation existing at the time such corporation
becomes a Restricted Subsidiary of the Company or at the time such corporation
is merged into the Company or any of its Restricted Subsidiaries, provided that
such Liens are not incurred in connection with, or in contemplation of, such
corporation becoming a Restricted Subsidiary of the Company or merging into the
Company or any of its Restricted Subsidiaries;
(ii) Liens securing Refinancing Indebtedness, provided that any
such Lien does not extend to or cover any Property, shares or debt other than
the Property, shares or debt securing the Indebtedness so refunded, refinanced
or extended;
(iii) Liens in favor of the Company or any of its Restricted
Subsidiaries;
(iv) Liens securing industrial revenue bonds;
(v) Liens to secure Purchase Money Indebtedness that is
otherwise permitted under this Indenture, provided that (A) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including sales and excise
taxes, installation and delivery charges and other direct costs of, and other
direct expenses paid or charged in connection with, such purchase or
construction) of such Property, (B) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (C) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item;
(vi) statutory Liens or landlords', carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which do not secure any Indebtedness and
with respect to
14
amounts not yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provisions, if any, as shall be
required in conformity with GAAP shall have been made therefor;
(vii) Liens in favor of the Trustee under this Indenture and any
substantially equivalent Lien granted to any trustee or similar institution
under any indenture for Indebtedness permitted by the terms of this Indenture;
(viii) Liens incurred or pledges or deposits made in the ordinary
course of business to secure obligations under workers' compensation,
unemployment insurance or other types of social security or similar
legislation;
(ix) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(x) 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
in the ordinary course of business;
(xi) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(xii) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of nondelinquent customs duties in
connection with the importation of goods;
(xiii) judgment and attachment Liens not giving rise to a Default
or Event of Default;
(xiv) leases or subleases granted to others not interfering in
any material respect with the business of the Company or any Subsidiary;
(xv) Liens encumbering customary initial deposits and margin
deposits, and other Liens incurred in the ordinary course of business that are
within the general parameters customary in the industry, in each case securing
Indebtedness under Hedging Obligations;
(xvi) Liens encumbering deposits made in the ordinary course of
business to secure nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or its
Subsidiaries for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made;
15
(xvii) Liens arising out of consignment or similar arrangements
for the sale of goods entered into by the Company or any Subsidiary in the
ordinary course of business;
(xviii) any interest or title of a lessor in the property subject
to any lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of a default by the
Company or any Subsidiary of its obligations under such lease;
(xix) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal property that
are otherwise permitted under the applicable indenture and under which the
Company or any Subsidiary is lessee;
(xx) other Liens securing obligations incurred in the ordinary
course of business which obligations or judgments do not exceed $5 million in
the aggregate at any one time outstanding;
(xxi) Liens securing Capitalized Lease Obligations permitted to
be incurred; provided that such Lien does not extend to any property other than
that subject to the underlying lease;
(xxii) Liens on capital stock of Unrestricted Subsidiaries;
(xxiii) Liens securing Indebtedness under the New Bank Credit
Facility, Interest Rate Agreements and Currency Agreements;
(xxiv) Liens existing on the Issue Date;
(xxv) Liens on assets of the Company securing Senior
Indebtedness and Liens on assets of a Subsidiary Guarantor securing Guarantor
Senior Indebtedness;
(xxvi) any extensions, substitutions, replacements or renewals of
the foregoing;
(xxvii) Liens for taxes, assessments or governmental charges that
are not delinquent or are being contested in good faith by appropriate
proceedings; and
(xxviii) easements or minor defects or irregularities in title
and other similar charges or encumbrances on property not interfering in any
material respect with the Company's or any Subsidiary's use of such property.
"person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or other agency or political
subdivision thereof.
16
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" means any Capital Stock of a person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such person over the
holders of other Capital Stock issued by such person.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" has the meaning set forth in the Registration
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Initial Notes in the form set forth in Exhibit A(1).
"Proceeds Purchase Date" has the meaning provided in Section 4.16.
"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 Regulation S-X under the Securities Act, as determined by
the Board of Directors of the Company in consultation with its independent
public accountants.
"Property" of any person means all types of real, personal, tangible,
intangible or mixed property owned by such person whether or not included in
the most recent consolidated balance sheet of such person and its subsidiaries
under GAAP.
"Public Equity Offering" means an underwritten equity offering of the
Qualified Capital Stock of the Company, or of any entity of which the Company
is a direct or indirect subsidiary, to the extent the proceeds thereof shall
have been contributed to the Company, pursuant to an effective registration
statement under the Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a person to finance the cost (including the cost
of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such person incurred in connection therewith.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
17
"Record Date" means, with respect to any Note, any of the Record Dates
specified in such Note, 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 Section 4.12.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" has the meaning provided in the
definition of "Exchange Offer."
"Regulation S" means Regulation S under the Securities Act.
"Representative" means the agent or representative in respect of any
Designated Senior Indebtedness; provided that if, and for so long as, any
Designated Senior Indebtedness lacks such a representative, then the
Representative for such Designated Senior Indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Indebtedness.
"Restricted Payment" has the meaning provided in Section 4.10.
"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" means any Subsidiary that is not an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
18
"Senior Indebtedness" means (i) indebtedness of the Company for money
borrowed and all obligations, whether direct or indirect, under guarantees,
letters of credit, foreign currency or interest rate swaps, foreign exchange
contracts, caps, collars, options, hedges or other agreements or arrangements
designed to protect against fluctuations in currency values or interest rates,
other extensions of credit, expenses, fees, reimbursements, indemnities and all
other amounts (including interest at the contract rate accruing on or after the
filing of any petition in bankruptcy or reorganization relating to the Company
whether or not a claim for post-filing interest is allowed in such proceeding)
owed by the Company under, or with respect to, the New Bank Credit Facility,
(ii) the principal of and premium, if any, and accrued and unpaid interest
(including interest at the contract rate accruing on or after the filing of any
petition in bankruptcy or reorganization relating to the Company whether or not
a claim for post-filing interest is allowed in such proceeding), whether
existing on the date hereof or hereafter incurred, in respect of (A)
indebtedness of the Company for money borrowed, (B) express written guarantees
by the Company of indebtedness for money borrowed by any other person, (C)
indebtedness evidenced by notes, debentures, bonds, or other instruments of
indebtedness for the payment of which the Company is responsible or liable, by
guarantees or otherwise, (D) obligations of the Company for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (E) obligations of the Company under any agreement to lease, or
any lease of, any real or personal property which, in accordance with GAAP, is
classified upon the Company's consolidated balance sheet as a liability, and
(F) obligations of the Company under interest rate swaps, caps, collars,
options and similar arrangements and foreign currency hedges and (iii)
modifications, renewals, extensions, replacements, refinancings, and refundings
of any such indebtedness, obligations or guarantees, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is expressly provided that such indebtedness, obligations or guarantees, or
such modifications, renewals, extensions, replacements, refinancings, or
refundings thereof, are not superior in right of payment to the Notes;
provided, that Senior Indebtedness will not be deemed to include (a) any
obligation of the Company to any Subsidiary (other than obligations pledged
pursuant to the New Bank Credit Facility, as security for the obligations of
the Company thereunder), (b) any liability for Federal, state, local or other
taxes owed or owing by the Company, (c) any accounts payable or other liability
to trade creditors arising in the ordinary course of business, (d) any
Indebtedness, guarantee or obligation of the Company which is subordinate or
junior by its terms in any respect to any other Indebtedness, guarantee or
obligations of the Company or (e) that portion of any Indebtedness incurred in
violation of Section 4.12.
"Significant Stockholder" means, with respect to any person, any other
person who is the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 5% of any class of equity securities of such person
that are entitled to vote on a regular basis for the election of directors of
such person.
19
"Significant Subsidiary" means each Restricted Subsidiary of the Company
that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X
under the Securities Act and the Exchange Act (as such regulation is in effect
on the date hereof).
"Subordinated Obligations" means any Indebtedness of the Company which
is expressly subordinated or junior in right of payment to the Notes.
"subsidiary" of any person means (i) a corporation a majority of whose
Capital Stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly, owned by
such person, by one or more subsidiaries of such person or by such person and
one or more subsidiaries of such person, or (ii) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, but only if such person or its subsidiary
is entitled to receive more than fifty percent of the assets of such
partnership upon its dissolution, or (iii) any other person (other than a
corporation or a partnership) in which such person, a subsidiary of such person
or such person and one or more subsidiaries of such person, directly or
indirectly, at the date of determination, has (x) at least a majority ownership
interest or (y) the power to elect or direct the election of a majority of the
directors or other governing body of such person.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means (i) each of Tracor Aerospace, Inc., Tracor
Applied Sciences, Inc., Tracor Flight Systems, Inc., Vitro Corporation, Vitro
Services Corporation, Quality Systems, Inc., Vitro Technical Services, Inc.,
Vitro Systems International Corporation, Vitro Sciences International, Inc.,
GDE Systems, Inc., GDE Holdings, Inc., GDE Systems Imaging, Inc., GDESI, Inc.,
Westmark Services Company, Inc., HealthCom, Inc., Helava Associates, Inc.,
Aerial Data Reduction Associates, Inc., Tracor Aerospace Electronic Systems,
Inc., Tracor Information Systems Company, Tracor Holdings, Inc., Tracor Marine,
Inc., Cordant, Inc., and Cordant Federal Services Corporation, (ii) each of the
Company's Subsidiaries which becomes a guarantor of the Notes pursuant to the
provisions of Section 4.20, and (iii) each of the Company's Subsidiaries
executing a supplemental indenture in which such Subsidiary agrees to be bound
by the terms of this Indenture; provided that any person constituting a
Subsidiary Guarantor as described above shall cease to constitute a Subsidiary
Guarantor when its respective Guarantee is released in accordance with the
terms thereof.
"Surviving person" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.04.
20
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 1 5 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market date)) most nearly equal to the
period from the Redemption Date to March 1, 2002; provided, however, that if
the period from the Redemption Date to March 1, 2002 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to March 1, 2002 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"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.
"U.S. Government Obligations" means non-callable direct obligations of,
and non-callable 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.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the private placement legend in the form set forth on Exhibit
A(1), including, without limitation, the Exchange Notes in the form set forth
as Exhibit A(2) hereto.
"Unrestricted Subsidiary" means any Subsidiary (other than a Subsidiary
Guarantor) designated as an Unrestricted Subsidiary by the Board of Directors
of the Company, provided that (i) such Subsidiary does not own any Capital
Stock of the Company or any Restricted Subsidiary, (ii) if such Subsidiary is
acquired by the Company, such Subsidiary is designated as an Unrestricted
Subsidiary prior to the consummation of such acquisition, (iii) no portion of
any
21
Indebtedness or any other Obligation (contingent or otherwise) of such
Subsidiary (a) is guaranteed by, or is otherwise the subject of credit support
provided by, the Company or any Restricted Subsidiary, (b) is recourse to or
obligates the Company or any Restricted Subsidiary in any way, or (c) subjects
any Property or asset of the Company or any Restricted Subsidiary, directly or
indirectly, contingent or otherwise, to the satisfaction of such Indebtedness
or other Obligation, (iv) neither the Company nor any of the Restricted
Subsidiaries has any contract, agreement, arrangement or understanding with
such Subsidiary other than on terms as favorable to the Company or such
Restricted Subsidiary, as the case may be, as those that might be obtained at
the time from persons that are not Affiliates of the Company, (v) after giving
effect to such designation, no Default or Event of Default shall be continuing,
and (vi) neither the Company nor any Restricted Subsidiary has any Obligation
(a) to subscribe for additional shares of Capital Stock of such Subsidiary, or
(b) to maintain or preserve such Subsidiary's financial condition or to cause
such Subsidiary 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 a Board Resolution with the Trustee giving effect to such
designation and an Officers' Certificate stating that such designation complies
with the foregoing conditions. Notwithstanding the foregoing or any other
provision of this Indenture to the contrary, no assets owned by the Company or
any Restricted Subsidiary on the Issue Date may be owned at any time by any
Unrestricted Subsidiary.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding aggregate principal amount of such Indebtedness into (ii) the total
of the product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which all of the outstanding voting securities (other than directors'
qualifying or similar shares required to be held by third parties in accordance
with applicable law, not in any event to exceed 5% of the total outstanding
voting securities) are owned by the Company or any wholly owned Restricted
Subsidiary of the Company.
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:
"Commission" means the SEC.
22
"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, the Subsidiary
Guarantors, if any, or any other obligor on the Notes or the Guarantees, if
any.
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;
(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.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes, the notation thereon relating to the Guarantees, if
any, and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit A(1) hereto. The Exchange Notes, the notation thereon
relating to the Guarantees, if any, and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A(2) hereto. The
Notes may have notations,
23
legends or endorsements required by law, stock exchange rule or depository rule
or usage. The Company and the Trustee 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.
The terms and provisions contained in the Notes and the Guarantees, if
any, annexed hereto as Exhibits A(1) and A(2), shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Subsidiary Guarantors, if any, 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(1) (the "Global Note"),
deposited with the Trustee, as custodian for the Depository, and shall bear the
legend set forth in Exhibit B, 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(1) (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(1) (the "U.S.
Physical Notes"). The Offshore Physical Notes and the U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes."
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. Each
Subsidiary Guarantor, if any, shall execute the Guarantee in the manner set
forth in Section 11.09.
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
24
that office or position 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 $350,000,000 in one or more
series, (ii) Private Exchange Notes from time to time only in exchange for a
like principal amount of Initial Notes and (iii) Unrestricted Notes from time
to time only (x) in exchange for a like principal amount of Initial Notes or
(y) in an aggregate principal amount of not more than the excess of
$350,000,000 over the sum of the aggregate principal amount of (A) Initial
Notes then outstanding, (B) Private Exchange Notes then outstanding and (C)
Unrestricted Notes issued in accordance with (iii)(x) above, in each case upon
a written order of the Company in the form of an Officers' Certificate of the
Company. Each such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated, whether
the Notes are to be Initial Notes, Private Exchange Notes or Unrestricted Notes
and whether the Notes are to be issued as Physical Notes or Global Notes or
such other information as the Trustee may reasonably request. In addition, with
respect to authentication pursuant to clauses (ii) or (iii) of the first
sentence of this paragraph, the first such written order from the Company shall
be accompanied by an Opinion of Counsel of the Company in a form reasonably
satisfactory to the Trustee stating that the issuance of the Private Exchange
Notes or the Unrestricted Notes, as the case may be, does not give rise to an
Event of Default, complies with this Indenture and has been duly authorized by
the Company. The aggregate principal amount of Notes outstanding at any time
may not exceed $350,000,000, except as provided in Section 2.07.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its best efforts to obtain the same
"CUSIP" number for such Notes as is printed on the Notes outstanding at such
time; provided, however, that if any series of Notes issued under this
Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee to be a
different class of security than the Notes outstanding at such time for federal
income tax purposes, the Company may obtain a "CUSIP" number for such Notes
that is different than the "CUSIP" number printed on the Notes then
outstanding. Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
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 of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
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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, State 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 reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. Neither the Company nor
any Affiliate of the Company 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, in advance, of the
name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices 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 prior written notice to
the Company.
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, subject to Articles Ten and Eleven, each Paying Agent
shall hold in trust for the benefit of the Holders or the Trustee all assets
held by the Paying Agent 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 the Company and the Paying Agent shall notify
the Trustee in writing of any Default by the Company (or any other obligor on
the Notes) 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.
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SECTION 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee as of each Record Date and before
each related Interest Payment 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
reasonably require of the names and addresses of Noteholders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Notes are
presented to the Registrar or a co-Registrar with a request 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 issue and execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made to a Noteholder for any registration of transfer or
exchange. The Company may require from such Noteholder payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Sections
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 before 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.
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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 execute and 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 the
Trustee and counsel and the Trustee may charge the Company for the Trustee's
reasonable out-of-pocket expenses in replacing such Note. 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 described 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, any Subsidiary Guarantor or any of their
respective 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 proof satisfactory to it 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.
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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, any Subsidiary Guarantor or any of their respective 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, and 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, and shall direct
the Trustee to authenticate such Notes and certify that all conditions
precedent to the issuance of such Notes contained herein have been complied
with. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company and the Trustee consider appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
the Trustee shall 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
(subject to the record-retention requirements of the Exchange Act) dispose of
all Notes surrendered for registration of 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 or any Subsidiary Guarantor 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.
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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, 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 one or more "CUSIP" numbers,
and if so, the appropriate CUSIP number(s) shall be included in all notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of any CUSIP number(s) printed in the notice or on the
Notes, and that reliance may be placed only on the other identification numbers
printed 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 10:00 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. Book-Entry Provisions for Global Note.
(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
Exhibit B.
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,
30
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 2.16. 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 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 (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
2.16, bear the legend regarding transfer restrictions applicable to the
Physical Notes set forth in Exhibit A.
(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.
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SECTION 2.16. 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 March 14, 2000 and the
transferor certifies that the Restricted Security was not acquired from the
Company or Affiliate of the Company less than three years prior to the date of
the proposed transfer 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 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
32
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 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 registration of 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 registration of 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 2.16 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 2.15 or this Section 2.16
for a period of three years. 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.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph Six of the
Notes, it shall notify both 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 30 days before the Redemption Date (unless a shorter notice period shall
be satisfactory to the Trustee, as evidenced in a writing signed on behalf of
the Trustee), together with an Officers' Certificate and Opinion of Counsel
stating that such redemption shall comply with the conditions contained herein
and in the Notes.
SECTION 3.02. Selection of Notes To Be Redeemed.
If fewer than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed on a pro rata basis, by lot or in such other
fair and appropriate manner chosen at the discretion of the Trustee and, if the
Notes are listed on any securities exchange, by a method that complies with the
requirements of such exchange. The Trustee shall make the selection from the
Notes outstanding and not previously called for redemption and shall promptly
notify the Company in writing of the Notes selected for redemption and, in the
case of any Note selected for partial redemption, the principal amount thereof
to be redeemed. Notes in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000. Provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first class
mail, postage prepaid, to each Holder whose Notes are to be redeemed, with a
copy to the Trustee and any Paying Agent.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
(1) the Redemption Date;
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(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 (a) the Company defaults in making the redemption
payment or (b) such redemption payment is prohibited pursuant to Article Ten or
Eleven hereof or otherwise, 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 (equal to $1,000 or any integral multiple thereof) of such
Note to be redeemed and that, on or after the Redemption Date, and upon
surrender of such Note, a new Note or Notes in the aggregate principal 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, unless prohibited
pursuant to Article Ten or Eleven or otherwise pursuant to this Indenture,
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.
35
SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent in immediately available funds U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Notes or portions
thereof 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 and payment of the
Notes is not prohibited under Article Ten or Eleven or otherwise, 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 issue and execute, and the Trustee shall authenticate for the Holder, a
new Note or Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
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 of the Company) holds on that date U.S. Legal Tender designated
for and sufficient to pay the installment in full and is not prohibited from
paying such money to the Holders pursuant to the terms of this Indenture.
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. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
36
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 12.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five, 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 the Restricted Subsidiaries in accordance with the
respective organizational documents of each such 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 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 its 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 its Properties or any of its Subsidiaries' Properties and (ii)
all material lawful claims for labor, materials and supplies that, if unpaid,
might by law become a Lien upon its Properties or any of its Subsidiaries'
Properties, except, in each case, as would not be, in the aggregate, reasonably
likely to have a material adverse effect on the business and financial
condition of the Company and its Restricted Subsidiaries, taken as a whole;
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.
37
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its 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, unless the failure to do so, in each case,
would not be, in the aggregate, reasonably likely to have a material adverse
effect on the business and financial condition of the Company and its
Restricted Subsidiaries, taken as a whole; 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 or other governing body of the Company or the Restricted
Subsidiary concerned, as the case may be, desirable in the conduct of its
businesses and is not disadvantageous in any material respect to the Holders.
(b) The Company shall maintain insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the good faith judgment
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 Company, for
companies similarly situated in the industry, except for any omissions thereof
which would not be, in the aggregate, reasonably likely to have a material
adverse effect on the business and financial condition of the Company and its
Restricted Subsidiaries, taken as a whole.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate which complies
with TIA Section 314(a)(4) stating that a review of its activities during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it 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 such covenant and the Obligations
contained in this Indenture and the Notes and no Default or Event of Default
occurred during such 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
38
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 of this Indenture 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 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 12.02 hereof,
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 thirty Business Days of
its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall, 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 its
businesses and the ownership of its properties, except for such noncompliances
as are not in the aggregate reasonably likely to have a material adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.08. SEC Reports.
(a) The Company shall file with the SEC all information, documents
and reports to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is subject to such filing requirements
so long as the SEC will accept such filings. The Company (at its own expense)
shall file with the Trustee within 15 days after it files them with the SEC,
copies of the 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) which the Company files with the SEC pursuant
to Section 13 or 15(d) of the
39
Exchange Act. Upon qualification of this Indenture under the TIA, the Company
shall also comply with the provisions of TIA Section 314(a).
(b) At the Company's expense, regardless of whether the Company is
required to furnish such reports and other information referred to in paragraph
(a) above to its stockholders pursuant to the Exchange Act, the Company shall
cause such reports and other information to be mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar within
15 days after it files them with the SEC.
(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.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company and each Subsidiary Guarantor covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Subsidiary Guarantor, as the case may be, from paying all
or any portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and 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 and each Subsidiary Guarantor, if any, hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly (i) declare or pay any dividend or make any
distribution in either case on account of the Company's Capital Stock or to the
holders of the Company's Capital Stock (except dividends or distributions
payable in the Company's Capital Stock), (ii) purchase, redeem or otherwise
acquire or retire for value any Capital Stock (including any option or warrant
to purchase Capital Stock) of the Company, (iii) purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment any Subordinated
Obligations, or (iv) make any Investment other than a Permitted Investment (any
such dividends distribution, payment, purchase, redemption, defeasance, other
acquisition or retirement or Investment being hereinafter referred to as a
"Restricted Payment") if at the time
40
the Company or such Restricted Subsidiary makes such Restricted Payment: (a) a
Default or an Event of Default has occurred and is continuing (or would result
therefrom); (b) the Company is not able to incur $1.00 of additional
Indebtedness under the first paragraph of Section 4.12; or (c) the aggregate
amount of such Restricted Payment and all other Restricted Payments made
subsequent to the Issue Date would exceed the sum of (A) the aggregate Net Cash
Proceeds received by the Company from any equity offering of the Qualified
Capital Stock of the Company, or of any entity of which the Company is a direct
or indirect Subsidiary, to the extent the proceeds thereof shall have been
contributed to the Company, and the amount of any other capital contributions
received by the Company in cash subsequent to the Issue Date and on or prior to
the date the Restricted Payment occurs (the "Reference Date"), (B) 50% of the
cumulative Consolidated Net Income of the Company subsequent to the Issue Date
and on or prior to the Reference Date or minus 100% of any cumulative deficit
in Consolidated Net Income during such period, (C) to the extent that any
Investment (other than a Permitted Investment) that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, or any
Unrestricted Subsidiary which is designated as an Unrestricted Subsidiary
subsequent to the Issue Date is sold or liquidated for cash, the lesser of (1)
the cash return of capital with respect to such Investment (less the cost of
disposition, if any) and (2) the initial amount of such Investment, and (D) $5
million.
Notwithstanding the foregoing, if no Default or Event of Default shall
have occurred and be continuing as a consequence thereof, the provisions set
forth in the immediately preceding paragraph will not prevent (i) the
declaration and payment of any dividends paid within 60 days after the date of
declaration thereof if, at such date of declaration, such dividend would have
complied with this covenant, (ii) any purchase or redemption of Capital Stock
or any Subordinated Obligations of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Qualified Capital Stock
of the Company (other than Capital Stock issued or sold to a Restricted
Subsidiary), (iii) the repurchase, redemption or other repayment of any
Subordinated Obligations in exchange for or solely out of the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of
Subordinated Obligations with a Weighted Average Life to Maturity equal to or
greater than the then remaining Weighted Average Life to Maturity of either (x)
the Subordinated Obligations repurchased, redeemed or repaid or (y) the Notes,
(iv) any payment by the Company or any Restricted Subsidiary (a) in connection
with repurchases of outstanding shares of common stock or equity appreciation
rights of the Company following the death, disability or termination of
employment of members of management, and (b) of amounts required to be paid by
the Company or any of its Subsidiaries to participants in employee benefit
plans upon termination of employment by such participants, as provided in the
documents related thereto, in an aggregate amount (for both clauses (a) and
(b)) not to exceed $5 million in any fiscal year (provided that any unused
amounts may be carried over to any subsequent fiscal year subject to a maximum
amount
41
of $10 million in any fiscal year), (v) Investments that are not Permitted
Investments made by the Company or any Restricted Subsidiary after the Issue
Date in an aggregate amount not to exceed $15 million, and (vi) Investments in
securities not constituting cash or Cash Equivalents and received in connection
with an Asset Sale made pursuant to the provisions of Section 4.16 or any other
disposition of assets not constituting an Asset Sale by reason of the $500,000
threshold contained in the definition thereof, provided that, for purposes of
determining whether Restricted Payments can be made pursuant to the previous
paragraph, all payments made pursuant to clauses (iv), (v) and (vi) shall be
included and payments made pursuant to all other clauses specified above shall
not be so included.
SECTION 4.11. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, following the Issue Date, enter into or permit to
exist any transaction with any Affiliate of the Company or any Significant
Stockholder of the Company (an "Affiliate Transaction") unless such transaction
is on terms that are fair and reasonable to the Company or such Restricted
Subsidiary and no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained in a comparable arm's length transaction with
an entity that is not an Affiliate or a Significant Stockholder of the Company;
provided that in the event such transaction or series of related transactions
involves aggregate consideration in excess of $2 million, the foregoing
determination as to fairness shall be made by a majority of the Independent
members of the Board of Directors of the Company as evidenced by a Board
Resolution (and if there are no Independent directors (x) directors shall be
deemed to be Independent if they are Independent with respect to the Affiliate
Transaction under consideration and (y) each of the Company's officers who are
also directors shall be considered Independent with respect to transactions to
which the Company or a Restricted Subsidiary, on the one hand, and a
Significant Stockholder or its Affiliate, on the other hand, are parties,
unless such officer is an officer, director, employee, partner or stockholder
of such Significant Stockholder or Affiliate, as the case may be); provided,
further, that in the event such transaction or series of related transactions
involves aggregate consideration in excess of $10 million, the Company shall,
in addition to obtaining the approval of the Independent members of its Board
of Directors, obtain a written opinion of an Independent Financial Advisor
stating that the terms of such transaction are fair and reasonable to the
Company or such Restricted Subsidiary from a financial point of view; provided,
however, that the (i) reasonable and customary directors' fees, indemnification
and similar arrangements and payments thereunder, (ii) transactions between or
among or for the benefit of the Company and its Subsidiaries, which are not
otherwise prohibited by this Indenture, (iii) any employment agreement entered
into by the Company or any of its Restricted Subsidiaries in the ordinary
course of business, (iv) Restricted Payments (other than Investments) permitted
by the provisions
42
of Section 4.10, (v) provision of administrative or management services by the
Company or its Subsidiaries or any of their officers to any of their respective
Subsidiaries in the ordinary course of business, and (vi) transactions
contemplated by any agreement as in effect as of the Issue Date or any
amendment thereto so long as any such amendment is not disadvantageous to the
Holders of the Notes in any material respect and so long as the amounts paid by
the Company and the Restricted Subsidiaries under any such amended agreement do
not exceed the amounts payable by the Company and the Restricted Subsidiaries
on the Issue Date, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. Limitation on Indebtedness.
Except as set forth in this Section 4.12, the Company shall not create,
incur, issue, assume, guarantee or otherwise become liable for, contingently or
otherwise (collectively, "issue"), directly or indirectly, any Indebtedness,
and shall not permit any Restricted Subsidiary to issue, directly or
indirectly, any Indebtedness, provided that the Company or a Restricted
Subsidiary may issue Indebtedness if the Operating Coverage Ratio of the
Company exceeds 2.25 to 1.0.
Notwithstanding the above limitation, the Company may issue, or permit a
Restricted Subsidiary to issue, directly or indirectly, the following
Indebtedness: (a) Indebtedness pursuant to the New Bank Credit Facility in an
aggregate principal amount not to exceed $200 million at any time outstanding;
(b) the Notes and the Guarantees; (c) Indebtedness owed to the Company or a
Restricted Subsidiary by the Company or a Restricted Subsidiary; provided,
however, that any transfer of such Indebtedness (excluding a pledge or other
transfer thereof intended to create a security interest therein, but including
any enforcement thereof other than an enforcement that results in the repayment
of an obligation permitted by the terms of this Section 4.12) to a person other
than the Company or a Restricted Subsidiary will be deemed for the purposes of
this Section 4.12 to constitute, in each case, the issuance of such
Indebtedness by the issuer thereof, (d) Indebtedness of the Company or any
Restricted Subsidiary (other than Indebtedness described in clause (a), (b) or
(c) above) outstanding as of the Issue Date; (e) Indebtedness issued in
exchange for, or the proceeds of which are used to refinance, extend, renew,
substitute, replace or refund or pay at maturity (including any mandatory
sinking fund payment) any Indebtedness issued pursuant to clauses (b) and (d)
above and (j) below (the "Refinancing Indebtedness"); provided that (1) the
principal amount of such Refinancing Indebtedness (or, if such Indebtedness is
issued with original issue discount, the amount equal to the original issue
price of such Indebtedness plus accretion, if any) shall not exceed the
principal amount and accrued interest of the Indebtedness so refinanced, (2)
the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life of Maturity of either (x)
the
43
Indebtedness being refinanced or (y) the Notes, (3) if the Indebtedness being
refinanced is subordinate in right of payment to the Notes or any Guarantee,
the Refinancing Indebtedness shall be subordinated in right of payment to the
Notes or any Guarantee, on terms at least as favorable to the holders of Notes
as those contained in the documentation governing the Indebtedness being
refinanced, if any, and (4) if the Indebtedness to be refinanced is
Indebtedness of the Company, such Refinancing Indebtedness will only be
permitted by this clause (e) if it is Indebtedness of the Company or a
Restricted Subsidiary that has executed a Guarantee; (f) Indebtedness incurred
by the Company or any Restricted Subsidiary under Hedging Obligations, provided
that (x) in the case of an Interest Rate Agreement, the notional principal
amount thereof does not exceed the principal amount of the Indebtedness to
which such Interest Rate Agreement relates and (y) in the case of a Currency
Agreement, such Currency Agreement does not increase the Indebtedness of the
Company and its Subsidiaries other than as a result of fluctuations in foreign
currency exchange or by reason of fees, indemnities and compensation payable
thereunder; (g) Indebtedness incurred by the Company or any Restricted
Subsidiary under performance bonds, letter of credit obligations to provide
security for worker's compensation claims, payment obligations in connection
with self-insurance or similar requirements and bank overdrafts incurred in the
ordinary course of business, provided that any Obligations arising in
connection with such bank overdraft Indebtedness is extinguished within five
business days; (h) Indebtedness incurred by the Company or any Restricted
Subsidiary and arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, from guarantees or letters
of credit, surety bonds or performance bonds securing any Obligations of the
Company or any Restricted Subsidiary pursuant to such agreements, in any case
incurred in connection with the disposition of any business, assets or
Restricted Subsidiary 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, in a principal amount
not to exceed the gross proceeds (with proceeds other than cash or Cash
Equivalents being valued at the fair market value thereof as determined by the
Board of Directors of the Company in good faith) actually received by the
Company or any Restricted Subsidiary in connection with such dispositions; (i)
Indebtedness of the Company in an aggregate principal amount not to exceed $5
million at any time outstanding in connection with the purchase, redemption,
acquisition, cancellation or other retirement for value of shares of Capital
Stock of the Company or any corporation of which the Company is a Subsidiary,
options on any such shares or related stock appreciation rights or similar
securities held by officers or employees or former officers or employees (or
their estates or beneficiaries under their estates) and which were issued
pursuant to any stock option or other equity incentive plan, upon death,
disability, retirement, termination of employment or pursuant to the terms of
such stock option or other equity incentive plan or any other agreement under
which such shares of capital stock, options, related rights or similarly.
securities were issued;
44
provided that (1) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is
expressly made subordinate in right of payment of the Notes at least to the
extent that the Notes are subordinated in right of payment to Senior
Indebtedness, (2) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, provides
that no payments of principal of such Indebtedness by way of sinking fund,
mandatory redemption or otherwise (including defeasance) may be made at any
time prior to one year after the stated maturity of the Notes; (j) Acquired
Indebtedness that is without recourse to the Company or any of its Restricted
Subsidiaries or any of their respective assets (other than the Subsidiary
acquired subject to such Acquired Indebtedness and its assets), and is not
guaranteed by any such person; provided that after giving pro forma effect to
the incurrence thereof, the Company could incur at least $1.00 of Indebtedness
under the first paragraph of this Section 4.12; and (k) additional Indebtedness
(including Capitalized Lease Obligations and Purchase Money Indebtedness) of
the Company and Restricted Subsidiaries, which may, but need not be incurred in
whole or in part under the New Bank Credit Facility, in an aggregate principal
amount not to exceed $30 million at any time outstanding. Notwithstanding any
other provision of this Section 4.12, a guarantee by a Subsidiary Guarantor or
the Company of Indebtedness incurred in accordance with the terms of the
Indenture at the time such Indebtedness was incurred will not constitute a
separate incurrence of Indebtedness.
SECTION 4.13. Limitation on Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to: (i) pay dividends or make any other distributions
on its Capital Stock or pay any Indebtedness or other obligation owed to the
Company or a Restricted Subsidiary, (ii) make any loans or advances to the
Company or a Restricted Subsidiary or (iii) transfer any of its property or
assets to the Company, except any such encumbrance or restriction under or by
reason of (a) applicable law, (b) this Indenture, (c) the New Bank Credit
Facility, (d) the terms of the Old Notes, (e) secured Indebtedness otherwise
permitted to be incurred pursuant to the provisions of Section 4.12 that limit
the right of the debtor to dispose of the assets securing such Indebtedness,
(f) customary net worth provisions contained in leases and other agreements
entered into in the ordinary course of business, (g) customary restrictions
with respect to a Restricted Subsidiary pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, (h) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements, (i) any other instrument
governing Indebtedness incurred on or after
45
the Issue Date or any refinancing thereof that is incurred in accordance with
the Indenture, provided that the encumbrance or restriction contained in any
such Indebtedness or any such refinancing thereof is no more restrictive and no
more unfavorable to the holders of the Notes in any material respect than that
contained in the New Bank Credit Facility as in effect on the Issue Date, (j)
customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of a Subsidiary or any other contract executed
by a Subsidiary in the ordinary course of business, and (k) Acquired
Indebtedness, provided that (x) such restriction is not applicable to any
person, or the properties or assets of any person, other than the person
acquired and (y) such Indebtedness is otherwise permitted to be incurred
pursuant to the provisions of Section 4.12.
SECTION 4.14. Limitation on Additional Senior Subordinated Indebtedness.
Neither the Company nor any Subsidiary Guarantor will incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is expressly by its terms subordinate or junior in right of payment to any
Indebtedness of such Person and senior in any respect in right of payment to
the Notes or the Guarantee of such Subsidiary Guarantor, as the case may be.
SECTION 4.15. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require the repurchase 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 and
unpaid interest, if any, to the date of purchase (subject to the rights of the
holders of record on the relevant record date to receive interest on the
relevant interest payment date). Within 10 days after the date upon which the
Change of Control occurs (the "Change of Control Date") requiring the Company
to make a Change of Control Offer pursuant to this Section 4.15, the Company
shall so notify in writing the Trustee.
(b) Within 30 days following any 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 will be accepted for
payment;
46
(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 60 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 if interest is then accruing;
(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 5:00 p.m., New York City time, on the 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 5:00 p.m., New York City
time, on the second Business Day preceding 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 Note purchased; and
(7) 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 or
portions thereof so tendered and accepted 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 or deliver to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued interest, if any, and the
Company shall execute and issue, and the Trustee shall promptly authenticate
and mail or deliver 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 or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date. For
purposes of this Section 4.15, the Trustee shall act as the Paying Agent.
47
(c) If the New Bank Credit Facility is in effect, or any amounts are
owing thereunder, at the time of the occurrence of a Change of Control, prior
to the mailing of the notice to Holders described in clause (b) above, but in
any event within 30 days following any Change of Control, the Company covenants
to (i) repay in full all Obligations under the New Bank Credit Facility and
terminate all commitments thereunder or offer to repay in full all Obligations
under the New Bank Credit Facility and terminate all commitments thereunder and
repay the Obligations under the New Bank Credit Facility and terminate all
commitments thereunder of each lender who has accepted such offer or (ii)
obtain the requisite consent under the New Bank Credit Facility to permit the
repurchase of the Notes as described above. The Company must first comply with
the covenant described in the preceding sentence before it shall be required to
purchase Notes in the event of a Change of Control; provided that the Company's
failure to comply with the covenant described in the preceding sentence will
constitute an Event of Default described in Section 6.01(3) if not cured within
30 days after the notice required by such Section. As a result of the
foregoing, a Holder may not be able to compel the Company to purchase the Notes
unless the Company is able at the same time to refinance all of the New Bank
Credit Facility or obtain requisite consents under the New Bank Credit
Facility.
The Company shall comply with all applicable securities laws in
connection with any Change of Control Offer, including Rule 14e-1 under the
Exchange Act.
SECTION 4.16. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted Subsidiary
to, consummate any Asset Sale unless (i) the Company (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of each such
Asset Sale at least equal to the fair market value (as determined by the Board
of Directors of the Company in good faith) of the assets sold; (ii) not less
than 80% (100% in the case of lease payments) of the consideration received by
the Company (or such Restricted Subsidiary, as the case may be) is in the form
of cash, provided that any note or other obligation received by the Company (or
such Restricted Subsidiary, as the case may be) that is converted into cash
within 30 days after receipt shall be deemed to be cash for purposes of this
clause (ii); and (iii) the Company within 365 days of such Asset Sale (x)
reinvests or causes a Restricted Subsidiary to reinvest (including by way of
acquisitions) the Net Cash Proceeds of any Asset Sale into one or more of the
then existing businesses of the Company and its Subsidiaries; or (y) applies or
causes to be applied such Net Cash Proceeds to the permanent reduction of
outstanding Senior Indebtedness (or, in the case of a revolving credit
facility, to the permanent reduction in the commitments thereunder); or (z)
after such time as the accumulated Excess Net Proceeds equal or exceed $5
million, applies or causes to be applied such Excess Net Proceeds to the
purchase of Notes tendered
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to the Company for purchase at a price equal to 100% of the principal amount
thereof plus accrued interest thereon to the date of purchase pursuant to a Net
Proceeds Offer (as defined below); provided, however, that the Company shall
have the right to exclude Asset Sales from the foregoing provision the net
proceeds of which in the aggregate do not exceed $20 million annually from the
calculation of accumulated Net Cash Proceeds.
In the event Net Cash Proceeds are required to be applied to the
purchase of Notes, the Company will be required to make an offer to purchase (a
"Net Proceeds Offer"). If the aggregate purchase price of Notes tendered
pursuant to the Net Proceeds Offer is less than the Net Cash Proceeds allotted
to the purchase of the Notes, the Company may apply the remaining Net Cash
Proceeds for general corporate purposes. Notice of a Net Proceeds Offer
pursuant to this Section 4.16 shall be mailed, by first class mail, by the
Company to all Holders at their last registered addresses, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable 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 no earlier than 30 days
nor later than 60 days from the date such notice is mailed, other than
as may be required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue
interest if interest is then accruing;
(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 5:00 p.m., New York City time, on the second Business
Day prior to the Proceeds Purchase Date;
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(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than 5:00 p.m., New York City
time, on the second Business Day preceding 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 were purchased only in part will
be issued new Notes equal to principal amount to the unpurchased portion
of the Notes surrendered.
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 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 Company shall execute and issue,
and the Trustee shall promptly authenticate and mail or deliver to such Holders
new Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. The Company shall publicly announce the results of the Net
Proceeds Offer on or as soon as practicable after the Proceeds Purchase Date.
For purposes of this Section 4.15, the Trustee shall act as the Paying Agent.
The Company will comply with all applicable securities laws in
connection with any Net Proceeds Offer, including Rule l4e-1 under the Exchange
Act.
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of the Restricted Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
SECTION 4.18. Limitation on Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns property or assets, now owned or
50
hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari
passu with the Notes or a Guarantee, then the Notes or such Guarantee, as the
case may be, are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Notes or a
Guarantee, any such Lien shall be subordinated to the Lien granted to the
holders of the Notes or such Guarantee, as the case may be, to the same extent
as such Subordinated Obligations are subordinated to the Notes.
SECTION 4.19. Limitation on Transfer of Assets to Certain Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of any of
its assets or property to any Subsidiary that is not a Wholly Owned Restricted
Subsidiary of the Company, except as otherwise permitted pursuant to Sections
4.10 and 4.16.
SECTION 4.20. Guarantees of Certain Indebtedness
The Company will not permit any of its Subsidiaries, directly or
indirectly, to incur, guarantee or secure through the granting of Liens the
payment of any Indebtedness under the New Bank Credit Facility or any refunding
or refinancing thereof in each case unless such Subsidiary, the Company and the
Trustee execute and deliver a supplemental indenture evidencing such
Subsidiary's Guarantee, such Guarantee to be a senior subordinated unsecured
obligation of such Subsidiary. Neither the Company nor any Subsidiary Guarantor
shall be required to make a notation on the Notes or the Guarantees to reflect
any such subsequent Guarantee. Nothing in this covenant shall be construed to
permit any Subsidiary of the Company to incur Indebtedness otherwise prohibited
by Section 4.12.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.
(a) The Company, in a single transaction or through a series of
related transactions, shall not consolidate with or merge with or into any
other person, or transfer (by lease, assignment, sale or otherwise) all or
substantially all of its properties and assets unless: (i) either the Company
shall be the continuing person, or the person (if other than the Company)
formed by such consolidation or into which the Company is merged or to which
all or substantially all of the properties and assets of the Company are
transferred (the Company or such other person hereinafter referred to as the
"Surviving person") shall be a corporation organized and validly existing under
the laws of the United States, any state thereof or the District of Columbia,
and if other than the Company shall expressly assume, by an indenture
supplement, all of the obligations of the Company under the Notes and this
Indenture; (ii) immediately after and giving effect to such transaction and the
assumption contemplated by clause (i) above and the incurrence or anticipated
incurrence of any Indebtedness to be incurred in connection therewith, the
Surviving person could incur at least $1.00 of Indebtedness pursuant to the
first paragraph under Section 4.12; (iii) immediately before and immediately
after and giving effect to such transaction and the assumption of the
obligations as set forth in clause (i) above and the incurrence or anticipated
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing; and (iv)
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, transfer or adoption and
such supplemental indenture comply with this Article Five, that the Surviving
Person agrees to be bound hereby, and that all conditions precedent herein
provided (which, in the case of the opinion of counsel, may be limited to the
condition specified in clause (i) of this Section 5.01(a)) 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 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.
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,
52
in which the Company is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, lease or transfer is made shall succeed to, and be substituted
for, and may exercise every right and power 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 the predecessor corporation shall be
relieved of all Obligations and covenants under this Indenture and the Notes;
provided that solely for the purpose of calculating amounts described in clause
(c) of the first paragraph of Section 4.10, any such Surviving Person shall
only be deemed to have succeeded to and be substituted for the Company with
respect to the period subsequent to the effective time of this transaction (and
the Company shall be deemed to be the "Company" for such purposes for all prior
periods).
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of any installment of
interest on any Notes as and when the same becomes due and payable and the
Default continues for a period of 30 days (whether or not prohibited by the
subordination provisions of this Indenture);
(2) the Company defaults in payment of all or any part of the
principal on any Notes when the same becomes due and payable at maturity, upon
any redemption, by declaration or otherwise (whether or not prohibited by the
subordination provisions of this Indenture);
(3) the Company or any Subsidiary Guarantor fails duly to observe or
perform any of its other covenants or agreements contained in the Notes or this
Indenture and the Default continues for a 30-day period and after the notice
specified below;
(4) there shall be a default under any bond, debenture or other
evidence of Indebtedness of the Company or any of its Restricted Subsidiaries
or under any mortgage, indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness of the
Company or any of its Restricted Subsidiaries, whether such Indebtedness now
exists or shall hereafter be created, if both (A) such default either (i)
results from the failure to pay interest or principal on Indebtedness at the
final maturity of the respective issue of Indebtedness, and such failure
continues for a period of 10 days or more, or (ii) results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior to
its stated maturity and such acceleration has not been rescinded, cancelled or
otherwise cured within 10 days after receipt of notice of acceleration by the
Company and (B) the principal amount of such Indebtedness,
53
together with the principal amount of any other such Indebtedness in default
for failure to pay principal or interest at final maturity or the maturity of
which has been so accelerated, in each case with respect to which the 10-day
period described above has passed, aggregates in excess of $10,000,000 at any
one time;
(5) the Company or any of its Significant Subsidiaries (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;
(6) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries 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 of its
Significant Subsidiaries, (B) appoint a Custodian of the Company or any of its
Significant Subsidiaries or for substantially all of its property or (C) order
the winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or
(7) any final judgment or order for the payment of money shall be
rendered against the Company or any Significant Subsidiary of the Company by a
court of competent jurisdiction in excess of $10,000,000 individually or in the
aggregate for all such judgments or orders against all such persons that are
not stayed, bonded or discharged and there is a period of 60 consecutive days,
after written notice has been given by the Trustee or the holders of at least
25% in aggregate principal amount of the Notes then outstanding, during which a
stay of enforcement of such judgment or order, by reason of pending appeal or
otherwise, shall not be in effect.
A Default under clause (3) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes notify the Company and the Trustee, of the
Default, and the Company does not cure the Default within 30 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default." Such notice shall be given
by the Trustee if so requested by the Holders of at least 25% in principal
amount of the Notes then outstanding. Such notice shall be given by registered
or certified mail, return receipt requested.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(5) or (6) with respect to the Company) occurs and is continuing
and has not been waived pursuant to Section 6.04, then the Trustee or the
54
Holders of at least 25% in principal amount of outstanding Notes may declare
the 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 (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the New Bank Credit Facility, shall
become immediately due and payable upon the first to occur of an acceleration
under the New Bank Credit Facility or 5 Business Days after receipt by the
Company and the Representative under the New Bank Credit Facility of such
Acceleration Notice, unless all Events of Default specified in such
Acceleration Notice (other than any Event of Default described in clause (2) of
Section 6.01) shall have been cured. In the event of a declaration of
acceleration because an Event of Default set forth in clause (4) of Section
6.01 has occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the missed payments in respect of such Indebtedness
have been paid or if the holders of the Indebtedness that is subject to
acceleration have rescinded their declaration of acceleration and the Trustee
has received written notice thereof or such Indebtedness has been repaid in
full, in each case within 60 days thereof and if (i) the annulment of such
acceleration would not conflict with any judgment or decree of a court of
competent jurisdiction, (ii) all existing Events of Default, except non-payment
of principal or interest which have become due solely because of the
acceleration, have been cured or waived, (iii) the Company has delivered an
Officers' Certificate to the Trustee to the effect of clauses (i) and (ii)
above and (iv) all amounts due to the Trustee under Section 7.07 have been
paid. If an Event of Default specified in Section 6.01(5) or (6) 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.
The declaration of acceleration is subject to the condition that if, at
any time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Notes and the principal of any and all
Notes which shall have become due otherwise than by acceleration (with interest
upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest specified in the Notes, to the date of such
payment or deposit) and such amount as shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith, and if any and all Events of Default, other
than the non-payment of the principal of Notes which shall have become due by
acceleration, shall have been cured, waived or otherwise remedied as provided
herein, then and in every such case the holders of a majority in aggregate
principal amount of the Notes
55
then outstanding, by written notice to the Company and to the Trustee, may
waive all defaults and rescind and annul such declaration and its consequences,
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or shall impair any right consequent thereon.
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. 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, 6.07 and 9.02, 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. 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. Subject to Section 7.01, however, the Trustee may refuse
to 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.
56
SECTION 6.06. Limitation on Suits.
A Holder 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 then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or 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 30
days after receipt of the request and the offer of satisfactory
indemnity; and
(5) during such 30-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.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal and premium, if any, or
interest on such Note on or after the respective due dates set forth in such
Note (including upon acceleration thereof); provided that upon institution of
any proceeding or exercise of any remedy, such Holders provide the Trustee with
prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
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 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 respective dates, shall not be
impaired or affected without the consent of such Holder.
57
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, any Subsidiary Guarantor, if any, 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, in each
case at the rate per annum borne by the Notes, 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 reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders 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 Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, 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 Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: subject to Articles Ten and Eleven, to Holders for amounts due
and unpaid on the Notes for interest and premium, ratably, without preference
or priority
58
of any kind, according to the amounts due and payable on the Notes for interest
and premium, respectively;
Third: subject to Articles Ten and Eleven, to Holders for amounts due
and unpaid on the Notes for principal, ratably without preference or priority
of any kind, according to the amounts due and payable on the Notes for
principal; and
Fourth: subject to Articles Ten and Eleven, to the Company, the
Subsidiary Guarantors, if any, 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 Holders 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. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as
a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and the TIA and no others 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, in the case of any such certificate or opinion which
by any provision hereof is specifically required to be furnished to the
Trustee, the Trustee shall examine the certificates 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 negligent action, its
own 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 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) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
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the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) 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 rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
or both, which shall conform to Sections 12.04 and 12.05. 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 act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or agent
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.
(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
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Trustee against the costs, expenses and liabilities which may be incurred by it
in compliance with such request, order or direction.
(g) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization and
protection from liability in respect of any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(h) The Trustee shall not be charged with knowledge of any Defaults
or Events of Default unless either (1) a Trust Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (2) written notice
of such Default or Event of Default shall have been given to the Trustee by any
Holder or by the Company or any other obligor on the Notes or any holder of
Senior Indebtedness or Guarantor Senior Indebtedness or any representative
thereof.
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 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 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 a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note, 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 Holders.
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SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15, the Trustee shall, to the extent that
any of the events described in TIA Section 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as
of such date that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Sections 313(b) and (c).
A copy of each report at the time of its mailing to Holders 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 in writing if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
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 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 fees and expenses of
the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers, directors and shareholders for, and hold it harmless against, any
loss, liability or expense incurred by it except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on its part, arising
out of or in connection with the administration of this trust including the
reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its 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. Failure
by the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. At the Trustee's sole discretion, the Company shall
defend the claim and the Trustee shall provide reasonable cooperation and may
participate at the Company's expense in the defense. 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 such fees and expenses if it assumes the
Trustee's defense, there is no conflict of interest between the Company and the
Trustee in connection with such defense as reasonably determined by the Trustee
and no Default or Event of Default has occurred and is continuing. The Company
need not pay for any settlement made without its written consent, which consent
shall not be unreasonably withheld. The Company need not reimburse any expense
or
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indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith 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.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(5) or (6) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The obligations of the Company under this Section 7.07 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's Obligations pursuant to Article Eight or the
termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee in writing and may
appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. 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 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 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
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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 Holder.
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.
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 or national banking association, 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.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Sections 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 $100 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 Section 310(a)(2). The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 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 Section 310(b)(1) are met.
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SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 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 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 under arrangements satisfactory to the
Trustee for the giving of such notice 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, under the
terms of an irrevocable trust agreement in form and substance 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 and, provided, further, that from and after
the time of deposit, the money deposited shall not be subject to the rights of
holders of Senior Debt pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this Indenture or
the Notes 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
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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 satisfaction and discharge 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.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's and the Subsidiary
Guarantors' obligations under the Notes, the Guarantees and this Indenture
except for those surviving obligations specified above.
SECTION 8.02. Legal Defeasance and 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 and the Subsidiary
Guarantors shall, subject to the satisfaction of the conditions set forth in
Section 8.03, 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 hereof 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), and
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Holders of the Notes and any amounts deposited under Section 8.03 hereof shall
cease to be subject to any obligations to, or the rights of, any holder of
Senior Indebtedness or Guarantor Senior Indebtedness under Article Ten or
Eleven, as the case may be, or otherwise, 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 hereof, (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, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.10 through
4.20 and Article Five hereof with respect to the outstanding Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for
the purposes of any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "outstanding" for all other purposes hereunder (it
being understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.03
hereof shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Indebtedness or Guarantor Senior Indebtedness under Article
Ten or Article Eleven or otherwise. 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) hereof, 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), subject to the satisfaction of the conditions
set forth in Section 8.03 hereof, those events described in Section 6.01
(except those events described in Section 6.01(1), (2), (5) and (6)) shall not
constitute Events of Default.
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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) hereof to the out standing 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;
(b) in the case of an election under Section 8.02(b) hereof, 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 of the Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(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 of the
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(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) or insofar as Sections 6.01(5) and 6.01(6) hereof are concerned, at
any time in the period ending on the 91st day after the date of such deposit;
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(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
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 Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary not withstanding, 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 in Section 8.03 hereof 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.
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SECTION 8.05. Repayment to the Company or the Subsidiary Guarantors.
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company, or if deposited with the Trustee by any Subsidiary
Guarantor, to such Subsidiary Guarantor, 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, or if deposited with the Trustee
by any Subsidiary Guarantor, to such Subsidiary Guarantor, 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 or a Subsidiary Guarantor.
After payment to the Company or a Subsidiary Guarantor, as the case may be,
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. Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in this 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, or are by their terms to become due
and payable within one year or are to be called for redemption within one year
upon delivery of notice under arrangements satisfactory to the Trustee, 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.
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SECTION 8.07. 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 and each Subsidiary Guarantor'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 or any Subsidiary Guarantor, as the case may be, has made any payment
of interest on or principal of any Notes because of the reinstatement of its
obligations, the Company or any Subsidiary Guarantor, as the case may be, 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.
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, the Notes or any Guarantee
without notice to or consent of any Holder:
(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;
(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; or
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate stating that such amendment or supplement complies
with the provisions of this Section 9.01.
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SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, 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, the Notes or any
Guarantee without notice to any other Holders. Subject to Section 6.07, 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 Holder. 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) change the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver of any provision of this Indenture, the
Notes or any Guarantee;
(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 amount of any Note;
(4) change the Maturity Date of any Note, or alter the redemption
provisions contained in Article Three or in Paragraph 6 of the Notes in a
manner adverse to any Holder;
(5) make any changes in provisions concerning waivers of Defaults or
Events of Default by Holders of the Notes or the rights of Holders to recover
the principal of, interest on, premium, if any, or redemption payment with
respect to, any Note;
(6) make the principal of, or the interest on any Note payable with
anything or in any manner other than as provided for in this Indenture and the
Notes as in effect on the date hereof; or
(7) make any change to the subordination provisions of this Indenture
and the Note in a manner that adversely affects the Holders.
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.
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SECTION 9.03. Effect on Senior Indebtedness.
No amendment, supplement or waiver of this Indenture shall adversely
affect the rights of any holder of Senior Indebtedness or Guarantor Senior
Indebtedness, if any (including their rights under Article Ten or Article
Eleven of this Indenture), without the consent of such holder.
SECTION 9.04. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
SECTION 9.05. 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
written 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 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 Holder, 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; provided that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of 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
respective dates without the consent of such Holder.
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SECTION 9.06. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may, at the written direction of the Company, require the Holder of the
Note to deliver it to the Trustee. The Trustee at the written direction of the
Company may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee 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.
Failure to make the appropriate notation or issue a new Note shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.07. 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, if requested, an indemnity reasonably
satisfactory to it and 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.
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ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness.
The Company covenants and agrees and the Trustee and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes
shall be issued subject to the provisions of this Article Ten; and the Trustee
and each person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of all
Obligations on the Notes by the Company shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents of all Obligations on the Senior
Indebtedness; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Indebtedness, and that each
holder of Senior Indebtedness whether now outstanding or hereinafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness in reliance upon the covenants and provisions contained in this
Indenture and the Notes.
SECTION 10.02. No Payment on Notes in Certain Circumstances.
(a) If (i) any default in the payment of any principal of or interest
on, or other amounts due and owing on, any Senior Indebtedness, when due and
payable, whether at maturity, upon any redemption, by declaration or otherwise,
occurs and is continuing or (ii) any default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity of all or any
portion of such Senior Indebtedness occurs and is continuing, no payment shall
be made by, or on behalf of, the Company or any of its Subsidiaries or any
other person on its or their behalf with respect to any Obligations on the
Notes, or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing (or if such an
event of default would occur upon any payment with respect to the Notes) with
respect to the Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness
then outstanding, or their Representative, to accelerate the maturity thereof
and if the Representative for the Designated Senior Indebtedness gives written
notice of the event of default to the Trustee (a "Default Notice"), then,
unless and until the date, if any, on which all Designated Senior Indebtedness
to which such event of default relates is discharged or the Representative for
the Designated Senior Indebtedness gives notice that all events of default have
been cured or waived or have ceased to exist or the Trustee receives written
notice from the Representative for the Designated Senior Indebtedness
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Default Notice (the "Blockage Period"), none of the
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Company or any of its Subsidiaries or any other person on its or their behalf
shall (x) make any payment with respect to any Obligations on the Notes or (y)
acquire any of the Notes for cash or property or otherwise. Notwithstanding
anything herein to the contrary, in no event will a Blockage Period extend
beyond 179 days from the date the payment on the Notes was due. Only one such
Blockage Period may be commenced within any 360 consecutive days. For all
purposes of this Section 10.02(a), no event of default which existed or was
continuing (it being acknowledged that any action of the Company or its
Subsidiaries occurring subsequent to delivery of a Default Notice that would
give rise to any event of default pursuant to any provision under which an
event of default previously existed (or was continuing at the time of delivery
of such Default Notice) shall constitute a new event of default for this
purpose) on the date of the commencement of any Blockage Period with respect to
the Designated Senior Indebtedness shall be, or be made, the basis for the
commencement of a second Blockage Period by the Representative of the
Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amount of Senior
Indebtedness held by such holders) or their respective Representatives, as
their respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Senior Indebtedness, if
any, received from the holders of Senior Indebtedness (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior
Indebtedness.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Senior Indebtedness thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to the Obligations on the Notes.
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SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshalling of assets of the Company, or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, whether voluntary or involuntary, all
Obligations with respect to all Senior Indebtedness shall first be paid in
full, in cash or Cash Equivalents, before any payment or distribution of any
kind or character is made on account of any Obligations on the Notes, or for
the acquisition of any of the Notes for cash or property or otherwise; and
until all such Obligations with respect to all Senior Indebtedness are paid in
full in cash or Cash Equivalents, any distribution to which the Holders of the
Notes would be entitled but for the subordination provisions will be made to
the holders of Senior Indebtedness as their interests may appear. Upon any such
dissolution, winding-up, liquidation, reorganization, bankruptcy, insolvency,
receivership or similar proceeding or assignment for the benefit of creditors
or marshalling of assets, any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to which the
Holders of the Notes or the Trustee under this Indenture would be entitled,
except for the provisions hereof, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holders of the Notes or by the
Trustee under this Indenture if received by them, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash or Cash Equivalents after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior
Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether by or
on behalf of the Company, as proceeds of security or enforcement of any right
of setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person, the Senior Indebtedness or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
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cash, property or securities, shall be received by any Holder when such payment
or distribution is prohibited by Section 10.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Indebtedness (pro rata to such holders on the basis
of the respective amount of Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such
Senior Indebtedness.
SECTION 10.04. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in
Sections 10.02 and 10.03, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge of the Trustee that a given payment would be prohibited by Section
10.02 or 10.03, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of and interest on the
Notes to the Holders entitled thereto unless at least one Business Day prior to
the date upon which such payment would otherwise become due and payable, the
Trustee shall have received the written notice provided for in Section 10.02(a)
or in Section 10.07 (provided that, notwithstanding the foregoing, such
application shall otherwise be subject to the provisions of the first sentence
of Section 10.02(a) and Section 10.03). The Company shall give prompt written
notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of the Company.
SECTION 10.05. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all Senior
Indebtedness, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Indebtedness
until the Notes shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holders
by virtue of this Article Ten which otherwise would have been made to the
Holders shall, as between the Company and the Holders of the Notes, be deemed
to be a payment by the Company to or on account of the Senior Indebtedness, it
being understood that the provisions of this Article Ten are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.
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If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of
amounts payable under the Senior Indebtedness, then the Holders shall be
entitled to receive from the holders of such Senior Indebtedness any payments
or distributions received by such holders of Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of the
Senior Indebtedness in full in cash or Cash Equivalents.
SECTION 10.06. Obligations of the Company Unconditional.
Nothing any contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders of the Notes the principal of and any interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Holder of any
Note or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
Ten. Regardless of anything to the contrary contained in this Article Ten or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any default or event of default with respect to any Senior
Indebtedness or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Indebtedness or
a Representative therefor, and, prior to the receipt of any such written
notice, the Trustee shall be entitled to assume (in the absence of actual
knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article Ten and, if such evidence is not furnished, the
Trustee may defer any
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payment to such person pending judicial determination as to the right of such
person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered
to the Trustee or the holders of the Notes, for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Ten.
SECTION 10.09. Trustee's Relation to Senior Indebtedness.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Indebtedness which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Senior
Indebtedness and nothing in this Indenture shall deprive the Trustee or any
such agent of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article,
except if such payment is made as a result of willful misconduct or gross
negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Indebtedness, the distribution may be made and the notice
given to their Representatives, if any.
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SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness, or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (iii) release any Person liable in any manner for the
payment or collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes.
Each Holder of Notes by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Indebtedness and
the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business as assets of the
Company, the filing of a claim for the unpaid balance of its or his Notes and
accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Indebtedness or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holders any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Senior
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Indebtedness or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest on
the Notes by reason of any provision of this Article Ten will not be construed
as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, the Notes or the obligations of the Company
hereunder or thereunder, that: (i) the principal of and interest on the Notes
will be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Notes and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any extension
of time of payment or renewal of any Notes or of any such other obligations,
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration or otherwise, subject, however, in
the case of clauses (i) and (ii) above, to the limitations set forth in Section
11.05. Each Subsidiary Guarantor hereby agrees that its Obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete
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performance of the obligations contained in the Notes, this Indenture and in
this Guarantee. If any Noteholder or the Trustee is required by any court or
otherwise to return to the Company, any Subsidiary Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or any Subsidiary Guarantor, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Noteholder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect as to such
amount only. Each Subsidiary Guarantor further agrees that, as between each
Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Six, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Guarantor for the purpose of this Guarantee.
SECTION 11.02. Subordination of Guarantee.
Each Subsidiary Guarantor agrees, and each Holder by accepting a
Guarantee agrees, that all Obligations owed under and in respect of such
Guarantees are subordinated in right of payment, to the extent and in the
manner provided in this Article Eleven, to the prior indefeasible payment in
full in cash or Cash Equivalents, of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor, and that the subordination of the Guarantees pursuant to
this Article Eleven is for the benefit of all holders of all Guarantor Senior
Indebtedness of such Subsidiary Guarantor, whether outstanding on the Issue
Date or issued thereafter.
SECTION 11.03. Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. Release of a Subsidiary Guarantor.
Upon (i) the release by the lenders under the New Bank Credit Facility,
related documents and future refinancings thereof of all guarantees of a
Subsidiary Guarantor and all Liens on the property and assets of such
Subsidiary Guarantor relating to such Indebtedness, or (ii) the sale or
disposition of a Subsidiary Guarantor (or all or substantially all of its
assets) to an entity which is not a Subsidiary of the Company, which is
otherwise in compliance with this Indenture, such Subsidiary Guarantor shall be
deemed released from all its obligations under this Article Eleven and its
Guarantee; provided, however, that any such termination shall occur only to the
extent that all Obligations of such Subsidiary Guarantor under the New Bank
Credit Facility and all of its guarantees of, and under all of its pledges of
assets or other security interests which secure, Indebtedness of the Company
shall also terminate upon such
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release, sale or transfer. The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a written request by the Company
accompanied by an Officers' Certificate certifying as to the compliance with
this Section 11.04 and the other provisions of this Indenture. Any Subsidiary
Guarantor not so released remains liable for the full amount of principal of
and interest on the Notes as provided in this Article Eleven.
SECTION 11.05. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Subsidiary Guarantor hereby irrevocably agree that the
Obligations of such Subsidiary Guarantor under its Guarantee shall be limited
to the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Guarantee or pursuant to Section 11.07, result in the Obligations of
such Subsidiary Guarantor under its Guarantee not constituting such fraudulent
transfer or conveyance.
SECTION 11.06. Subsidiary Guarantors May Consolidate, Etc., on Certain
Terms.
(a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor or shall prevent any sale or conveyance
of the assets of a Subsidiary Guarantor to the Company or another Subsidiary
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Subsidiary Guarantor shall no longer have any force or
effect.
(b) Except as set forth in Article Four hereof, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Subsidiary Guarantor with or into a corporation or corporations other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor), or successive consolidations or mergers in which a
Subsidiary Guarantor or its successor or successors shall be a party or
parties, or shall prevent any sale or conveyance of all or substantially all of
the assets of a Subsidiary Guarantor to a corporation other than the Company or
another Subsidiary Guarantor (whether or not affiliated with the Subsidiary
Guarantor); provided, however, that, subject to Sections 11.04 and 11.06(a),
either (x) the transaction is an Asset Sale consummated in accordance with
Section 4.16, or (y) (i) immediately after such transaction, and giving effect
thereto, no Default or Event of Default shall have occurred
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as a result of such transaction and be continuing, and (ii) each Subsidiary
Guarantor hereby covenants and agrees that, upon any such consolidation,
merger, sale or conveyance, the Guarantee of such Subsidiary Guarantor set
forth in this Article Eleven, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by such Subsidiary Guarantor, shall be expressly assumed (in the
event that the Subsidiary Guarantor is not the surviving corporation in such
transaction), by supplemental indenture satisfactory in form to the Trustee,
executed and delivered to the Trustee, together with an Officers' Certificate
of the Company and an Opinion of Counsel stating that the transaction and such
supplemental indenture comply with this Indenture, by the corporation formed by
such consolidation, or into which the Subsidiary Guarantor shall have merged,
or by the corporation that shall have acquired such property. In the case of
any such consolidation, merger, sale or conveyance that is not an Asset Sale
consummated in accordance with Section 4.16, upon the assumption by the
successor corporation, by supplemental indenture executed and delivered to the
Trustee and satisfactory in form to the Trustee of the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Subsidiary Guarantor, such successor corporation shall succeed
to and be substituted for the Subsidiary Guarantor with the same effect as if
it had been named herein as a Subsidiary Guarantor.
SECTION 11.07. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under this Guarantee, such Funding Guarantor shall be
entitled to a contribution from all other Subsidiary Guarantors in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including
the Funding Guarantor) for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Notes or any other Subsidiary Guarantor's Obligations with respect to this
Guarantee.
SECTION 11.08. Waiver of Subrogation.
Each Subsidiary Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise
from the existence, payment, performance or enforcement of such Subsidiary
Guarantor's Obligations under this Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding
sentence and the Notes shall not have been paid in full, such amount shall have
been
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deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Notes, and shall forthwith
be paid to the Trustee for the benefit of such Holders to be credited and
applied upon the Notes, whether matured or unmatured, in accordance with the
terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.08 is knowingly made in contemplation of such benefits.
SECTION 11.09. Execution of Guarantee.
To evidence their guarantee to the Noteholders specified in Section
11.01, the Subsidiary Guarantors hereby agree to execute the Guarantee in
substantially the form of Exhibit A recited to be endorsed on each Note ordered
to be authenticated and delivered by the Trustee. Each Subsidiary Guarantor
hereby agrees that its Guarantee set forth in Section 11.01 shall remain in
full force and effect notwithstanding any failure to endorse on each Note a
notation of such Guarantee. Each such Guarantee shall be signed on behalf of
each Subsidiary Guarantor by two Officers, or an Officer and an Assistant
Secretary 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 such Guarantee prior to the authentication
of the Note on which it is endorsed, and the delivery of such Note by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Subsidiary Guarantor. Such
signatures upon the Guarantee may be by manual or facsimile signature of such
officers and may be imprinted or otherwise reproduced on the Guarantee, and in
case any such officer who shall have signed the Guarantee shall cease to be
such officer before the Note on which such Guarantee is endorsed shall have
been authenticated and delivered by the Trustee or disposed of by the Company,
such Note nevertheless may be authenticated and delivered or disposed of as
though the person who signed the Guarantee had not ceased to be such officer of
the Subsidiary Guarantor.
SECTION 11.10. No Payment on Guarantees in Certain Circumstances.
(a) If (i) any default in the payment of any principal of or interest
on, or other amounts due and owing on, any Guarantor Senior Indebtedness or any
Senior Indebtedness guaranteed by a Subsidiary Guarantor (which Guarantee
constitutes Guarantor Senior Indebtedness of such Subsidiary Guarantor), when
due and payable, whether at maturity, upon any redemption, by declaration or
otherwise, occurs and is continuing or (ii) any default with respect to any
such Guarantor Senior Indebtedness or Senior Indebtedness resulting in the
acceleration of the maturity of all or any portion of such Guarantor Senior
Indebtedness or Senior Indebtedness occurs and is continuing, no payment shall
be made by, or on behalf of, the Subsidiary Guarantor or any other Person on
its behalf with respect to any Obligations on the Notes or any of the
Obligations of such Subsidiary Guarantor on its Guarantee, or to acquire any of
the Notes for cash or property or otherwise.
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In addition, if any other event of default occurs and is continuing (or if such
an event of default would occur upon any payment with respect to the Notes)
with respect to the Designated Senior Indebtedness guaranteed by a Subsidiary
Guarantor (which guarantee constitutes Guarantor Senior Indebtedness of such
Subsidiary Guarantor), as such event of default is defined in the instrument
creating or evidencing such Designated Senior Indebtedness, permitting the
holders of such Designated Senior Indebtedness then outstanding, or their
Representative, to accelerate the maturity thereof and if the Representative
for the Designated Senior Indebtedness gives written notice of the event of
default to the Trustee (a "Guarantor Default Notice"), then, unless and until
the date, if any, on which all Designated Senior Indebtedness to which such
event of default relates is discharged or the Representative for the Designated
Senior Indebtedness gives notice that all events of default have been cured or
waived or have ceased to exist or the Trustee receives written notice from the
Representative for the Designated Senior Indebtedness terminating the Guarantor
Blockage Period (as defined below), during the 179 days after the delivery of
such Guarantor Default Notice (the "Guarantor Blockage Period"), no Subsidiary
Guarantor or any other Person on its behalf shall (x) make any payment with
respect to any Obligations on the Notes or under its Guarantee or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Guarantor Blockage Period extend
beyond 179 days from the date the payment on the Notes was due. Only one such
Guarantor Blockage Period may be commenced within any 360 consecutive days. For
all purposes of this Section 11.10(a), no event of default which existed or was
continuing (it being acknowledged that any action of the Company occurring
subsequent to delivery of a Default Notice that would give rise to any event of
default pursuant to any provision under which an event of default previously
existed (or was continuing at the time of delivery of such Default Notice)
shall constitute a new event of default for this purpose) on the date of the
commencement of any Guarantor Blockage Period with respect to the Designated
Senior Indebtedness shall be, or be made, the basis for the commencement of a
second Guarantor Blockage Period by the Representative of the Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such event of default shall have been cured or waived for a period of not less
than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 11.10(a), such payment shall be held in trust for the benefit of,
shall be paid over or delivered to, the holders of Guarantor Senior
Indebtedness (pro rata to such holders on the basis of the respective amount of
Guarantor Senior Indebtedness held by such holders) or their respective
Representatives, as their respective interests may appear. The Trustee shall be
entitled to rely on information regarding amounts then due and owing on the
Guarantor Senior Indebtedness, if any, received from the holders of Guarantor
Senior Indebtedness (or their Representatives) or, if such information is not
received from such holders or their Representatives, from such Subsidiary
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Guarantor and only amounts included in the information provided to the Trustee
shall be paid to the holders of Guarantor Senior Indebtedness.
Nothing contained in this Article Eleven shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Guarantor Senior Indebtedness thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to the Obligations on the Notes or on account of any Subsidiary
Guarantor's Guarantee.
SECTION 11.11. Payment Over of Proceeds Upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of any Subsidiary
Guarantor of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshalling of assets of such
Subsidiary Guarantor, or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to any Subsidiary Guarantor or its
property, whether voluntary or involuntary, all Obligations with respect to all
Guarantor Senior Indebtedness shall first be paid in full, in cash or Cash
Equivalents, before any payment or distribution of any kind or character is
made on account of any Obligations on the Notes or any of the Obligations of
such Subsidiary Guarantor on its Guarantee, or for the acquisition of any of
the Notes for cash or property or otherwise; and until all such Obligations
with respect to all Guarantor Senior Indebtedness are paid in full in cash or
Cash Equivalents, any distribution to which the Holders of the Notes would be
entitled but for the subordination provisions will be made to the holders of
Guarantor Senior Indebtedness as their interests may appear. Upon any such
dissolution, winding-up, liquidation, reorganization, bankruptcy, insolvency,
receivership or similar proceeding or assignment for the benefit of creditors
or marshalling of assets, any payment or distribution of assets of any
Subsidiary Guarantor of any kind or character, whether in cash, property or
securities, to which the Holders of the Notes or the Trustee under this
Indenture would be entitled, except for the provisions hereof, shall be paid by
such Subsidiary Guarantor or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
or by the Holders of the Notes or by the Trustee under this Indenture if
received by them, directly to the holders of Guarantor Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Guarantor Senior
Indebtedness held by such holders) or their respective Representatives, or to
the trustee or trustees under any indenture pursuant to which any of such
Guarantor Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Guarantor Senior
Indebtedness remaining unpaid until all such Guarantor Senior Indebtedness has
been paid in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
Guarantor Senior Indebtedness.
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(b) To the extent any payment of Guarantor Senior Indebtedness
(whether by or on behalf of such Subsidiary Guarantor, as proceeds of security
or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar person, the
Guarantor Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of a Subsidiary Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 11.11(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Indebtedness (pro rata to such
holders on the basis of the respective amount of Guarantor Senior Indebtedness
held by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior
Indebtedness may have been issued, as their respective interests may appear,
for application to the payment of Guarantor Senior Indebtedness remaining
unpaid until all such Guarantor Senior Indebtedness has been paid in full in
cash or Cash Equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Guarantor
Senior Indebtedness.
SECTION 11.12. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Eleven or elsewhere in this Indenture
shall prevent (i) any Subsidiary Guarantor, except under the conditions
described in Sections 11.10 and 11.11, from making payments at any time for the
purpose of making payments of principal of and interest on the Notes, or from
depositing with the Trustee any moneys for such payments, or (ii) in the
absence of actual knowledge by the Trustee that a given payment would be
prohibited by Section 11.10 or 11.11, the application by the Trustee of any
moneys deposited with it for the purpose of making such payments of principal
of and interest on the Notes to the Holders entitled thereto unless at least
one Business Day prior to the date upon which such payment would otherwise
become due and payable, the Trustee shall have received the written notice
provided for in Section 11.10(a) or in Section 11.15 (provided that,
notwithstanding the foregoing, such application shall otherwise be subject to
the provisions of the first sentence of Section 11.10(a) and Section 11.11).
Each Subsidiary Guarantor shall give prompt written notice to the Trustee of
any dissolution, winding-up, liquidation or reorganization of any Subsidiary
Guarantor.
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SECTION 11.13. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Indebtedness, the Holders of the Notes shall be subrogated to
the rights of the holders of Guarantor Senior Indebtedness to receive payments
or distributions of cash, property or securities of such Subsidiary Guarantor
applicable to the Guarantor Senior Indebtedness of such Subsidiary Guarantor
until the Notes shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Guarantor
Senior Indebtedness by or on behalf of such Subsidiary Guarantor or by or on
behalf of the Holders by virtue of this Article Eleven which otherwise would
have been made to the Holders shall, as between the Subsidiary Guarantors and
the Holders of the Notes, be deemed to be a payment by such Subsidiary
Guarantor to or on account of the Guarantor Senior Indebtedness, it being
understood that the provisions of this Article Eleven are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes, on the one hand, and the holders of the Guarantor Senior Indebtedness,
on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, to the payment of
amounts payable under the Guarantor Senior Indebtedness, then the Holders shall
be entitled to receive from the holders of such Guarantor Senior Indebtedness
any payments or distributions received by such holders of Guarantor Senior
Indebtedness in excess of the amount sufficient to pay all amounts payable
under or in respect of the Guarantor Senior Indebtedness in full in cash or
Cash Equivalents.
SECTION 11.14. Obligations of Each Guarantor Unconditional.
Nothing contained in this Article Eleven or elsewhere in this Indenture
or in the Notes or the Guarantees is intended to or shall impair, as among any
Subsidiary Guarantor, its creditors other than the holders of Guarantor Senior
Indebtedness, and the Holders of the Notes, the obligation of such Subsidiary
Guarantor, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of and any interest on the Notes as and when the same shall
become due and payable in accordance with the terms of the Guarantees, or is
intended to or shall affect the relative rights of the Holders of the Notes and
creditors of any Subsidiary Guarantor other than the holders of Guarantor
Senior Indebtedness, nor shall anything herein or therein prevent the Holder of
any Note or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, in respect of cash, property or securities of any Subsidiary
Guarantor received upon the exercise of any such remedy.
SECTION 11.15. Notice to Trustee.
The Company or any Subsidiary Guarantor shall give prompt written notice
to the Trustee of any fact known to the Company or any such Subsidiary
Guarantor which would prohibit the making of any payment to or by the Trustee
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in respect of the Guarantees pursuant to the provisions of this Article Eleven.
Regardless of anything to the contrary contained in this Article Eleven or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any default or event of default with respect to any Guarantor
Senior Indebtedness or of any other facts which would prohibit the making of
any payment to or by the Trustee unless and until the Trustee shall have
received notice in writing from the Company or a Subsidiary Guarantor, or from
a holder of Guarantor Senior Indebtedness or a Representative therefor, and,
prior to the receipt of any such written notice, the Trustee shall be entitled
to assume (in the absence of actual knowledge to the contrary) that no such
facts exist.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any person as a holder of Guarantor
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eleven, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts of Guarantor
Senior Indebtedness held by such person, the extent to which such person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article Eleven, and if such
evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
SECTION 11.16. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of any Subsidiary Guarantor
referred to in this Article Eleven, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Trustee or the holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Guarantor Senior Indebtedness and other Indebtedness of such
Subsidiary Guarantor, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Eleven.
SECTION 11.17. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any agent of any Subsidiary Guarantor or the Trustee
shall be entitled to all the rights set forth in this Article Eleven with
respect to any Guarantor Senior Indebtedness which may at any time be held by
it in its individual or any other capacity to the same extent as any other
holder of Guarantor Senior Indebtedness and nothing in this Indenture shall
deprive the Trustee or any such agent of any of its rights as such holder.
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With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Eleven, and no
implied covenants or obligations with respect to the holders of Guarantor
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of
Guarantor Senior Indebtedness and shall not be liable to any such holders if
the Trustee shall pay over or distribute to or on behalf of Holders or any such
Subsidiary Guarantor or any other person money or assets to which any holders
of Guarantor Senior Indebtedness shall be entitled by virtue of this Article,
except if such payment is made as a result of willful misconduct or gross
negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Indebtedness, the distribution may be made and the
notice given to their Representatives, if any.
SECTION 11.18. Subordination Rights Not Impaired by Acts or Omissions of
a Subsidiary Guarantor or Holders of Guarantor Senior
Indebtedness.
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Subsidiary Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by such Subsidiary Guarantor with the
terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Eleven or the
obligations hereunder of the Holders of the Notes to the holders of the
Guarantor Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or
renew or alter, Guarantor Senior Indebtedness, or otherwise amend or supplement
in any manner Guarantor Senior Indebtedness, or any instrument evidencing the
same or any agreement under which Guarantor Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Guarantor Senior Indebtedness; (iii) release
any person liable in any manner for the payment or collection of Guarantor
Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against such Subsidiary Guarantor and any other person.
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SECTION 11.19. Noteholders Authorize Trustee To Effectuate Subordination
of Guarantees.
Each Holder of Notes by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Guarantor Senior
Indebtedness and the Holders of Notes, the subordination provided in this
Article Eleven, and appoints the Trustee its attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, liquidation
or reorganization of any Subsidiary Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business as assets of such Subsidiary Guarantor, the filing
of a claim for the unpaid balance of its or his Notes and accrued interest in
the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Guarantor Senior
Indebtedness or their Representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Notes. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Indebtedness
or their Representative to authorize or consent to or accept or adopt on behalf
of any Holders any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Guarantor Senior Indebtedness or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 11.20. This Article Eleven Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest on
the Notes by reason of any provision of this Article Eleven will not be
construed as preventing the occurrence of an Event of Default.
SECTION 11.21. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eleven will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
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ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 12.02. 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 private courier service guaranteeing next day delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or the Subsidiary Guarantors, if any:
Tracor, Inc.
6500 Tracor Lane
Austin, Texas 78725
Attention: Corporate Secretary
Telecopy: (512) 929-2257
if to the Trustee:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
with a copy to:
U.S. Trust Company of Texas, N.A.111 Broadway
Lower Level
New York, New York 10006-1906
Attention: Corporate Trust Department
Each of the Company, the Subsidiary Guarantors, if any, 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, the Guarantors, if any, or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered or
delivered by private courier service guaranteeing next day delivery; when
answered back, if telexed; when receipt is acknowledged, if faxed; and five (5)
calendar days after mailing if sent by registered or
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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 Holder shall be mailed to such
Holder by first class mail or other equivalent means at such Holder's address
as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and any other
Person shall have the protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee upon
request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel, all
such conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant reasonably satisfactory to the Trustee that
complies with TIA Section 314(c).
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
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(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is 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 12.06. 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 Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 12.07. 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 12.08. Governing Law.
THIS INDENTURE, THE NOTES AND THE GUARANTEES 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 12.09. 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.
97
SECTION 12.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
the Company, the Subsidiary Guarantors, if any, or of the Trustee shall not
have any liability for any obligations of the Company under the Notes or this
Indenture. Each Holder 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 12.11. Successors.
All agreements of the Company and the Subsidiary Guarantors, if any, in
this Indenture, the Notes and the Guarantees, if any, shall bind their
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.12. 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 12.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Notes or in the Guarantees, if any, 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.
98
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
TRACOR, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
TRACOR INFORMATION SYSTEMS COMPANY
CORDANT, INC.
CORDANT FEDERAL SERVICES CORPORATION
GDE HOLDINGS, INC.
GDE SYSTEMS, INC.
GDE SYSTEMS IMAGING, INC.
HEALTHCOM, INC.
HELAVA ASSOCIATES, INC.
TRACOR AEROSPACE ELECTRONIC SYSTEMS, INC.
TRACOR AEROSPACE, INC.
TRACOR APPLIED SCIENCES, INC.
TRACOR FLIGHT SYSTEMS, INC.
TRACOR HOLDINGS, INC.
TRACOR MARINE, INC.
VITRO CORPORATION
QUALITY SYSTEMS, INC.
VITRO SYSTEMS INTERNATIONAL CORPORATION
VITRO SCIENCES INTERNATIONAL, INC.
VITRO SERVICES CORPORATION
VITRO TECHNICAL SERVICES, INC.
WESTMARK SERVICES COMPANY, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
AERIAL DATA REDUCTION
ASSOCIATES, INC.
GDESI, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
Title: Vice President
99
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/ James J. McGinley
---------------------------------------
Name: James J. McGinley
Title: Authorized Signatory
100
EXHIBIT A(1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "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 ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3)
OR (7) UNDER THE 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 WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY 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 ACT, (C) INSIDE THE UNITED STATES TO AN
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 FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN 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 ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION
S UNDER THE ACT.
A.1-1
CUSIP No.:
TRACOR, INC.
8 1/2% SENIOR SUBORDINATED NOTE DUE 2007
No. $
TRACOR, 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
March 1, 2007.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
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.
TRACOR, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Dated: , 1997 Title:
Certificate of Authentication
This is one of the 8 1/2% Senior Subordinated Notes due 2007 referred to
in the within-mentioned Indenture.
U.S. TRUST COMPANY OF TEXAS, N.A., as
Trustee
By:
----------------------------------
Authorized Signatory
A.1-2
(REVERSE OF SECURITY)
8 1/2% Senior Subordinated Note due 2007
1. Interest. TRACOR, 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 March
14, 1997. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing September 1, 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 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 canceled 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, U.S. Trust Company of Texas,
N.A. (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 March 1, 1997 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Note is one of a duly authorized issue of Initial Notes
of the Company designated as its 8 1/2% Senior Subordinated Notes due 2007 (the
"Initial Notes"). The Notes include the Initial Notes, the Private Exchange
Notes and the Unrestricted Notes issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement or, with respect to Initial Notes
issued under the Indenture subsequent to the Issue Date, a registration rights
agreement substantially identical to the Registration Rights Agreement. The
Initial Notes and the Unrestricted Notes are treated as a single class of
securities under the Indenture. The terms of the Notes include those stated in
this Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
A.1-3
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 limited in aggregate principal amount to $350,000,000. Under certain
circumstances as provided for in Article Eleven of the Indenture, the payment
on each Note may be guaranteed on a senior subordinated basis by the Subsidiary
Guarantors. 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.
5. Subordination. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Senior Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. The Guarantees, if any, in respect of the
Notes will be subordinated in right of payment, in the manner and to the extent
set forth in the Indenture, to the prior payment in full in cash or Cash
Equivalents of all Guarantor Senior Indebtedness of each Subsidiary Guarantor,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees
to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.
6. Redemption Provisions. Except as provided below, the Notes may not
be redeemed prior to March 1, 2002.
(a) Optional Redemption. On or after such date, the Notes may be
redeemed at the option of the Company, at any time as a whole, or from time to
time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest (if any) to the date of redemption (subject to
the rights of holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the 12-month
period commencing March 1:
REDEMPTION
PRICE
---------
2002 . . . . . . . . . . . . . . . . . . . . . . . . 104.250%
2003 . .. . . . . . . . . . . . . . . . . . . . . . . . 102.833%
2004 . .. . . . . . . . . . . . . . . . . . . . . . . . 101.417%
2005 and thereafter .. . . . . . . . . . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, at any time prior to March 1, 2000,
the Company may redeem, in part and from time to time, with the net proceeds of
one or more Public Equity Offerings, up to $87.5 million aggregate principal
amount of the
A.1-4
Notes at a redemption price equal to 108.500% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon, if any, to the redemption
date; provided that at least 65% of the aggregate principal amount of the Notes
originally issued remains outstanding immediately after the occurrence of any
such redemption. In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 90 days after the consummation of any such Public Equity Offering.
(c) At any time on or prior to March 1, 2002, the Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days prior notice
(but in no event more than 90 days after the occurrence of such Change of
Control) mailed by first-class mail to each holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued and unpaid interest, if any, to, the date
of redemption (the "Redemption Date") (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date).
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date. 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.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
upon a Change of Control if the Company does not redeem the Notes, each holder
will have the right, subject to certain conditions set forth in the Indenture,
to require the Company to repurchase such holder's Notes at a price equal to
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Section 4.16 of the Indenture provides that, after certain Asset
Sales, 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
A.1-5
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, the Notes or the Guarantee, if any, 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.
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 or Liens, make payments in respect of its
Capital Stock or certain Indebtedness, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Subsidiaries, incur
additional Senior Subordinated Indebtedness, 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 and sell
Capital Stock of a Restricted Subsidiary. 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.
A.1-6
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.
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. 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.
A.1-7
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: TRACOR, INC., 6500 Tracor Lane, Austin,
TX 78725-2000, Attn: Corporate Secretary
A.1-8
SENIOR SUBORDINATED GUARANTEE
Tracor Aerospace, Inc., Tracor Applied Sciences, Inc., Tracor Flight
Systems, Inc., Vitro Corporation, Vitro Services Corporation, Quality Systems,
Inc., Vitro Technical Services, Inc., Vitro Systems International Corporation,
Vitro Sciences International, Inc., GDE Systems, Inc., GDE Holdings, Inc., GDE
Systems Imaging, Inc., GDESI, Inc., Westmark Services Company, Inc., HealthCom,
Inc., Helava Associates, Inc., Aerial Data Reduction Associates, Inc., Tracor
Aerospace Electronic Systems, Inc., Tracor Information Systems Company, Tracor
Holdings, Inc., Tracor Marine, Inc., Cordant, Inc., and Cordant Federal
Services Corporation (the "Subsidiary Guarantors") have unconditionally
guaranteed on a senior subordinated basis (such guarantee by each Guarantor
being referred to herein as the "Guarantee") (i) the due and punctual payment
of the principal of and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Notes, to the extent lawful, and
the due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms set forth in Article
Eleven of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of
such Subsidiary Guarantor, to the extent and in the manner provided, in Article
Eleven of the Indenture, and reference is hereby made to such Indenture for the
precise terms of the Guarantee therein made.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Subsidiary Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. 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 Guarantees.
A.1-9
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
By:
---------------------------------------
Name:
Title:
Attest:
---------------------
A.1-10
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) March 15, 2000, 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:
A.1-11
(1) _______ to the Company or a subsidiary thereof; or
(2) _______ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(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.
A.1-12
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 2.16 of the Indenture shall have
been satisfied.
Date: Signed:
--------------------- --------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
-----------------------------------------------------------
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.
Date: Signed:
--------------------- --------------------------------------
NOTICE: To be executed by an executive
officer
A.1-13
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.1-14
EXHIBIT A(2)
CUSIP No.:
TRACOR, INC.
8 1/2% SENIOR SUBORDINATED NOTE DUE 2007
No. $
TRACOR, 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 March 1, 2007.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
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.
TRACOR, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Dated: , 1997 Title:
A.2-1
Certificate of Authentication
This is one of the 8 1/2% Senior Subordinated Notes due 2007 referred to in the
within-mentioned Indenture.
U.S. TRUST COMPANY OF TEXAS, N.A., as
Trustee
By:
---------------------------------------
Authorized Signatory
A.2-2
(REVERSE OF SECURITY)
8 1/2% Senior Subordinated Note due 2007
1. Interest. TRACOR, 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 March
14, 1997. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing September 1, 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 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 canceled 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, U.S. Trust Company of Texas,
N.A. (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 March 1, 1997 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Note is one of a duly authorized issue of Unrestricted
Notes of the Company designated as its 8 1/2% Senior Subordinated Notes due
2007 (the "Unrestricted Notes"). The Notes include the Initial Notes, the
Private Exchange Notes and the Unrestricted Notes issued in exchange for the
Initial Notes pursuant to the Registration Rights Agreement
A.2-3
or, with respect to Initial Notes issued under the Indenture subsequent to the
Issue Date, a registration rights agreement substantially identical to the
Registration Rights Agreement. The Initial Notes and the Unrestricted Notes
are treated as a single class of securities under the Indenture. The terms of
the Notes include those stated in this Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Sections 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 limited in aggregate principal amount to $350,000,000. Under certain
circumstances as provided for in Article Eleven of the Indenture, the payment
on each Note may be guaranteed on a senior subordinated basis by the Subsidiary
Guarantors. 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.
5. Subordination. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Senior Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. The Guarantees, if any, in respect of the
Notes will be subordinated in right of payment, in the manner and to the extent
set forth in the Indenture, to the prior payment in full in cash or Cash
Equivalents of all Guarantor Senior Indebtedness of each Subsidiary Guarantor,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees
to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.
6. Redemption Provisions. Except as provided below, the Notes may not
be redeemed prior to March 1, 2002.
(a) Optional Redemption. On or after such date, the Notes
may be redeemed at the option of the Company, at any time as a whole, or
from time to time in part, on not less than 30 nor more than 60 days'
notice, at the following redemption prices (expressed as percentages of
principal amount), plus accrued and unpaid interest (if any) to the date
of redemption (subject to the rights of holders of record on the
relevant record date to receive interest
A.2-4
due on the relevant interest payment date), if redeemed during the 12-
month period commencing March 1:
REDEMPTION
PRICE
---------
2002 104.250%
2003 102.833%
2004 101.417%
2005 and thereafter 100.000%
(b) Notwithstanding the foregoing, at any time prior to March
1, 2000, the Company may redeem, in part and from time to time, with the
net proceeds of one or more Public Equity Offerings, up to $87.5 million
aggregate principal amount of the Notes at a redemption price equal to
108.500% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon, if any, to the redemption date; provided that
at least 65% of the aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of any such
redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 90 days after the consummation of any such
Public Equity Offering.
(c) At any time on or prior to March 1, 2002, the Notes may also
be redeemed as a whole at the option of the Company upon the occurrence
of a Change of Control, upon not less than 30 nor more than 60 days
prior notice (but in no event more than 90 days after the occurrence of
such Change of Control) mailed by first-class mail to each holder's
registered address, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium as of, and accrued and unpaid
interest, if any, to, the date of redemption (the "Redemption Date")
(subject to the right of holders of record on the relevant record date
to receive interest due on the relevant interest payment date).
A.2-5
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date. 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.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
upon a Change of Control if the Company does not redeem the Notes, each holder
will have the right, subject to certain conditions set forth in the Indenture,
to require the Company to repurchase such holder's Notes at a price equal to
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Section 4.16 of the Indenture provides that, after certain Asset
Sales, 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
A.2-6
(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, the Notes or the Guarantee, if any, 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.
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 or Liens, make payments in respect of its
Capital Stock or certain Indebtedness, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Subsidiaries, incur
additional Senior Subordinated Indebtedness, 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 and sell
Capital Stock of a Restricted Subsidiary. 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
A.2-7
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.
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. 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: TRACOR, INC., 6500 Tracor Lane, Austin,
TX 78725-2000, Attn: Corporate Secretary.
A.2-8
SENIOR SUBORDINATED GUARANTEE
Tracor Aerospace, Inc., Tracor Applied Sciences, Inc., Tracor Flight
Systems, Inc., Vitro Corporation, Vitro Services Corporation, Quality Systems,
Inc., Vitro Technical Services, Inc., Vitro Systems International Corporation,
Vitro Sciences International, Inc., GDE Systems, Inc., GDE Holdings, Inc., GDE
Systems Imaging, Inc., GDESI, Inc., Westmark Services Company, Inc., HealthCom,
Inc., Helava Associates, Inc., Aerial Data Reduction Associates, Inc., Tracor
Aerospace Electronic Systems, Inc., Tracor Information Systems Company, Tracor
Holdings, Inc., Tracor Marine, Inc., Cordant, Inc., and Cordant Federal
Services Corporation (the "Subsidiary Guarantors") have unconditionally
guaranteed on a senior subordinated basis (such guarantee by each Guarantor
being referred to herein as the "Guarantee") (i) the due and punctual payment
of the principal of and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Notes, to the extent lawful, and
the due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms set forth in Article
Eleven of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of
such Subsidiary Guarantor, to the extent and in the manner provided, in Article
Eleven of the Indenture, and reference is hereby made to such Indenture for the
precise terms of the Guarantee therein made.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Subsidiary Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. 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 Guarantees.
A.2-9
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
TRACOR AEROSPACE, INC.
Tracor Applied Sciences, Inc.
Tracor Flight Systems, Inc.
Vitro Corporation
Vitro Services Corporation
Quality Systems, Inc.
Vitro Technical Services, Inc.
Vitro Systems International Corporation
Vitro Sciences International, Inc.
GDE Systems, Inc.
GDE Holdings, Inc.
GDE Systems Imaging, Inc.
GDESI, Inc.
Westmark Services Company, Inc.
HealthCom, Inc.
Helava Associates, Inc.
Aerial Data Reduction Associates, Inc.
Tracor Aerospace Electronic Systems, Inc.
Tracor Information Systems Company
Tracor Holdings, Inc.
Tracor Marine, Inc.
Cordant, Inc.
Cordant Federal Services Corporation
By:
---------------------------------------
Name:
Title:
A.2-10
TRACOR APPLIED SCIENCES, INC.,TRACOR
FLIGHT SYSTEMS, INC.,VITRO CORPORATION,
VITRO SERVICES CORPORATION, QUALITY
SYSTEMS, INC., VITRO TECHNICAL SERVICES,
INC.,VITRO SYSTEMS INTERNATIONAL
CORPORATION, GDE SYSTEMS, INC., GDE
HOLDINGS, INC., GDE SYSTEMS IMAGING, INC.,
HEALTHCOM, INC., HELAVA ASSOCIATES, INC.,
ADR ASSOCIATES, INC., TRACOR AEROSPACE
ELECTRONICS, INC. TRACOR INFORMATION
SYSTEMS COMPANY, CORDANT, INC., CORDANT
FEDERAL SERVICES CORPORATION]
By:
---------------------------------------
Name:
Title:
Attest:
------------------------
A.2-11
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:
A.2-12
(2) ______________ pursuant to and in compliance with Rule 144A under
the Securities Act; or
(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;
A.2-13
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.2-14
EXHIBIT B
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT
EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS
A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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.
B-1
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Re: TRACOR, INC. (the "Company") 8 1/2% Senior
Subordinated Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate principal
amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated February 28, 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)-
(iii) 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 dated as of
March 1, 1997 relating to the Notes (the "Indenture") 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 within the United States or to, or for the account or benefit of, U.S.
Persons 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 subsidiary thereof, (ii) inside the United
States in accordance with Rule 144A under the Securities Act to a "qualified
institutional 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-
C-1
dealer) to you a signed letter containing certain representatives and
agreements relating to the restrictions on transfer of the Notes, substantially
in the form of this letter, (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 you and the Company such certification, legal opinions
and other information as you 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 own 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.
You, the Company and the Initial Purchasers (as defined in the Offering
Memorandum) 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.
Very truly yours,
By:
---------------------------------------
Authorized Signature
C-2
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
______________, ____
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Re: TRACOR, INC.
(the "Company") 8 1/2% Senior Subordinated
Notes due 2007 (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.
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,
By:
---------------------------------------
Authorized Signature
D-1
EXHIBIT 4.7
________________________________________________________________________________
TRACOR, INC.
AND
SUBSIDIARY GUARANTORS
AND
U. S. TRUST COMPANY OF TEXAS, N.A.,
TRUSTEE
_______________
THIRD SUPPLEMENTAL INDENTURE
Dated as of September 26, 1996
TO INDENTURE
Dated as of August 15, 1993
_______________
$105,000,000
10 7/8% Senior Subordinated Notes dues 2001
________________________________________________________________________________
THIRD SUPPLEMENTAL INDENTURE
This THIRD SUPPLEMENTAL INDENTURE dated as of September 26, 1996 among
Tracor, Inc., a Delaware corporation (the "COMPANY"), the Original Subsidiary
Guarantors (as defined below) and the New Subsidiary Guarantors (as defined
below), and U.S. Trust Company of Texas, N.A., a national banking association,
as Trustee (the "TRUSTEE").
R E C I T A L S:
1. The Company, the Original Subsidiary Guarantors, and the Trustee
have previously entered into that certain Indenture dated as of August 15,
1993, as amended by that certain First Supplemental Indenture dated as of
November 17, 1994, and by that certain Second Supplemental Indenture dated as
of February 22, 1996 (as amended, the "INDENTURE"), pursuant to which
$105,000,000 of the Company's 10 7/8% Senior Subordinated Notes due 2001 were
issued. (The Subsidiary Guarantors (as defined in the Indenture) signatories
to the Indenture are herein referred to as the "ORIGINAL SUBSIDIARY
GUARANTORS").
2. Effective as of the date hereof the Company is consummating an
Agreement and Plan of Merger pursuant to which, inter alia, Cordant Holdings
Corporation, a Delaware corporation ("CORDANT HOLDINGS") is becoming a wholly
owned subsidiary of the Company, and Cordant Holdings and its wholly owned
subsidiary, Cordant, Inc., a Maryland corporation ("CORDANT"), and Cordant's
wholly owned subsidiary, Cordant Federal Services Corporation, a Maryland
corporation ("CFSC") will each be guaranteeing the obligations and indebtedness
of the Company under the New Bank Credit Facility (as defined in the
Indenture). (Cordant Holdings, Cordant and CFSC are herein referred to as the
"NEW SUBSIDIARY GUARANTORS").
3. Pursuant to Section 4.17 of the Indenture, each of the New
Subsidiary Guarantors is required to execute and deliver a supplemental
indenture to the Indenture, evidencing each such New Subsidiary Guarantor's
guarantee of the obligations under the Indenture as specifically required
thereby.
NOW THEREFORE, in consideration of the matters hereinabove recited and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby supplement the Indenture and
agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.1 Definitions. Capitalized terms not otherwise defined
herein shall have the meanings given in the Indenture as supplemented hereby.
ARTICLE TWO
NEW SUBSIDIARY GUARANTORS
Section 2.1 Guarantee of Securities. Each of the undersigned New
Subsidiary Guarantors hereby unconditionally, jointly and severally, guarantees
to each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, the Securities or the obligations
of the Company under the Indenture or thereunder in the manner provided in
Section 11.01 of the Indenture and agrees to be bound by all the terms of
Article Eleven of the Indenture.
ARTICLE THREE
MISCELLANEOUS
Section 3.1 Continuation. Except as amended by this Third
Supplemental Indenture, the Indenture remains in full force and effect in
accordance with its terms.
Section 3.2 Governing Law. THIS THIRD SUPPLEMENTAL INDENTURE 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 CONFLICTS OF LAW. 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 Third Supplemental
Indenture.
Section 3.3 Successors. All agreements of the Company and each
Subsidiary Guarantor (inclusive of the New Subsidiary Guarantors) in this Third
Supplemental Indenture shall bind their respective successors. All agreements
of the Trustee in this Third Supplemental Indenture shall bind its successor.
Section 3.4 Duplicate Originals. All parties may sign any number of
copies of this Third Supplemental Indenture. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
Section 3.5 Severability. In case any one or more of the provisions
in this Third Supplemental Indenture 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.
-2-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed, all as of the date first written above.
COMPANY:
-------
TRACOR, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
----------------------------------
Title: Vice President
---------------------------------
TRUSTEE:
-------
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/John C. Stohlman
---------------------------------------
Name: John C. Stohlman
----------------------------------
Title: Vice President
---------------------------------
-3-
SUBSIDIARY GUARANTORS:
---------------------
ORIGINAL SUBSIDIARY GUARANTORS:
TRACOR AEROSPACE, INC.
TRACOR APPLIED SCIENCES, INC.
TRACOR FLIGHT SYSTEMS, INC.
VITRO CORPORATION
VITRO SERVICES CORPORATION
QUALITY SYSTEMS, INC.
VITRO TECHNICAL SERVICES, INC.
VITRO SYSTEMS INTERNATIONAL
CORPORATION
GDE HOLDINGS, INC.
GDE SYSTEMS, INC.
GDE SYSTEMS IMAGING, INC.
HEALTHCOM, INC.
HELAVA ASSOCIATES, INC.
AEL INDUSTRIES, INC.
By: /s/ Russell E. Painton
---------------------------------------
NEW SUBSIDIARY GUARANTORS:
CORDANT HOLDINGS CORPORATION
CORDANT, INC.
CORDANT FEDERAL SERVICES CORPORATION
By: /s/ Peter P. Kusek
---------------------------------------
-4-
EXHIBIT 4.8
________________________________________________________________________________
TRACOR, INC.
AND
SUBSIDIARY GUARANTORS
AND
U. S. TRUST COMPANY OF TEXAS, N.A.,
TRUSTEE
_______________
FOURTH SUPPLEMENTAL INDENTURE
Dated as of March 14, 1997
TO INDENTURE
Dated as of August 15, 1993
_______________
$105,000,000
10 7/8% Senior Subordinated Notes due 2001
________________________________________________________________________________
FOURTH SUPPLEMENTAL INDENTURE
This FOURTH SUPPLEMENTAL INDENTURE dated as of March 14, 1997 is among
Tracor, Inc., a Delaware corporation (the "COMPANY"), the Original Subsidiary
Guarantors (as defined below) and the New Subsidiary Guarantors (as defined
below) and U.S. Trust Company of Texas, N.A., a national banking association,
as Trustee (the "TRUSTEE"), and, relative to the modification of the Indenture
(as defined below) contained in Article Two hereof, has been consented to by
Holders (as defined in the Indenture) of at least a majority in aggregate
principal amount of the outstanding Securities (as defined in the Indenture).
R E C I T A L S:
1. The Company, the Original Subsidiary Guarantors and the Trustee
have previously entered into that certain Indenture dated as of August 15,
1993, as amended by that certain First Supplemental Indenture dated as of
November 17, 1994, that certain Second Supplemental Indenture dated as of
February 22, 1996, and that certain Third Supplemental Indenture dated as of
September 26, 1996 (as amended, the "INDENTURE"), pursuant to which up to
$105,000,000 of the Company's 10 7/8% Senior Subordinated Notes due 2001 were
issued. (The Subsidiary Guarantors (as defined in the Indenture) signatories
to the Indenture are herein referred to as the "ORIGINAL SUBSIDIARY
GUARANTORS").
2. Effective as of the date hereof, the Company is entering into a
refinancing of the New Bank Credit Facility (as defined in the Indenture)
pursuant to which, inter alia, and in addition to the Original Subsidiary
Guarantors, those certain wholly owned subsidiaries of the Company as
designated on Schedule 1 attached hereto will be guaranteeing the obligations
and indebtedness of the Company under the refinancing of the New Bank Credit
Facility. (Such subsidiaries described on Schedule 1 attached hereto are
herein referred to as the "NEW SUBSIDIARY GUARANTORS").
3. Pursuant to Section 4.17 of the Indenture, each of the New
Subsidiary Guarantors is required to execute and deliver a supplemental
indenture to the Indenture, evidencing each such New Subsidiary Guarantor's
guaranty of the obligations under the Indenture as specifically required
thereby.
4. The parties hereto desire to modify and amend the Indenture as
herein set forth.
NOW THEREFORE, in consideration of the matters hereinabove recited and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby modify and amend the
Indenture and agree as follows:
ARTICLE ONE
DEFINITIONS
Capitalized terms not otherwise defined herein shall have the meanings
given in the Indenture as supplemented hereby.
ARTICLE TWO
MODIFICATION OF INDENTURE
Section 2.1 Deletion of Covenants. Effective as of the date hereof,
each of the following sections of the Indenture (each, a "Deleted Covenant"),
together with all references to any such section set forth in the Indenture,
are hereby deleted in their entirety:
Section 4.03 Limitation on Restricted Payments.
Section 4.05 Payment of Taxes and Other Claims.
Section 4.06 Maintenance of Properties and Insurance.
Section 4.11 Limitation on Transactions with Affiliates.
Section 4.12 Limitation on Indebtedness.
Section 4.13 Limitation on Payment Restrictions Affecting Subsidiaries.
Section 4.15 Limitation on Asset Sales.
Section 4.17 Guarantees of Certain Indebtedness.
Section 2.2 Covenant Concerning Compliance Certificates and Notices of
Default. Effective as of the date hereof, subsection (b) of Section 4.07 of
the Indenture, which reads as set forth below, is hereby deleted in its
entirety.
"(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the
Company shall deliver to the Trustee within 120 days after the
end of each fiscal year a written statement by the Company's
independent certified public accountants stating (A) that their
audit examination has included a review of the terms of this
Indenture and the Securities as they relate to accounting
matters, and (B) whether, in connection with their audit
examination, any Default has come to their attention and if such
a
-2-
Default has come to their attention, specifying the nature and
period of existence thereof."
Section 2.3 Covenant Concerning SEC Reports. Effective as of the date
hereof, the second sentence of the second paragraph of Section 4.09 of the
Indenture, which reads as set forth below, is deleted in its entirety.
"If the Company is not permitted by applicable law or regulation
to file such reports with the SEC, the Company shall cause its financial
statements, including any notes thereto (and, with respect to annual
reports, an auditors' report by an accounting firm of established
national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," comparable to that which
would have been required to appear in annual or quarterly reports filed
under Section 13 or 15(d) of the Exchange Act to be filed with the
Trustee and provided to the Holders."
Section 2.4 Provision Concerning When Company May Merge, Etc.
Effective as of the date hereof, subsections (2) and (4) of Section 5.01 of the
Indenture, which read as set forth below, are hereby deleted in their entirety.
"(2) immediately after and giving effect to such transaction and the
assumption contemplated by clause (1) above and the incurrence or
anticipated incurrence of any Indebtedness to be incurred in
connection therewith, (A) the Surviving person shall have a Net
Worth equal to or greater than the net worth of the Company
immediately preceding the transaction, (B) the Surviving person
could incur at least $1 of Indebtedness pursuant to Section
4.13(a), and (C) if the Operating Coverage Ratio of the Company
immediately preceding the transaction is within the range set
forth under column X below, then the Surviving person shall have
an Operating Coverage Ratio at least equal to the greater of (i)
the actual Operating Coverage Ratio of the Company multiplied by
the appropriate percentage set forth in column Y below and (ii)
the ratio set forth in column Z below:
X Y Z
- - -
2.5:1 to 2.999:1 100% 2.75:1
3.0:1 to 3.499:1 90% 3.00:1
3.5:1 or greater 80% 3.15:1"
"(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation,
merger, transfer
-3-
or adoption and such supplemental indenture comply with this
Article V, that the Surviving person agrees to be bound hereby,
and that all conditions precedent herein provided relating to
such transaction have been satisfied."
Section 2.5 Deletion of Definitions. Effective as of the date hereof,
all definitions set forth in Article One of the Indenture which relate solely
to the Deleted Covenants or to Section 5.01 of the Indenture are hereby deleted
in their entirety from the Indenture, including without limitation the
following definitions: "Consolidated EBITDA,"Consolidated Net Income,"
"Excess Net Proceeds,"Independent Financial Advisor,"Investment,"Net Cash
Proceeds,"Net Proceeds Offer,"Net Proceeds Securities,"Net Worth,"
"Operating Coverage Ratio,"Permitted Investment,"Permitted Refinancing,"
"Proceeds Purchase Date,"Qualified Capital Stock,"Refinancing
Indebtedness,"Restricted Payment,"Significant Stockholder" and "Weighted
Average Life to Maturity."
ARTICLE THREE
NEW SUBSIDIARY GUARANTORS
Section 3.1 Guarantee of Securities. Each of the undersigned New
Subsidiary Guarantors hereby unconditionally, jointly and severally, guarantees
to each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, the Securities or the obligations
of the Company under the Indenture or thereunder in the manner provided in
Section 11.01 of the Indenture and agrees to be bound by all the terms of
Article Eleven of the Indenture.
ARTICLE FOUR
MISCELLANEOUS
Section 4.1 Continuation. Except as amended by this Fourth
Supplemental Indenture, the Indenture remains in full force and effect in
accordance with its terms.
Section 4.2 Governing Law. THIS FOURTH SUPPLEMENTAL INDENTURE 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 CONFLICTS OF LAW. 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 Fourth Supplemental
Indenture.
Section 4.3 Successors. All agreements of the Company and each
Subsidiary Guarantor (inclusive of the New Subsidiary Guarantors) in this
Fourth Supplemental Indenture
-4-
shall bind their respective successors. All agreements of the Trustee in this
Fourth Supplemental Indenture shall bind its successors.
Section 4.4 Duplicate Originals. All parties may sign any number of
copies of this Fourth Supplemental Indenture. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
Section 4.5 Severability. In case any one or more of the provisions
in this Fourth Supplemental Indenture 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.
-5-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed, all as of the date first written above.
TRACOR, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
----------------------------------
Title: Vice President
---------------------------------
TRUSTEE:
-------
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/John C. Stohlman
---------------------------------------
Name: John C. Stohlman
----------------------------------
Title: Vice President
---------------------------------
-6-
SUBSIDIARY GUARANTORS:
---------------------
ORIGINAL SUBSIDIARY GUARANTORS:
TRACOR AEROSPACE, INC.
TRACOR APPLIED SCIENCES, INC.
TRACOR FLIGHT SYSTEMS, INC.
VITRO CORPORATION
VITRO SERVICES CORPORATION
QUALITY SYSTEMS, INC.
VITRO TECHNICAL SERVICES, INC.
VITRO SYSTEMS INTERNATIONAL
CORPORATION
GDE HOLDINGS, INC.
GDE SYSTEMS, INC.
GDE SYSTEMS IMAGING, INC.
HEALTHCOM, INC.
HELAVA ASSOCIATES, INC.
TRACOR AEROSPACE ELECTRONIC SYSTEMS,
INC., (formerly AEL Industries, Inc.)
TRACOR INFORMATION SYSTEMS COMPANY
(formerly Cordant Holdings Corporation)
CORDANT, INC.
CORDANT FEDERAL SERVICES CORPORATION
By: /s/ Russell E. Painton
---------------------------------------
NEW SUBSIDIARY GUARANTORS:
AERIAL DATA REDUCTION ASSOCIATES, INC.
GDESI, INC.
By: /s/ Russell E. Painton
---------------------------------------
TRACOR HOLDINGS, INC.
WESTMARK SERVICES COMPANY, INC.
TRACOR MARINE, INC.
VITRO SCIENCES INTERNATIONAL, INC.
By: /s/ Russell. E. Painton
---------------------------------------
-7-
SCHEDULE 1
to
Fourth Supplemental Indenture
The New Subsidiary Guarantors are as follows:
1. Aerial Data Reduction Associates, Inc., a Pennsylvania corporation
2. GDESI, Inc., a Delaware corporation
3. Tracor Holdings, Inc., a Delaware corporation
4. Westmark Services Company, Inc., a Delaware corporation
5. Tracor Marine, Inc., a Florida corporation
6. Vitro Sciences International, Inc., a Delaware corporation
EXHIBIT 4.13
________________________________________________________________________________
TRACOR, INC.
AND
SUBSIDIARY GUARANTORS
AND
U. S. TRUST COMPANY OF TEXAS, N.A.,
TRUSTEE
_______________
THIRD SUPPLEMENTAL INDENTURE
Dated as of September 26, 1996
TO INDENTURE
Dated as of November 17, 1994
_______________
$14,831,000
10 7/8% Senior Subordinated Notes dues 2001, Series A
________________________________________________________________________________
THIRD SUPPLEMENTAL INDENTURE
This THIRD SUPPLEMENTAL INDENTURE dated as of September 26, 1996 among
Tracor, Inc., a Delaware corporation (the "COMPANY"), the Original Subsidiary
Guarantors (as defined below) and the New Subsidiary Guarantors (as defined
below), and U.S. Trust Company of Texas, N.A., a national banking association,
as Trustee (the "TRUSTEE").
R E C I T A L S:
1. The Company, the Original Subsidiary Guarantors, and the Trustee
have previously entered into that certain Indenture dated as of November 17,
1994, as amended by that certain First Supplemental Indenture dated as of April
11, 1995, and by that certain Second Supplemental Indenture dated as of
February 22, 1996 (as amended, the "INDENTURE"), pursuant to which up to
$14,831,000 of the Company's 10 7/8% Senior Subordinated Notes due 2001, Series
A were issued. (The Subsidiary Guarantors (as defined in the Indenture)
signatories to the Indenture are herein referred to as the "ORIGINAL SUBSIDIARY
GUARANTORS").
2. Effective as of the date hereof the Company is consummating an
Agreement and Plan of Merger pursuant to which, inter alia, Cordant Holdings
Corporation, a Delaware corporation ("CORDANT HOLDINGS") is becoming a wholly
owned subsidiary of the Company, and Cordant Holdings and its wholly owned
subsidiary, Cordant, Inc., a Maryland corporation ("CORDANT"), and Cordant's
wholly owned subsidiary, Cordant Federal Services Corporation, a Maryland
corporation ("CFSC") will each be guaranteeing the obligations and indebtedness
of the Company under the New Bank Credit Facility (as defined in the
Indenture). (Cordant Holdings, Cordant and CFSC are herein referred to as the
"NEW SUBSIDIARY GUARANTORS").
3. Pursuant to Section 4.17 of the Indenture, each of the New
Subsidiary Guarantors is required to execute and deliver a supplemental
indenture to the Indenture, evidencing each such New Subsidiary Guarantor's
guarantee of the obligations under the Indenture as specifically required
thereby.
NOW THEREFORE, in consideration of the matters hereinabove recited and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby supplement the Indenture and
agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.1 Definitions. Capitalized terms not otherwise defined
herein shall have the meanings given in the Indenture as supplemented hereby.
ARTICLE TWO
NEW SUBSIDIARY GUARANTORS
Section 2.1 Guarantee of Securities. Each of the undersigned New
Subsidiary Guarantors hereby unconditionally, jointly and severally, guarantees
to each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, the Securities or the obligations
of the Company under the Indenture or thereunder in the manner provided in
Section 11.1 of the Indenture and agrees to be bound by all the terms of
Article Eleven of the Indenture.
ARTICLE THREE
MISCELLANEOUS
Section 3.1 Continuation. Except as amended by this Third
Supplemental Indenture, the Indenture remains in full force and effect in
accordance with its terms.
Section 3.2 Governing Law. THIS THIRD SUPPLEMENTAL INDENTURE 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 CONFLICTS OF LAW. 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 Third Supplemental
Indenture.
Section 3.3 Successors. All agreements of the Company and each
Subsidiary Guarantor (inclusive of the New Subsidiary Guarantors) in this Third
Supplemental Indenture shall bind their respective successors. All agreements
of the Trustee in this Third Supplemental Indenture shall bind its successor.
Section 3.4 Duplicate Originals. All parties may sign any number of
copies of this Third Supplemental Indenture. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
-2-
Section 3.5 Severability. In case any one or more of the provisions
in this Third Supplemental Indenture 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.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed, all as of the date first written above.
COMPANY:
-------
TRACOR, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
----------------------------------
Title: Vice President
---------------------------------
TRUSTEE:
-------
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/ John C. Stohlman
---------------------------------------
Name: John C. Stohlman
----------------------------------
Title: Vice President
---------------------------------
-3-
SUBSIDIARY GUARANTORS:
---------------------
ORIGINAL SUBSIDIARY GUARANTORS:
TRACOR AEROSPACE, INC.
TRACOR APPLIED SCIENCES, INC.
TRACOR FLIGHT SYSTEMS, INC.
VITRO CORPORATION
VITRO SERVICES CORPORATION
QUALITY SYSTEMS, INC.
VITRO TECHNICAL SERVICES, INC.
VITRO SYSTEMS INTERNATIONAL
CORPORATION
GDE HOLDINGS, INC.
GDE SYSTEMS, INC.
GDE SYSTEMS IMAGING, INC.
HEALTHCOM, INC.
HELAVA ASSOCIATES, INC.
AEL INDUSTRIES, INC.
By: /s/ Russell E. Painton
---------------------------------------
NEW SUBSIDIARY GUARANTORS:
CORDANT HOLDINGS CORPORATION
CORDANT, INC.
CORDANT FEDERAL SERVICES CORPORATION
By: /s/ Peter P. Kusek
---------------------------------------
-4-
EXHIBIT 4.14
________________________________________________________________________________
TRACOR, INC.
AND
SUBSIDIARY GUARANTORS
AND
U. S. TRUST COMPANY OF TEXAS, N.A.,
TRUSTEE
_______________
FOURTH SUPPLEMENTAL INDENTURE
Dated as of March 14, 1997
TO INDENTURE
Dated as of November 17, 1994
_______________
$14,831,000
10 7/8% Senior Subordinated Notes due 2001, Series A
________________________________________________________________________________
FOURTH SUPPLEMENTAL INDENTURE
This FOURTH SUPPLEMENTAL INDENTURE dated as of March 14, 1997 is among
Tracor, Inc., a Delaware corporation (the "COMPANY"), the Original Subsidiary
Guarantors (as defined below) and the New Subsidiary Guarantors (as defined
below) and U.S. Trust Company of Texas, N.A., a national banking association,
as Trustee (the "TRUSTEE"), and, relative to the modification of the Indenture
(as defined below) contained in Article Two hereof, has been consented to by
Holders (as defined in the Indenture) of at least a majority in aggregate
principal amount of the outstanding Securities (as defined in the Indenture).
R E C I T A L S:
1. The Company, the Original Subsidiary Guarantors and the Trustee
have previously entered into that certain Indenture dated as of November 17,
1994, as amended by that certain First Supplemental Indenture dated as of April
11, 1995, that certain Second Supplemental Indenture dated as of February 22,
1996, and that certain Third Supplemental Indenture dated as of September 26,
1996 (as amended, the "INDENTURE"), pursuant to which up to $14,831,000 of the
Company's 10 7/8% Senior Subordinated Notes due 2001, Series A were issued.
(The Subsidiary Guarantors (as defined in the Indenture) signatories to the
Indenture are herein referred to as the "ORIGINAL SUBSIDIARY GUARANTORS").
2. Effective as of the date hereof, the Company is entering into a
refinancing of the New Bank Credit Facility (as defined in the Indenture)
pursuant to which, inter alia, and in addition to the Original Subsidiary
Guarantors, those certain wholly owned subsidiaries of the Company as
designated on Schedule 1 attached hereto will be guaranteeing the obligations
and indebtedness of the Company under the refinancing of the New Bank Credit
Facility. (Such subsidiaries described on Schedule 1 attached hereto are
herein referred to as the "NEW SUBSIDIARY GUARANTORS").
3. Pursuant to Section 4.17 of the Indenture, each of the New
Subsidiary Guarantors is required to execute and deliver a supplemental
indenture to the Indenture, evidencing each such New Subsidiary Guarantor's
guaranty of the obligations under the Indenture as specifically required
thereby.
4. The parties hereto desire to modify and amend the Indenture as
herein set forth.
NOW THEREFORE, in consideration of the matters hereinabove recited and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby modify and amend the
Indenture and agree as follows:
ARTICLE ONE
DEFINITIONS
Capitalized terms not otherwise defined herein shall have the meanings
given in the Indenture as supplemented hereby.
ARTICLE TWO
MODIFICATION OF INDENTURE
Section 2.1 Deletion of Covenants. Effective as of the date hereof,
each of the following sections of the Indenture (each, a "Deleted Covenant"),
together with all references to any such section set forth in the Indenture,
are hereby deleted in their entirety:
Section 4.3 Limitation on Restricted Payments.
Section 4.5 Payment of Taxes and Other Claims.
Section 4.6 Maintenance of Properties and Insurance.
Section 4.11 Limitation on Transactions with Affiliates.
Section 4.12 Limitation on Indebtedness.
Section 4.13 Limitation on Payment Restrictions Affecting
Subsidiaries.
Section 4.15 Limitation on Asset Sales.
Section 4.17 Guarantees of Certain Indebtedness.
Section 2.2 Covenant Concerning Compliance Certificates and Notices of
Default. Effective as of the date hereof, subsection (b) of Section 4.7 of the
Indenture, which reads as set forth below, is hereby deleted in its entirety.
"(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the
Company shall deliver to the Trustee within 120 days after the
end of each fiscal year a written statement by the Company's
independent certified public accountants stating (A) that their
audit examination has included a review of the terms of this
Indenture and the Securities as they relate to accounting
matters, and (B) whether, in connection with their audit
examination, any Default has come to their attention and if such
a
-2-
Default has come to their attention, specifying the nature and
period of existence thereof."
Section 2.3 Covenant Concerning SEC Reports. Effective as of the date
hereof, the second sentence of the second paragraph of Section 4.9 of the
Indenture, which reads as set forth below, is deleted in its entirety.
"If the Company is not permitted by applicable law or regulation
to file such reports with the SEC, the Company shall cause its financial
statements, including any notes thereto (and, with respect to annual
reports, an auditors' report by an accounting firm of established
national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," comparable to that which
would have been required to appear in annual or quarterly reports filed
under Section 13 or 15(d) of the Exchange Act to be filed with the
Trustee and provided to the Holders."
Section 2.4 Provision Concerning When Company May Merge, Etc.
Effective as of the date hereof, subsections (2) and (4) of Section 5.1 of the
Indenture, which read as set forth below, are hereby deleted in their entirety.
"(2) immediately after and giving effect to such transaction and the
assumption contemplated by clause (1) above and the incurrence or
anticipated incurrence of any Indebtedness to be incurred in
connection therewith, (A) the Surviving person shall have a Net
Worth equal to or greater than the net worth of the Company
immediately preceding the transaction, (B) the Surviving person
could incur at least $1 of Indebtedness pursuant to Section
4.13(a), and (C) if the Operating Coverage Ratio of the Company
immediately preceding the transaction is within the range set
forth under column X below, then the Surviving person shall have
an Operating Coverage Ratio at least equal to the greater of (i)
the actual Operating Coverage Ratio of the Company multiplied by
the appropriate percentage set forth in column Y below and (ii)
the ratio set forth in column Z below:
X Y Z
- - -
2.5:1 to 2.999:1 100% 2.75:1
3.0:1 to 3.499:1 90% 3.00:1
3.5:1 or greater 80% 3.15:1"
"(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation,
merger, transfer
-3-
or adoption and such supplemental indenture comply with this
Article V, that the Surviving person agrees to be bound hereby,
and that all conditions precedent herein provided relating to
such transaction have been satisfied."
Section 2.5 Deletion of Definitions. Effective as of the date hereof,
all definitions set forth in Article One of the Indenture which relate solely
to the Deleted Covenants or to Section 5.1 of the Indenture are hereby deleted
in their entirety from the Indenture, including without limitation the
following definitions: "Consolidated EBITDA,"Consolidated Net Income,"
"Excess Net Proceeds,"Independent Financial Advisor,"Investment,"Net Cash
Proceeds,"Net Proceeds Offer,"Net Proceeds Securities,"Net Worth,"
"Operating Coverage Ratio,"Permitted Investment,"Permitted Refinancing,"
"Proceeds Purchase Date,"Qualified Capital Stock,"Refinancing
Indebtedness,"Restricted Payment,"Significant Stockholder" and "Weighted
Average Life to Maturity."
ARTICLE THREE
NEW SUBSIDIARY GUARANTORS
Section 3.1 Guarantee of Securities. Each of the undersigned New
Subsidiary Guarantors hereby unconditionally, jointly and severally, guarantees
to each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, the Securities or the obligations
of the Company under the Indenture or thereunder in the manner provided in
Section 11.1 of the Indenture and agrees to be bound by all the terms of
Article Eleven of the Indenture.
ARTICLE FOUR
MISCELLANEOUS
Section 4.1 Continuation. Except as amended by this Fourth
Supplemental Indenture, the Indenture remains in full force and effect in
accordance with its terms.
Section 4.2 Governing Law. THIS FOURTH SUPPLEMENTAL INDENTURE 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 CONFLICTS OF LAW. 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 Fourth Supplemental
Indenture.
Section 4.3 Successors. All agreements of the Company and each
Subsidiary Guarantor (inclusive of the New Subsidiary Guarantors) in this
Fourth Supplemental Indenture
-4-
shall bind their respective successors. All agreements of the Trustee in this
Fourth Supplemental Indenture shall bind its successors.
Section 4.4 Duplicate Originals. All parties may sign any number of
copies of this Fourth Supplemental Indenture. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
Section 4.5 Severability. In case any one or more of the provisions
in this Fourth Supplemental Indenture 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.
-5-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed, all as of the date first written above.
COMPANY:
-------
TRACOR, INC.
By: /s/ Russell E. Painton
---------------------------------------
Name: Russell E. Painton
----------------------------------
Title: Vice President
---------------------------------
TRUSTEE:
-------
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/John C. Stohlman
---------------------------------------
Name: John C. Stohlman
----------------------------------
Title: Vice President
---------------------------------
-6-
SUBSIDIARY GUARANTORS:
---------------------
ORIGINAL SUBSIDIARY GUARANTORS:
TRACOR AEROSPACE, INC.
TRACOR APPLIED SCIENCES, INC.
TRACOR FLIGHT SYSTEMS, INC.
VITRO CORPORATION
VITRO SERVICES CORPORATION
QUALITY SYSTEMS, INC.
VITRO TECHNICAL SERVICES, INC.
VITRO SYSTEMS INTERNATIONAL
CORPORATION
GDE HOLDINGS, INC.
GDE SYSTEMS, INC.
GDE SYSTEMS IMAGING, INC.
HEALTHCOM, INC.
HELAVA ASSOCIATES, INC.
TRACOR AEROSPACE ELECTRONIC SYSTEMS,
INC., (formerly AEL Industries, Inc.)
TRACOR INFORMATION SYSTEMS COMPANY
(formerly Cordant Holdings Corporation)
CORDANT, INC.
CORDANT FEDERAL SERVICES CORPORATION
By: /s/ Russell E. Painton
---------------------------------------
NEW SUBSIDIARY GUARANTORS:
AERIAL DATA REDUCTION ASSOCIATES, INC.
GDESI, INC.
By: /s/ Russell E. Painton
---------------------------------------
TRACOR HOLDINGS, INC.
WESTMARK SERVICES COMPANY, INC.
TRACOR MARINE, INC.
VITRO SCIENCES INTERNATIONAL, INC.
By: /s/ Russell E. Painton
---------------------------------------
-7-
SCHEDULE 1
to
Fourth Supplemental Indenture
The New Subsidiary Guarantors are as follows:
1. Aerial Data Reduction Associates, Inc., a Pennsylvania corporation
2. GDESI, Inc., a Delaware corporation
3. Tracor Holdings, Inc., a Delaware corporation
4. Westmark Services Company, Inc., a Delaware corporation
5. Tracor Marine, Inc., a Florida corporation
6. Vitro Sciences International, Inc., a Delaware corporation
EXHIBIT 4.15
================================================================================
CREDIT AGREEMENT
among
TRACOR, INC.,
VARIOUS BANKS,
CREDIT LYONNAIS NEW YORK BRANCH,
THE FIRST NATIONAL BANK OF CHICAGO,
and
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
as CO-AGENTS
and
BANKERS TRUST COMPANY,
as AGENT
---------------------------------
Dated as of March 14, 1997
---------------------------------
================================================================================
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C> <C>
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 The Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Amount of Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.13 Replacement of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.02 Minimum Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.03 Letter of Credit Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.05 Agreement to Repay Letter of Credit Drawings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.06 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.07 Special Provisions Regarding the Existing CoreStates Letters of Credit . . . . . . . . . . . . . . . . 20
SECTION 3. Fees; Reductions of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.02 Voluntary Termination of Unutilized Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.03 Mandatory Reduction of Revolving Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i)
Page
----
SECTION 4. Prepayments; Payments; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.02 Mandatory Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5. Conditions Precedent to the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.02 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.03 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.04 Corporate Documents; Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.05 Debt Agreements; Tax Sharing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.06 Issuance of the New Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.07 Pledge Agreement, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.08 Subsidiaries Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.09 Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.11 Fees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.12 Solvency Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.13 Consent Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.14 Existing Credit Agreement; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.15 Pro Forma Balance Sheet and Income Statements; Projections; Pro Forma Financial Statements;
Financial Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.16 Existing Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.17 Existing Senior Subordinated Notes Tender Offer and Existing Senior Subordinated Notes Consent
Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6. Conditions Precedent to All Credit Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.01 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.02 No Default; Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.03 Notice of Borrowing; Letter of Credit Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7. Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.04 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(ii)
Page
----
7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc. . . . . . . . . 37
7.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.07 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.09 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11 The Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12 Representations and Warranties in Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.13 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.14 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.16 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.20 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.21 Patents, Licenses, Franchises and Formulas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.22 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.23 Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.24 Existing Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.25 Restrictions on or Relating to Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.26 Debarment or Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.04 Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.05 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.06 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.08 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.09 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.10 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.11 Permitted Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.12 Existing Senior Subordinated Notes Tender Offer and Existing Senior Subordinated Notes Consent
Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.13 Foreign Subsidiaries Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(iii)
Page
----
SECTION 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. . . . . . . . . . . . . . . . . . . . . . . . 58
9.03 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.05 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.06 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.07 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.08 Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.09 Maximum Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.10 Minimum Consolidated Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.11 Limitation on Voluntary Payments and Modifications of Indebtedness; Modifications of Certificate
of Incorporation, By-Laws and Certain Other Agreements; etc. . . . . . . . . . . . . . . . . . . 66
9.12 Limitation on Certain Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.13 Limitation on Issuance of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.14 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.15 Limitation on Creation of Subsidiaries and Entering into Partnerships and Joint Ventures . . . . . . . 67
SECTION 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.07 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.08 Subsidiaries Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.10 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.11 Debarment or Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11. Definitions and Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.01 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
12.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
12.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
(iv)
Page
----
12.03 Lack of Reliance on the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
12.04 Certain Rights of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
12.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
12.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.07 The Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.09 Resignation by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
13.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
13.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
13.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
13.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
13.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
13.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
13.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 104
13.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
13.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
13.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
13.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
13.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
13.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
13.15 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
13.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
13.17 Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
</TABLE>
(v)
SCHEDULE I Commitments
SCHEDULE II Existing Letters of Credit
SCHEDULE III Subsidiaries
SCHEDULE IV Environmental Matters
SCHEDULE V Existing Indebtedness
SCHEDULE VI Insurance
SCHEDULE VII Existing Liens
SCHEDULE VIII Tax Matters
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-1 Form of Revolving Note
EXHIBIT B-2 Form of Swingline Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Section 4.04(b)(iii) Certificate
EXHIBIT E-1 Form of Opinion of Winstead, Sechrest & Minick
EXHIBIT E-2 Form of Opinion of Brown & Wood
EXHIBIT E-3 Form of Opinion of Russell E. Painton, Esq.
EXHIBIT F Form of Officers' Certificate
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Subsidiaries Guaranty
EXHIBIT I Form of Solvency Certificate
EXHIBIT J Form of Consent Letter
EXHIBIT K Form of Assignment and Assumption Agreement
(vi)
CREDIT AGREEMENT, dated as of March 14, 1997, among TRACOR, INC., a
Delaware corporation (the "Borrower"), the Banks party hereto from time to
time, CREDIT LYONNAIS NEW YORK BRANCH, THE FIRST NATIONAL BANK OF CHICAGO and
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as Co-Agents, and BANKERS TRUST
COMPANY, as Agent (all capitalized terms used herein and defined in Section 11
are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facility provided for herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees, at any time and from
time to time on and after the Effective Date and prior to the Final Maturity
Date, to make a revolving loan or revolving loans (each a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which Revolving Loans (i)
shall, at the option of the Borrower, be Base Rate Loans or Eurodollar Loans,
provided that, except as otherwise specifically provided in Section 1.10(b),
all Revolving Loans comprising the same Borrowing shall at all times be of the
same Type, (ii) may be repaid and reborrowed in accordance with the provisions
hereof, (iii) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when added to the product of (x) such Bank's
Adjusted Percentage and (y) the sum of (I) the aggregate principal amount of
all Swingline Loans (exclusive of Swingline Loans which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) then outstanding and (II) the aggregate amount
of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) at such time, equals the Available
Revolving Loan Commitment of such Bank at such time and (iv) shall not exceed
for all Banks at any time outstanding that aggregate principal amount which,
when added to (I) the aggregate principal amount of all Swingline Loans
(exclusive of Swingline Loans which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans)
then outstanding and (II) the aggregate amount of all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, equals the Total Available Revolving Loan
Commitment at such time.
(b) Subject to and upon the terms and conditions set forth herein,
BTCo in its individual capacity agrees to make at any time and from time to
time on and after the Effective Date and prior to the Swingline Expiry Date, a
revolving loan or revolving loans (each a "Swingline Loan" and, collectively,
the "Swingline Loans") to the Borrower, which Swingline Loans (i) shall be made
and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed in aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Revolving Loans made by Non-Defaulting Banks 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, the respective incurrence of Revolving Loans) at such time, an amount equal
to the Total Available Revolving Loan Commitment then in effect and (iv) shall
not exceed in aggregate principal amount at any time outstanding the Maximum
Swingline Amount. 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 repaid 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 10.05 or upon the exercise of any of the remedies
provided in the last paragraph of Section 10), 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 Adjusted Percentage, and the proceeds of
such Mandatory Borrowing 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 immediately 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 6 are then satisfied, (iii) whether a Default or an Event of Default
has occurred and is continuing, (iv) the date of such Mandatory Borrowing
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and (v) the amount of the Total Revolving Loan Commitment or the Adjusted Total
Revolving Loan Commitment at such time. 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 (as of the date the
Mandatory Borrowing would otherwise have occurred but adjusted for any payments
received from the Borrower on or after such date and prior to such purchase)
from BTCo (without recourse or warranty) such participations in the outstanding
Swingline Loans as shall be necessary to cause the Banks to share in such
Swingline Loans ratably based upon their respective Adjusted Percentages,
provided that (x) all interest payable on the Swingline Loans shall be for the
account of BTCo until the date the respective participation is required to be
purchased and, to the extent attributable to the purchased participation, shall
be payable to the Bank purchasing same from and after such date and (y) at the
time that any purchase of participations pursuant to this sentence is actually
made, the purchasing Bank shall be required to pay to BTCo interest on the
principal amount of the participation purchased for each day from and including
the day upon which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the overnight Federal
Funds Rate for the first three days and at the rate otherwise applicable to
Base Rate Loans hereunder for each day thereafter.
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of any Loans hereunder shall not be less than the
Minimum Borrowing Amount applicable thereto. More than one Borrowing may occur
on the same date, but at no time shall there be outstanding more than ten
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), the Borrower shall give the Agent at its
Notice Office at least one Business Day's prior notice of each Base Rate Loan
and at least three Business Days' prior notice of each Eurodollar Loan to be
incurred hereunder, provided that any such notice shall be deemed to have been
given on a certain day only if given before 12:00 Noon (New York time) on such
day in the case of Eurodollar Loans and 2:00 p.m. (New York time) on such day
in the case of Base Rate Loans. Each such notice (each a "Notice of
Borrowing"), except as otherwise expressly provided in Section 1.10, shall be
irrevocable and shall be given by the Borrower in the form of Exhibit A,
appropriately completed to specify the aggregate principal amount of the
Revolving Loans to be made pursuant to such Borrowing, the date of such
Borrowing (which shall be a Business Day) and whether the Revolving Loans being
made
-3-
pursuant to such Borrowing are to be initially maintained as Base Rate Loans or
Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be
applicable thereto. The Agent shall promptly give each Bank notice of such
proposed Borrowing, of such Bank's proportionate share thereof and of the other
matters required by the immediately preceding sentence to be specified in the
Notice of Borrowing.
(b) (i) Whenever the Borrower desires to incur Swingline Loans
hereunder, the Borrower 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 in
respect of a Borrowing of Swingline Loans, BTCo may prior to receipt of written
confirmation act without liability upon the basis of such telephonic notice,
believed by BTCo in good faith to be from the President, the Chief Financial
Officer, the Treasurer or any Assistant Treasurer of the Borrower. In each
such case, the Borrower hereby waives the right to dispute BTCo's record of the
terms of such telephonic notice.
1.04 Disbursement of Funds. No later than 2:00 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 3:00 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 portion of each such Borrowing requested to be
made on such date (or, in the case of Swingline Loans, BTCo will make available
the full amount thereof). All such amounts shall be made available in Dollars
and in immediately available funds at the Payment Office of the Agent, and the
Agent will make available to the Borrower at the Payment Office the aggregate
of the amounts so made available by the Banks no later than 2:00 p.m. (New York
time) on such day (other than in respect of Mandatory Borrowings). 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 such Bank's portion of
any Borrowing to be made on such date, the Agent may assume that such Bank has
made
-4-
such amount available to the Agent on such date of Borrowing and the Agent may,
in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to recover
such corresponding amount on demand 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
on demand from such 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 until the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to
(i) if recovered from such Bank, at the overnight Federal Funds Rate and (ii)
if recovered from the Borrower, the rate of interest applicable to the
respective Borrowing, as determined pursuant to Section 1.08. Nothing in this
Section 1.04 shall be deemed to relieve any Bank from its obligation to make
Loans hereunder or to prejudice any rights which the Borrower may have against
any Bank as a result of any failure by such Bank to make Loans hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made by each Bank shall be evidenced (i) if
Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-1 with blanks appropriately
completed in conformity herewith (each a "Revolving Note" and, collectively,
the "Revolving Notes") and (ii) if Swingline Loans, by a promissory note duly
executed and delivered by the Borrower 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 such Bank or its registered assigns 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
the Total 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 outstanding 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.
-5-
(c) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to BTCo or its registered assigns and be dated the
Effective Date, (iii) be in a stated principal amount equal to the Maximum
Swingline Amount and be payable in the outstanding 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 (or any error in 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, all or a portion equal to at least the Minimum Borrowing
Amount of the outstanding principal amount of the Revolving Loans made pursuant
to one or more Borrowings of one or more Types of Revolving Loans into a
Borrowing of another Type of Revolving Loan, provided that (i) except as
otherwise provided in Section 1.10(b), Eurodollar Loans may be converted into
Base Rate Loans only on the last day of an Interest Period applicable thereto
and no such partial conversion of Eurodollar Loans shall reduce the outstanding
principal amount of such Eurodollar Loans made pursuant to a single Borrowing
to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate
Loans may only be converted into Eurodollar Loans if no Default or Event of
Default is in existence on the date of the conversion and (iii) no conversion
pursuant to this Section 1.06 shall result in a greater number of Borrowings of
Eurodollar Loans than is permitted under Section 1.02. Each such conversion
shall be effected by the Borrower by giving the Agent at its Notice Office
prior to (x) 12:00 Noon (New York time) at least three Business Days' prior
notice (in the case of conversions into Eurodollar Loans) and (y) 2:00 p.m.
(New York time) at least one Business Day's prior notice (in the case of
conversions into Base Rate Loans) (each a "Notice of Conversion") specifying
the Revolving Loans to be so converted, the Borrowing(s) pursuant to which such
Revolving Loans were made and, if to be converted into 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. Upon any such conversion the proceeds thereof will be deemed
to be applied directly on the day of such conversion to prepay the outstanding
principal amount of the Revolving Loans being converted.
-6-
1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans under
this Agreement shall be incurred from the Banks pro rata on the basis of their
Revolving Loan Commitments, provided that all Borrowings of Revolving Loans
made pursuant to a Mandatory Borrowing shall be incurred from the Banks pro
rata on the basis of their Adjusted Percentages. It is understood that no Bank
shall be responsible for any default by any other Bank of its obligation to
make Loans hereunder and that each Bank shall be obligated to make the Loans
provided to be made by it hereunder, regardless of the failure of any other
Bank to make its Loans hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in respect
of the unpaid principal amount of each Base Rate Loan from the date the
proceeds thereof are made available to the Borrower until the earlier of (i)
the maturity thereof (whether by acceleration or otherwise) and (ii) the
conversion thereof to a Eurodollar Loan pursuant to Section 1.06, at a rate per
annum which shall be equal to the sum of the Applicable Base Rate Margin plus
the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made available to the Borrower until the earlier of (i) the maturity thereof
(whether by acceleration or otherwise) and (ii) the conversion thereof to a
Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate
per annum which shall, during each Interest Period applicable thereto, be equal
to the sum of the Applicable Eurodollar Margin plus the Eurodollar Rate for
such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the greater of
(x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans
from time to time and (y) the rate which is 2% in excess of the rate then borne
by such Loans, in each case with such interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest 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 the last 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, on any
repayment (on the amount repaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Agent shall
determine the Eurodollar Rate for each Interest Period applicable to Eurodollar
Loans and shall
-7-
promptly notify the Borrower and the Banks thereof. Each such determination
shall, absent manifest error, be final and conclusive and binding on all
parties hereto.
1.09 Interest Periods. At the time the Borrower gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Eurodollar Loan (in the case of the initial Interest Period
applicable thereto) or on the third Business Day prior to the expiration of an
Interest Period applicable to such Eurodollar Loan (in the case of any
subsequent Interest Period), the Borrower shall have the right to elect, by
giving the Agent notice thereof, the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at
the option of the Borrower, be a one, two, three or six-month period, provided
that:
(i) all Eurodollar Loans comprising a Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including
the date of any conversion thereto from a Base Rate Loan) and each
Interest Period occurring thereafter in respect of such Eurodollar
Loan shall commence on the day on which the next preceding Interest
Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan 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, however, that if any Interest
Period for a Eurodollar Loan 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;
(v) no Interest Period may be selected at any time when a
Default or an Event of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of Eurodollar
Loans shall be selected which extends beyond any date upon which a
mandatory prepayment of Revolving Loans is required to be made under
Section 4.02(a), as a result of reductions to the Total Revolving Loan
Commitment pursuant to Section 3.03(b), unless the aggregate principal
amount of Revolving Loans
-8-
which are maintained as Base Rate Loans or which have Interest Periods
which will expire on or before such date will be sufficient to make
such required payment; and
(vii) no Interest Period shall be selected which extends beyond
the Final Maturity Date.
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, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to
convert such Eurodollar Loans into 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 any
Bank shall have determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto but, with respect
to clause (i) below, may be made only by the Agent):
(i) on any Interest Determination Date 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 actual increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loan because of (x) any change since the
date of this Agreement in any applicable law or governmental rule,
regulation, order, guideline 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, order, guideline or request, such as, for example, but not
limited to: (A) a change in the basis of taxation of payment to any
Bank of the principal of or interest on the Notes or any other amounts
payable hereunder (except for changes in the rate of tax on, or
determined by reference to, the net income or profits of such Bank
pursuant to the laws of the jurisdiction in which it is organized or
in which its principal office or applicable lending office is located
or any subdivision thereof or therein) or (B) 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 since the date of this
Agreement affecting such Bank or the interbank Eurodollar market or
the position of such Bank in such market (excluding, however,
differences in a Bank's cost of funds from those of BTCo
-9-
which are solely the result of credit differences between such Bank
and BTCo); or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Bank in good
faith with any governmental request (whether or not having the force
of law) or (z) 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 promptly give notice (by telephone confirmed in writing) to the
Borrower and, except in the case of clause (i) above, 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
(including by way of conversion) shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii) above, the Borrower shall pay to such Bank, within
10 days following written demand therefor (which may be no more often than
monthly), 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 on all the
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 by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, by giving the Agent
telephonic notice (confirmed in writing) on the same date that the Borrower was
notified by the affected Bank or the Agent pursuant to Section 1.10(a)(ii) or
(iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least
three Business Days' written notice to the Agent, require the affected Bank to
convert such Eurodollar Loan into a Base Rate Loan, provided that, if more than
one
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Bank is affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(b).
(c) If at any time after the date of this Agreement any Bank
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's Revolving Loan
Commitment hereunder or its obligations hereunder, then the Borrower shall pay
to such Bank, within 10 days following its written demand therefor, such
additional amounts as shall be required to compensate such Bank or such other
corporation for the increased cost to such Bank or such other corporation or
the reduction in the rate of return to such Bank or such other corporation as a
result of such increase of capital. In determining such additional amounts,
each Bank will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable, provided that such Bank's
determination of compensation owing under this Section 1.10(c) shall, absent
manifest error, be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining 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 show the basis for calculation of such
additional amounts.
1.11 Compensation. The Borrower shall compensate each Bank, within
10 days following its written request (which request shall set forth the basis
for requesting such compensation and shall, absent manifest error, be final and
conclusive and binding on all the parties hereto), 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) which such Bank
may sustain: (i) if for any reason (other than a default by such Bank or the
Agent) a Borrowing of, or conversion from or into, 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 repayment
made pursuant to Section 4.01 or 4.02 or as a result of an acceleration of the
Loans pursuant to Section 10) or conversion of any of its Eurodollar Loans
occurs on a date which is not the last day of an Interest Period with respect
thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on
the date specified in the notice of prepayment given by the Borrower in respect
of such Eurodollar Loans; or (iv) as a consequence of (x) any other default by
the Borrower to repay its Loans when required by the terms
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of this Agreement or any Note held by such Bank or (y) any election made
pursuant to Section 1.10(b).
1.12 Change of Lending Office. Each Bank agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to such Bank,
it will 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 such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of 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 Sections 1.10, 2.06 and 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank
or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings,
(y) if any Bank refuses to consent to any proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Banks as provided in Section 13.12(b) or (z) upon the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section
1.10(c), Section 2.06 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, the Borrower shall have the right, if no
Default or Event of Default then exists (or, in the case of preceding clause
(y), no Default or Event of Default will exist immediately after giving effect
to the respective replacement), to replace such Bank (the "Replaced Bank") with
one or more other Eligible Transferees, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank") and each of whom shall be required to be reasonably acceptable to the
Agent, provided that:
(i) at the time of any replacement pursuant to this Section 1.13,
the Replaced Bank and the Replacement Bank shall enter into one or
more Assignment and Assumption Agreements pursuant to Section 13.04(b)
(and with all fees payable pursuant to said Section 13.04(b) to be
paid by the Replacement Bank) pursuant to which the Replacement Bank
shall acquire all of the Revolving Loan Commitment and outstanding
Revolving Loans of, and 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
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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 respective Issuing Bank or Banks an amount equal to such Replaced
Bank's Adjusted Percentage (for this purpose, determined as if the
adjustment described in clause (y) of the immediately succeeding
sentence had been made with respect to such Replaced Bank) of any
Unpaid Drawing (which at such time remains an Unpaid Drawing) to the
extent such amount was not theretofore funded by such Replaced Bank
and (z) BTCo an amount equal to such Replaced Bank's Adjusted
Percentage of any Mandatory Borrowing to the extent such amount was
not theretofore funded by such Replaced Bank; and
(ii) all obligations of the Borrower 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
13.17 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) the Adjusted Percentages of the Banks shall be
automatically adjusted at such time to give effect to such replacement (and to
give effect to the replacement of a Defaulting Bank with one or more
Non-Defaulting Banks).
SECTION 2.Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions set forth herein, the Borrower may request any Issuing Bank to
issue, at any time and from time to time on and after the Effective Date and
prior to the 30th day prior to the Final Maturity Date, (i) for the account of
the Borrower (including the account of the Borrower acting on behalf of any of
its Subsidiaries) and for the benefit of any holder (or any trustee, agent or
other similar representative for any such holders) of L/C Supportable
Indebtedness of the Borrower or any of its Subsidiaries, an irrevocable standby
letter of credit, in a form customarily used by such Issuing Bank or in such
other form as has been approved by such Issuing Bank and acceptable to the
Borrower (each such standby letter of credit, a "Standby Letter of Credit") in
support of such L/C Supportable Indebtedness and (ii) for the account of the
Borrower (including the account
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of the Borrower acting on behalf of any of its Subsidiaries) and for the
benefit of sellers of goods to the Borrower or any of its Subsidiaries, an
irrevocable sight commercial letter of credit, in a form customarily used by
such Issuing Bank or in such other form as has been approved by such Issuing
Bank and acceptable to the Borrower (each such commercial letter of credit, a
"Trade Letter of Credit" and each such Trade Letter of Credit and each Standby
Letter of Credit, a "Letter of Credit") in support of commercial transactions
of the Borrower and its Subsidiaries.
(b) Subject to and upon the terms and conditions set forth herein,
each Issuing Bank hereby agrees that it will, at any time and from time to time
on or after the Effective Date and prior to the 30th day prior to the Final
Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Borrower one or more Letters of Credit
(x) in the case of Standby Letters of Credit, in support of such L/C
Supportable Indebtedness of the Borrower or any of its Subsidiaries as is
permitted to remain outstanding without giving rise to a Default or an Event of
Default hereunder and (y) in the case of Trade Letters of Credit, in support of
sellers of goods as referenced in Section 2.01(a), provided that no Issuing
Bank shall be under any obligation to issue any Letter of Credit of the types
described above 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 such
Issuing Bank from issuing such Letter of Credit or any requirement of
law applicable to such Issuing Bank or any request or directive
(whether or not having the force of law) from any governmental
authority with jurisdiction over such Issuing Bank shall prohibit, or
request that such Issuing Bank refrain from, the issuance of letters
of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Bank with respect to such Letter of Credit
any restriction or reserve or capital requirement (for which such
Issuing Bank is not otherwise compensated) not in effect on the date
hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Issuing Bank as of the date of
this Agreement and which such Issuing Bank in good faith deems
material to it; or
(ii) such Issuing Bank shall have received notice from the Required
Banks prior to the issuance of such Letter of Credit of the type
described in the second sentence of Section 2.03(b).
(c) Notwithstanding anything to the contrary contained in this
Agreement, (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
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date of, and prior to the issuance of, the respective Letter of Credit) at such
time would exceed, when added to the aggregate principal amount of all
Revolving Loans made by Non-Defaulting Banks and the aggregate principal amount
of all Swingline Loans then outstanding, an amount equal to the Adjusted Total
Available Revolving Loan Commitment at such time and (ii) each Letter of Credit
shall by its terms terminate on or before the earlier of (x) (A) in the case of
Standby Letters of Credit, the date which occurs 12 months (or such longer
period as may be acceptable to the respective Issuing Bank in its sole
discretion) after the date of the issuance thereof (although any such Standby
Letter of Credit may be extendable for successive periods of up to 12 months
(or such longer period, as the case may be), but not beyond the fifth Business
Day preceding the Final Maturity Date, on the same terms or, if different, on
terms acceptable to the Issuing Bank thereof) and (B) in the case of Trade
Letters of Credit, the date which occurs 180 days after the date of issuance
thereof or (y) five Business Days prior to the Final Maturity Date (or, in the
case of a negotiable Trade Letter of Credit, the 30th day prior to the Final
Maturity Date). Each Letter of Credit issued hereunder shall be denominated in
Dollars.
(d) Schedule II contains a description of all letters of credit which
were issued pursuant to the Existing Credit Agreement and which are to remain
outstanding on the Effective Date (each such letter of credit (including the
Existing CoreStates IRB Letter of Credit), an "Existing Letter of Credit").
Each such Existing Letter of Credit shall constitute a Letter of Credit for all
purposes of this Agreement and shall, for purposes of Sections 2.04 and 3.01,
be deemed issued on the Effective Date.
2.02 Minimum Stated Amount. The initial Stated Amount of each Letter
of Credit shall be not less than $25,000 or such lesser amount as is acceptable
to the respective Issuing Bank.
2.03 Letter of Credit Requests. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, the Borrower shall give the
Agent and the respective Issuing Bank at least three Business Days' (or two
Business Days' in the case of Trade Letters of Credit to be issued after the
time at which the respective Issuing Bank and the Borrower agree on a standard
form of Trade Letter of Credit to be utilized hereunder, or, in each case such
shorter period as is acceptable to the respective Issuing Bank in any given
case) written notice thereof. Each notice shall be in the form of Exhibit C
(each a "Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
2.01(c). Unless the respective Issuing Bank has received notice from the
Required Banks before it
-15-
issues a Letter of Credit that one or more of the conditions specified in
Section 5 or Section 6 are not then satisfied, or that the issuance of such
Letter of Credit would violate Section 2.01(c) or any other provision of this
Agreement, then such Issuing Bank shall issue the requested Letter of Credit
for the account of the Borrower in accordance with such Issuing Bank's usual
and customary practices. Upon its issuance of any Standby Letter of Credit,
such Issuing Bank shall promptly notify each Bank of such issuance, which
notice shall be accompanied by a copy of the Standby Letter of Credit actually
issued. In addition, each Issuing Bank agrees to notify the Agent in writing
on the first Business Day of each week of the daily aggregate Stated Amount of
each Letter of Credit issued by such Issuing Bank for the immediately preceding
week.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall
be deemed to have sold and transferred to each Bank, other than such Issuing
Bank (each such Bank, in its capacity under this Section 2.04(a), a
"Participant"), and each such Participant shall be deemed irrevocably and
unconditionally to have purchased and received from such Issuing Bank, without
recourse or warranty, an undivided interest and participation, to the extent of
such Participant's Adjusted Percentage in such Letter of Credit, each drawing
made thereunder and the obligations of the Borrower under this Agreement with
respect thereto, and any security therefor or guaranty pertaining thereto.
Upon any change in the Revolving Loan Commitments or Adjusted Percentages of
the Banks pursuant to Section 1.13 or 13.04(b) or as a result of a Bank
Default, it is hereby agreed that, with respect to all outstanding Letters of
Credit and Unpaid Drawings relating to Letters of Credit, there shall be an
automatic adjustment to the participations pursuant to this Section 2.04(a) to
reflect the new Adjusted Percentages of the assignor and assignee Bank or of
all Banks with Revolving Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit, no
Issuing Bank shall have any obligation relative to the other Banks other than
to confirm that any documents required to be delivered under such Letter of
Credit appear to 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 any Issuing Bank under or in connection
with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Issuing Bank any
resulting liability to the Borrower or any Bank.
(c) In the event that any Issuing Bank makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such amount in full
to such Issuing Bank pursuant to Section 2.05(a), such Issuing Bank shall
promptly notify the Agent,
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which shall promptly notify each Participant of such failure, and each such
Participant shall promptly and unconditionally pay to the Agent for the account
of such Issuing Bank the amount of such Participant's Adjusted Percentage of
such unreimbursed payment in Dollars and in same day funds. If the Agent so
notifies, prior to 11:00 a.m. (New York time) on any Business Day, any
Participant required to fund a payment under a Letter of Credit, such
Participant shall make available to the Agent for the account of such Issuing
Bank in Dollars such Participant's Adjusted 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 Adjusted Percentage of the amount of
such payment available to the Agent for the account of such Issuing Bank, such
Participant agrees to pay to the Agent for the account of such Issuing Bank,
forthwith on demand such 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 such Issuing Bank at the overnight Federal Funds Rate. The failure of any
Participant to make available to the Agent for the account of such Issuing Bank
its Adjusted 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 such Issuing Bank its Adjusted Percentage of any
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 such Issuing Bank such other Participant's
Adjusted Percentage of any such payment.
(d) Whenever any Issuing Bank receives a payment of a reimbursement
obligation as to which the Agent has received for the account of such Issuing
Bank any payments from the Participants pursuant to clause (c) above, such
Issuing Bank shall pay to the Agent and the Agent shall pay to each Participant
which has paid its Adjusted Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the
proportionate aggregate amount originally funded by such Participant to the
aggregate amount funded by all Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of
the respective participations.
(e) Upon the request of any Participant, each Issuing Bank shall
furnish to such Participant copies of any Letter of Credit issued by it and
such other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to the Agent
for the account of each Issuing Bank with respect to Letters of Credit shall be
irrevocable and not subject to any 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:
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(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, setoff, 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, any Issuing Bank, any Participant, or any 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 any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) 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 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
hereby agrees to reimburse the respective Issuing Bank, by making payment to
the Agent in immediately available funds at the Payment Office (or by making
the payment directly to the respective Issuing Bank at such location as may
otherwise have been agreed upon by the Borrower and such Issuing Bank), for any
payment or disbursement made by it under any Letter of Credit issued by it
(each such amount, so paid until reimbursed, an "Unpaid Drawing"), on the day
immediately succeeding the date the Borrower is notified of such payment or
disbursement to the extent the Borrower is notified prior to or by 2:00 p.m.
(New York time) (or by 12:00 Noon on the second immediately succeeding Business
Day to the extent the Borrower is notified after 2:00 p.m. (New York time)),
with interest on the amount so paid or disbursed by such Issuing Bank accruing
from the date of such payment or disbursement to, but excluding, the date the
Agent was reimbursed by the Borrower at a rate per annum which shall be the
Base Rate in effect from time to time plus the Applicable Base Rate Margin,
provided, however, to the extent such amounts are not reimbursed prior to 12:00
Noon (New York time) on the third Business Day following notice to the Borrower
by the Agent or the respective Issuing Bank of such payment or disbursement,
interest shall thereafter accrue on the amounts so paid or disbursed by such
Issuing Bank (and until reimbursed by the Borrower) at a rate per annum which
shall be the Base Rate in effect
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from time to time plus the Applicable Base Rate Margin plus 2%, in each such
case, with interest to be payable on demand, it being understood and agreed,
however, that the notice referred to in the immediately preceding proviso shall
not be required to be given if a Default or an Event of Default under Section
10.05 shall have occurred and be continuing and, in such case, interest shall
accrue on and after the third Business Day after the respective Drawing at the
rate provided in the immediately preceding proviso. The respective Issuing
Bank shall give the Borrower prompt notice of each Drawing under any Letter of
Credit issued by it, provided that the failure to give any such notice shall in
no way affect, impair or diminish the Borrower's obligations hereunder.
(b) The obligations of the Borrower under this Section 2.05 to
reimburse the respective Issuing Bank 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 may have or have had against any Bank
(including in its capacity as Issuing Bank or as Participant), including,
without limitation, any defense based upon the failure of any payment or
disbursement under a Letter of Credit (each a "Drawing") to conform to the
terms of the Letter of Credit or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing; provided, however, that the
Borrower shall not be obligated to reimburse an Issuing Bank for any wrongful
payment made by it under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such Issuing
Bank.
2.06 Increased Costs. If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Issuing Bank or
any Participant with any request or directive by any such authority (whether or
not having the force of law), or any change in generally accepted accounting
principles in the United States, shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement
against letters of credit issued by any Issuing Bank or participated in by any
Participant, or (ii) impose on any Issuing Bank or any Participant any other
conditions relating, directly or indirectly, to this Agreement or any Letter of
Credit; and the result of any of the foregoing is to increase the cost to any
Issuing Bank or any Participant of issuing, maintaining or participating in any
Letter of Credit, or reduce the amount of any sum received or receivable by any
Issuing Bank or any Participant hereunder or reduce the rate of return on its
capital with respect to Letters of Credit (except for changes in the rate of
tax on, or determined by reference to, the net income or profits of such
Issuing Bank or such Participant pursuant to the laws of the jurisdiction in
which it is organized
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or in which its principal office or applicable lending office is located or any
subdivision thereof or therein), then, within 10 days of written demand to the
Borrower by any Issuing Bank or any Participant (a copy of which demand shall
be sent by such Issuing Bank or such Participant to the Agent), the Borrower
shall pay to such Issuing Bank or such Participant such additional amount or
amounts as will compensate such Bank for such increased cost or reduction in
the amount receivable or reduction on the rate of return on its capital. Any
Issuing Bank or any Participant, upon determining that any additional amounts
will be payable pursuant to this Section 2.06, will give prompt written notice
thereof to the Borrower, which notice shall include a certificate submitted to
the Borrower by such Issuing Bank or such Participant (a copy of which
certificate shall be sent by such Issuing Bank or such Participant to the
Agent), setting forth in reasonable detail the basis for the calculation of
such additional amount or amounts necessary to compensate such Issuing Bank or
such Participant. The certificate required to be delivered pursuant to this
Section 2.06 shall, absent manifest error, be final and conclusive and binding
on the Borrower.
2.07 Special Provisions Regarding the Existing CoreStates Letters of
Credit. As provided above in this Section 2, on the Effective Date the
Existing CoreStates IRB Letter of Credit shall become a Letter of Credit under,
and for all purposes of, this Agreement. Except as modified by the provisions
of this Section 2, Section 3.01 and as set forth in the respective amendments
(or terminations) delivered pursuant to Section 5.06(b) of the Existing Credit
Agreement, the provisions of the Existing CoreStates IRB Letter of Credit
Reimbursement Agreement shall continue to apply to the Existing CoreStates IRB
Letter of Credit. In addition, notwithstanding anything to the contrary
contained in the Existing CoreStates Letters of Credit, but solely for purposes
of this Agreement, the Borrower (and not TAESI) shall be deemed to be the
account party under the Existing CoreStates Letters of Credit.
SECTION 3. Fees; Reductions of Commitments.
3.01 Fees. (a) The Borrower agrees to pay to the Agent for
distribution to each Non-Defaulting Bank a commitment commission (the
"Commitment Commission") for the period from the Effective Date to and
including the Final Maturity Date (or such earlier date as the Total Revolving
Loan Commitment shall have been terminated), computed at a rate for each day
equal to the Applicable Commitment Commission Percentage on the daily average
Unutilized Revolving Loan Commitment of such Non-Defaulting Bank. Accrued
Commitment Commission 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 is terminated.
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(b) The Borrower agrees to pay to the Agent for distribution to each
Non-Defaulting Bank (based on its Adjusted Percentage) a fee in respect of each
Letter of Credit issued hereunder (the "Letter of Credit Fee") from and
including the date of issuance of such Letter of Credit to and including the
termination or expiration of such Letter of Credit, computed at a rate equal to
the Applicable L/C Percentage 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 agrees to pay to each Issuing Bank, for its own
account, a facing fee in respect of each Letter of Credit issued by such
Issuing Bank hereunder (the "Facing Fee") for the period from and including the
date of issuance of such Letter of Credit to and including the termination of
such Letter of Credit, computed at a rate equal to 1/8 of 1% per annum of the
daily Stated Amount of such Letter of Credit, provided, that, in any event the
minimum amount of the Facing Fee for each Letter of Credit shall be $500 (it
being agreed that, at the time of any termination or expiration of a Letter of
Credit, if $500 exceeds the amount of Facing Fees theretofore paid or then
accrued with respect to such Letter of Credit, the amount of such excess shall
be payable on the next date upon which accrued Facing Fees are otherwise
payable with respect to Letters of Credit as provided in the following
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 agrees to pay to each Issuing Bank with respect to
Letters of Credit issued by it upon each drawing under, issuance of, or
amendment to, any such Letter of Credit, such amount (including out-of-pocket
expenses) as shall at the time of such event be the administrative charge which
such Issuing Bank is generally imposing in connection with such occurrence with
respect to letters of credit.
(e) The Borrower agrees to pay to the Agent, for its own account,
such other fees as have been agreed to in writing by the Borrower and the
Agent.
3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at
least two Business Days' prior notice 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, at any time or from time to time, without premium or
penalty, to terminate the Total Unutilized Revolving Loan Commitment, in whole
or in part, in integral multiples of $1,000,000 in the case of partial
reductions to the Total Unutilized Revolving Loan Commitment, provided that (i)
each such reduction shall apply proportionately to
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permanently reduce the Revolving Loan Commitment of each Bank, and (ii) the
reduction to the Total Unutilized Revolving Loan Commitment shall in no case be
in an amount which would cause the Revolving Loan Commitment of any Bank to be
reduced (as required by preceding clause (i)) by an amount which exceeds the
remainder of (x) the Unutilized Revolving Loan Commitment of such Bank as in
effect immediately before giving effect to such reduction minus (y) such Bank's
Adjusted Percentage of the aggregate principal amount of all Swingline Loans
then outstanding.
(b) In the event of any refusal by a Bank to consent to any proposed
change, waiver, discharge or termination with respect to this Agreement which
has been approved by the Required Banks as provided in Section 13.12(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, owing to such Bank are repaid pursuant to
Section 4.01(b) and such Bank's Adjusted Percentage of any outstanding Letters
of Credit are cash collateralized in a manner satisfactory to the Agent and the
respective Issuing Banks, in each case concurrently with the effectiveness of
such termination (at which time Schedule 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, 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 March 31, 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, the Total Revolving Loan Commitment shall be permanently
reduced on the dates set forth below and in the amounts set forth opposite such
dates below:
Date Amount
---- ------
February 28, 2000 $25,000,000
February 28, 2001 $50,000,000
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date after the Effective Date upon which the
Borrower or any of its Subsidiaries receives any proceeds from any incurrence
by the Borrower or any of its Subsidiaries of Indebtedness for borrowed money
(other than (i) Indebtedness for
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borrowed money permitted to be incurred pursuant to Section 9.04 as such
Section is in effect on the Effective Date and (ii) additional Indebtedness
permitted to be incurred by the Borrower or any of its Subsidiaries pursuant to
Section 9.04 as such Section may be modified by the Required Banks from time to
time but only to the extent that the Required Banks expressly waive the
applicability of this Section 3.03(c) with respect to the incurrence of such
additional Indebtedness or expressly permit the proceeds thereof to be used for
purposes other than for commitment reductions pursuant to this Section
3.03(c)), the Total Revolving Loan Commitment shall be permanently reduced by
an amount equal to 100% of the cash proceeds (net of underwriting or placement
discounts and commissions and other reasonable costs 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 after the Effective Date upon which the
Borrower or any of its Subsidiaries receives proceeds from any sale of assets
(including capital stock and securities held thereby, but excluding sales of
inventory in the ordinary course of business), the Total Revolving Loan
Commitment shall be permanently reduced by an amount equal to 100% of the Net
Sale Proceeds therefrom, provided, however, that up to $20,000,000 of such Net
Sale Proceeds received in any fiscal year of the Borrower may be retained by
the Borrower or such Subsidiary without any requirement to reduce the Total
Revolving Loan Commitment as provided above in this Section 3.03(d).
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, within 10 Business Days following each date after the
Effective Date upon which the Borrower or any of its Subsidiaries receives any
proceeds from any Recovery Event, the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to 100% of the proceeds of such Recovery
Event (net of reasonable costs 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 from such Recovery Event do not exceed $25,000,000
(or, if such proceeds exceed $25,000,000, the first $25,000,000 of such
proceeds), 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 the
Borrower or such Subsidiary shall commence actions within one year of such
Recovery Event to use such proceeds to replace or restore any properties or
assets in respect of which such proceeds were paid and that such replacement or
restoration shall be completed within two years following the date of such
Recovery Event (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 $25,000,000 and so long as no Default or Event of Default then
exists, then the Total Revolving Loan Commitment shall be permanently reduced
by only the portion of such proceeds in excess of $25,000,000 as provided
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above in this Section 3.03(e) and with the portion of such proceeds up to
$25,000,000 to be applied as provided in the immediately preceding proviso,
(ii) if the Borrower or such Subsidiary shall not have commenced actions within
the one year period following the date of such Recovery Event to use such
proceeds to replace or restore any properties or assets in respect of which
such proceeds were paid, the Total Revolving Loan Commitment shall be
permanently reduced on the last of such one year period by the amount of such
proceeds and (iii) if all or any portion of such proceeds from such Recovery
Event are not so used within the two year period following the date of such
Recovery Event, the Total Revolving Loan Commitment shall be permanently
reduced on the last day of such two year period by an amount equal to such
remaining portion.
(f) Each reduction to the Total Revolving Loan Commitment pursuant to
this Section 3.03 shall be applied proportionately to permanently reduce the
Revolving Loan Commitment of each Bank.
(g) The Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate in its entirety on the Final Maturity
Date.
(h) The Revolving Loan Commitments hereunder may not be terminated or
reduced except as expressly provided in Sections 3.02, 3.03 and/or 10.
SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. (a) The Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and 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 the Loans, whether such
Loans are Revolving Loans or Swingline Loans, the amount of such prepayment,
the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings pursuant to which made, which notice shall be
given by the Borrower prior to (x) 2:00 p.m. (New York time) at least one
Business Day prior to the date of such prepayment in the case of Revolving
Loans maintained as Base Rate Loans, (y) 12:00 Noon (New York time) on the date
of such prepayment in the case of Swingline Loans and (z) 12:00 Noon (New York
time) at least three Business Days prior to the date of such prepayment in the
case 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 at least $500,000 (or
$250,000 in the case of Swingline Loans) and, if greater, shall be in an
integral multiple of $50,000, provided that if any partial prepayment of
Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding
Eurodollar Loans made pursuant to such Borrowing to an
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amount less than the Minimum Borrowing Amount applicable thereto, then such
Borrowing may not be continued as a Borrowing of Eurodollar Loans and any
election of an Interest Period with respect thereto given by the Borrower shall
have no force or effect; (iii) prepayments of Eurodollar Loans made pursuant to
this Section 4.01(a) which are made on a day other than the last day of an
Interest Period applicable thereto shall be accompanied by any amounts owing
pursuant to Section 1.11; and (iv) 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 Loan of a Defaulting Bank.
(b) In the event of any refusal by a Bank to consent to any proposed
change, waiver, discharge or termination with respect to this Agreement which
has been approved by the Required Banks as provided in Section 13.12(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, together with accrued and
unpaid interest, Fees, and other amounts owing to such Bank in accordance with
said Section 13.12(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 Schedule I shall be deemed modified to reflect the
changed Revolving Loan Commitments) and such Bank's Adjusted Percentage of any
outstanding Letters of Credit are cash collateralized in a manner satisfactory
to the Agent at such time and (B) the consents required by Section 13.12(b) in
connection with the repayment pursuant to this clause (b) have been obtained.
4.02 Mandatory Repayments. (a)(i) On any day on which the sum of the
aggregate outstanding principal amount of the Revolving Loans made by
Non-Defaulting Banks, Swingline Loans and the Letter of Credit Outstandings
exceeds the Adjusted Total Available Revolving Loan Commitment as then in
effect, the Borrower shall prepay on such date principal of Swingline Loans,
and if no Swingline Loans are or remain outstanding, Revolving Loans of
Non-Defaulting Banks in an aggregate amount equal to such excess. If after
giving effect to the prepayment of all outstanding Swingline Loans and
Revolving Loans of Non-Defaulting Banks, the aggregate amount of the Letter of
Credit Outstandings exceeds the Adjusted Total Available Revolving Loan
Commitment as then in effect, the Borrower shall pay to the Agent at the
Payment Office on such date an amount of cash or Cash Equivalents equal to the
amount of such excess (up to a maximum amount equal to the Letter of Credit
Outstandings at such time), such cash or Cash Equivalents to be held as
security for all obligations of the
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Borrower to Non-Defaulting Banks hereunder in a cash collateral account to be
established by the Agent.
(ii) On any day on which the aggregate outstanding principal amount
of the Revolving Loans made by any Defaulting Bank exceeds the Available
Revolving Loan Commitment of such Defaulting Bank, the Borrower shall prepay
principal of Revolving Loans of such Defaulting Bank in an amount equal to such
excess.
(b) With respect to each repayment of Revolving Loans required by
this Section 4.02, the Borrower may designate the Types of Revolving Loans
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, provided that: (i) repayments
of Eurodollar Loans pursuant to this Section 4.02 may only be made on the last
day of an Interest Period applicable thereto unless all Eurodollar Loans with
Interest Periods ending on such date of required repayment 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 Eurodollar Loans
made pursuant to such Borrowing to an amount less than the Minimum Borrowing
Amount applicable thereto, such Borrowing shall be converted at the end of the
then current Interest Period into a Borrowing of Base Rate Loans; and (iii)
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.
(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 and (ii) all then outstanding Revolving Loans
shall be repaid in full on the Final Maturity Date.
4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Agent for the account of the Bank or Banks entitled thereto not later than
2:00 p.m. (New York time) on the date when due and shall be made in Dollars in
immediately available funds at the Payment Office of the Agent. Whenever any
payment to be made hereunder or under any Note 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 at the applicable rate during such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder,
or by the Borrower under any Note, will be made without setoff, counterclaim or
other
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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 of the jurisdiction in which it is organized or 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 (collectively, "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, then 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 income or
similar 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) for U.S. Federal income tax
purposes agrees (i) in the case of any such Bank that is a "bank" within the
meaning of Section 881(c)(3)(A) of the Code and which constitutes a Bank
hereunder on the Effective Date, to provide to the Borrower and the Agent on or
prior to the Effective Date two original signed copies of Internal Revenue
Service Form 4224 or Form 1001 certifying to such Bank's entitlement to an
exemption from United States withholding tax with respect to payments to be
made under this Agreement and under any Note, (ii) in the case of any such Bank
that is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, that,
to the extent legally entitled to do so, (x) with respect to a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to Section
1.13 or 13.04(b)
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(unless the respective Bank was already a Bank hereunder immediately prior to
such assignment or transfer), upon the date of such assignment or transfer to
such Bank, and (y) with respect to any such Bank, from time to time upon the
reasonable written request of the Borrower or the Agent after the Effective
Date, such Bank will provide to the Borrower and the Agent two original signed
copies of Internal Revenue Service Form 4224 or Form 1001 (or any successor
forms) certifying to such Bank's entitlement to an exemption from, or reduction
in, United States withholding tax with respect to payments to be made under
this Agreement and under any Note, (iii) in the case of any such Bank (other
than a Bank described in clause (i) or (ii) above) which constitutes a Bank
hereunder on the Effective Date, to provide to the Borrower and the Agent, on
or prior to the Effective Date (x) a certificate substantially in the form of
Exhibit D (any such certificate, a "Section 4.04(b)(iii) Certificate") and (y)
two accurate and complete original signed copies of Internal Revenue Service
Form W-8, certifying to such Bank's entitlement at the date of such certificate
(assuming compliance with Section 13.17 as, and to the extent, provided
therein) to an exemption from U.S. withholding tax under the provisions of
Section 881(c) of the Code with respect to payments to be made under this
Agreement and under any Note and (iv) in the case of any such Bank (other than
a Bank described in clause (i) or (ii) above), to the extent legally entitled
to do so, (x) with respect to a Bank that is an assignee or transferee of an
interest under this Agreement pursuant to Section 1.13 or 13.04(b) (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), upon the date of such assignment or transfer to such
Bank, and (y) with respect to any such Bank, from time to time upon the
reasonable written request of the Borrower or the Agent after the Effective
Date, to provide to the Borrower and the Agent such Section 4.04(b)(iii)
Certificate, Internal Revenue Service Form W-8 and/or such other forms as may
be required in order to establish the entitlement of such Bank to an exemption
from withholding with respect to payments under this Agreement and under any
Note. Notwithstanding anything to the contrary contained in Section 4.04(a),
but subject to the immediately succeeding sentence, 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 (without any obligation to pay the respective
Bank additional amounts with respect thereto) 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 and which has not provided to
the Borrower such forms required to be provided to the Borrower pursuant to the
first sentence of this Section 4.04(b) (or to the extent such forms do not
establish a complete exemption from such withholding). Notwithstanding
anything to the contrary contained in the preceding sentence and except as set
forth in Section 13.04(b), the Borrower agrees to indemnify each Bank in the
manner set forth in Section 4.04(a) in respect of any amounts deducted or
withheld by it as described in the immediately
-28-
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.
(c) If the Borrower pays any additional amount under this Section
4.04 to a Bank that is organized under the laws of a jurisdiction outside the
United States and such Bank determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its tax liabilities, such Bank shall pay to
the Borrower an amount that such Bank shall, in its sole discretion, determine
is equal to the net benefit, after tax, which was obtained by such Bank as a
consequence of such refund, reduction or credit. Whether or not a Bank claims
any refund or credit shall be in the sole discretion of such Bank. Nothing in
this Section 4.04(c) shall require a Bank to disclose or detail the basis of
its calculation of the amount of any tax benefit or any other amount to the
Borrower or to any other party (including, without limitation, any tax return).
SECTION 5. Conditions Precedent to the Effective Date. The
occurrence of the Effective Date pursuant to Section 13.10, is subject 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 13.10 and (ii) there shall have been delivered to the Agent for the
account of each of the Banks 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.
5.02 Officer's Certificate. On the Effective Date, the Agent shall
have received a certificate dated the Effective Date signed on behalf of the
Borrower by the President, any Executive Vice President or any Vice President
of the Borrower stating that all of the conditions in Sections 5.06, 5.09,
5.10, 5.14 (except to the extent that such condition is required to be
satisfactory to or determined by the Banks and/or the Agent), 5.17 and 6.02
have been satisfied on such date.
5.03 Opinions of Counsel. On the Effective Date, the Agent shall
have received (i) from Winstead, Sechrest & Minick P.C., counsel to the
Borrower, an opinion addressed to the Agent and each of the Banks upon the
express instruction of the Borrower and dated the Effective Date covering the
matters set forth in Exhibit E-1 and such other matters incident to the
transactions contemplated herein as the Agent may reasonably request, (ii) from
Brown & Wood, special New York counsel to the Borrower, an opinion addressed to
the Agent and each of the Banks upon the express instruction of the Borrower
covering the matters set forth in Exhibit E-2 and such other
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matters incident to the transactions contemplated herein as the Agent may
reasonably request, (iii) from Russell E. Painton, Esq., General Counsel to
the Borrower, covering the matters set forth on Exhibit E-3 and such other
matters incident to the transactions contemplated herein as the Agent may
reasonably request.
5.04 Corporate Documents; Proceedings. (a) On the Effective Date,
the Agent shall have received a certificate from each Credit Party, dated the
Effective Date, signed by the President, any Executive Vice 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 F with
appropriate insertions, together with copies of the Certificate of
Incorporation, By-Laws and the resolutions of such Credit Party referred to in
such certificate, and the foregoing shall be acceptable to the Agent in its
reasonable discretion.
(b) On the Effective Date, the Agent shall have received bring-down
certificates of all Credit Parties stating to the effect that each such Credit
Party is in good standing in its respective state of incorporation and in those
states where each such Credit Party conducts business.
(c) 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 satisfactory in form and substance to the
Agent and the Agent shall have received all information and copies of all
documents and papers, including records of corporate proceedings, governmental
approvals, good standing certificates and bring-down telegrams, 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.
5.05 Debt Agreements; Tax Sharing Agreement. On or prior to the
Effective Date, there shall have been delivered (or made available) to the
Agent true and correct copies, certified as true and complete by an appropriate
officer of the Borrower, of (i) all agreements evidencing or relating to any
Existing Indebtedness in excess of $1,000,000 and (ii) any tax sharing or tax
allocation agreements or similar agreements entered into by the Borrower or any
of its Subsidiaries with any third Person (collectively, the "Tax Sharing
Agreements"); all of which Existing Indebtedness agreements and Tax Sharing
Agreement shall be in form and substance satisfactory to the Agent and shall be
in full force and effect on the Effective Date.
5.06 Issuance of the New Senior Subordinated Notes. (a) On or prior
to the Effective Date, the Borrower shall have received cash proceeds of at
least $244,000,000 from the issuance of the New Senior Subordinated Notes.
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(b) On or prior to the Effective Date, there shall have been
delivered to the Banks true and correct copies of all of the New Senior
Subordinated Note Documents and all of the terms and conditions of the New
Senior Subordinated Note Documents (including, without limitation,
amortization, maturities, interest rates, covenants, defaults, limitations on
cash interest payable, remedies, sinking fund provisions and subordination
provisions) shall be in form and substance satisfactory to the Agent and the
Required Banks.
5.07 Pledge Agreement, etc. (a) On the Effective Date, each Credit
Party shall have duly authorized, executed and delivered the Pledge 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 "Pledge Agreement")
and shall have delivered to the Collateral Agent, as pledgee thereunder all of
the Pledged Stock referred to therein, accompanied by executed and undated
stock powers, and the Pledge Agreement shall be in full force and effect.
(b) On or prior to the Effective Date, there shall have been
delivered to the Agent certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, listing all effective financing
statements that name the Borrower or any other Credit Party as debtor and that
are filed against the Borrower or such other Credit Party, together with copies
of such other financing statements (other than financing statements that were
delivered under the Existing Credit Agreement) that name the Borrower or any
other Credit Party as debtor (none of which shall cover the assets of the
Borrower or any such other Credit Party except to the extent evidencing
Permitted Liens or in respect of which the Collateral Agent shall have received
termination statements (Form UCC-3) or such other termination statements as
shall be required by local law fully executed for filing).
5.08 Subsidiaries Guaranty. On the Effective Date, each Subsidiary
Guarantor shall have duly authorized, executed and delivered the Subsidiaries
Guaranty in the form of Exhibit H (as modified, amended or supplemented from
time to time in accordance with the terms thereof and hereof, the "Subsidiaries
Guaranty"), and the Subsidiary Guaranty shall be in full force and effect.
5.09 Adverse Change, etc. (a) Nothing shall have occurred (and the
Banks shall have become aware of no facts or conditions not previously known)
which the Agent or the Required Banks shall determine has, or could reasonably
be expected to have, a material adverse effect on the rights or remedies of the
Agent or the Banks, or on the ability of the Borrower or any of the other
Credit Parties to perform their respective obligations to the Agent and the
Banks or which has, or could reasonably be expected to have, a materially
adverse effect on the business, operations, property,
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assets, liabilities, condition (financial or otherwise) or prospects of the
Borrower or of the Borrower and its Subsidiaries taken as a whole.
(b) On or prior to the Effective Date, all necessary governmental
(domestic and foreign) and third party approvals in connection with the
Transaction and the other 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
and the other transactions contemplated by the Documents and otherwise referred
to herein or therein. 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 the Loans.
5.10 Litigation. On the Effective Date, no litigation by any entity
(private or governmental) shall be pending or threatened (i) with respect to
this Agreement or any documentation executed in connection herewith or the
transactions contemplated hereby (including the Transaction), (ii) with respect
to any material Indebtedness of the Borrower, or of the Borrower and its
Subsidiaries taken as a whole which is to remain outstanding after the
Effective Date or (iii) which the Agent or the Required Banks shall determine
could reasonably be expected to have a materially adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
5.11 Fees, etc. On the Effective Date, the Borrower shall have paid
to the Agent and the Banks all reasonable costs, fees and expenses (including,
without limitation, reasonable legal fees and expenses) payable to the Agent
and the Banks to the extent then due.
5.12 Solvency Certificate. On the Effective Date, the Borrower shall
cause to be delivered to the Agent (or the Agent shall have received) a
certificate from the chief financial officer of the Borrower in the form of
Exhibit I, addressed to the Agent and each of the Banks and dated the Effective
Date, supporting the conclusions that, after giving effect to the Transaction
and the incurrence of all financings contemplated herein, the Borrower and its
Subsidiaries taken as a whole 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 business and will
not have incurred debts beyond their ability to pay such debts as they mature
and become due.
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5.13 Consent Letter. On the Effective Date, the Agent shall have
received a letter from CT Corporation System, presently located at 1633
Broadway, New York, New York 10019, substantially in the form of Exhibit J,
indicating its consent to its appointment by the Borrower and the other Credit
Parties as their agent to receive service of process as specified in Section
13.08 of this Agreement and Section 21 of the Subsidiaries Guaranty.
5.14 Existing Credit Agreement; etc. (a) On or prior to the
Effective Date, the commitments under the Existing Credit Agreement shall have
been terminated, all Loans thereunder shall have been repaid in full, together
with all accrued and unpaid interest thereon, all accrued and unpaid fees
thereunder shall have been paid in full, all letters of credit issued
thereunder shall have been terminated or incorporated hereunder as Letters of
Credit, and all other amounts then owing pursuant to the Existing Credit
Agreement shall have been repaid in full, and the Agent shall have received
evidence in form, scope and substance satisfactory to it that the matters set
forth in this Section 5.14(a) have been satisfied at such time.
(b) On or prior to the Effective Date, all security
interests and Liens created under the Existing Credit Agreement and the related
security documents on the capital stock of, and assets owned by, the Borrower
and its Subsidiaries shall have been terminated and released and the Agent
shall have received all such releases as may have been requested by the Agent,
which releases shall be in scope, form and substance satisfactory to the Agent.
5.15 Pro Forma Balance Sheet and Income Statements; Projections; Pro
Forma Financial Statements; Financial Officer's Certificates. (a) On or prior
to the Effective Date, the Banks shall have received (x) an unaudited pro forma
consolidated balance sheet of the Borrower and its Subsidiaries at December 31,
1996 and (y) an unaudited pro forma consolidated income statement of the
Borrower and its Subsidiaries for the period ending December 31, 1996, in each
case prepared in accordance with generally accepted accounting principles
except as specifically set forth therein (after giving effect to the
Transaction, the related financing thereof and the other transactions
contemplated hereby and thereby), which pro forma financial statements shall be
in form and substance satisfactory to the Agent and Required Banks.
(b) On or prior to the Effective Date, the Borrower shall have
delivered to each Bank:
(i) projected financial statements for the Borrower and its
Subsidiaries for the period from the Effective Date to and including
December 31, 2006 (the "Projections"), which Projections (x) shall
reflect the forecasted financial
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condition and income and expenses of the Borrower and its Subsidiaries
after giving effect to the Transaction and the related financing
thereof and the other transactions contemplated hereby and thereby,
(y) shall be certified by the chief financial officer of the Borrower
and (z) shall be satisfactory in form and substance to the Agent and
the Required Banks; and
(ii) to the extent that the Existing Senior Subordinated Notes
Consent Solicitation is not consummated on the Effective Date, the
Banks shall have received such calculations and pro forma financial
data (including a certificate from the chief financial officer of the
Borrower) as shall be reasonably required by the Agent in order for
them to determine, pursuant to Section 5.16, that the incurrence of
debt contemplated hereunder complies in all respects with the terms of
the Existing Senior Subordinated Notes Indentures, all of which shall
be in form and substance satisfactory to the Agent and the Required
Banks.
5.16 Existing Senior Subordinated Notes. On or prior to the
Effective Date, (i) the Borrower shall have delivered to the Agent such
evidence as may be required by the Agent (including, without limitation,
evidence demonstrating compliance with the requirements of Section 4.12(a) of
each Existing Senior Subordinated Notes Indenture to the extent that the
Existing Senior Subordinated Notes Consent Solicitation is not consummated on
the Effective Date) to the effect that under the terms of the Existing Senior
Subordinated Notes Documents, this Agreement (and only this Agreement)
constitutes the "New Bank Credit Facility" (as defined in the Existing Senior
Subordinated Notes Indenture), and (ii) the Borrower shall have taken all other
action as may be necessary or, in the opinion of the Agent desirable, to ensure
that this Agreement is entitled to all the rights and benefits afforded the
"New Bank Credit Facility" under the Existing Senior Subordinated Note
Indentures (including, without limitation, by delivering to the respective
trustees thereunder the notification required by the final sentence of the
definition "New Bank Credit Facility" contained therein) and that the issuance
of the Notes hereunder, the issuance of the New Senior Subordinated Notes and
the Transaction do not conflict with, constitute a default under, or require
any consent or approval pursuant to the terms of the Existing Senior
Subordinated Note Documents.
5.17 Existing Senior Subordinated Notes Tender Offer and Existing
Senior Subordinated Notes Consent Solicitation. On or prior to the Effective
Date, the Borrower shall have commenced the Existing Senior Subordinated Notes
Tender Offer and the Existing Senior Subordinated Notes Consent Solicitation,
and the Agent shall have received true and correct copies of all Existing
Senior Subordinated Notes Tender Offer Documents and all Existing Senior
Subordinated Notes Consent Solicitation
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Documents and all of the terms and conditions of such Documents shall be in
form and substance satisfactory to the Agent and the Required Banks.
SECTION 6. Conditions Precedent to All Credit Events. The obligation
of each Bank to make Loans, and the obligation of an Issuing Bank to issue any
Letter of Credit, is subject, at the time of each such Credit Event (except as
hereinafter indicated), to the satisfaction of the following conditions:
6.01 Effective Date. The Effective Date shall have occurred.
6.02 No Default; Representations and Warranties. At the time of each
such 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 shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on the
date of the making of such Credit Event (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects only as
of such specified date).
6.03 Notice of Borrowing; Letter of Credit Requests. (a) Prior to
the making of each Revolving Loan, the Agent shall have received a Notice of
Borrowing meeting the requirements of Section 1.03(a). Prior to the making of
each Swingline Loan, BTCo shall have received a notice referred to in Section
1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and the
respective Issuing Bank shall have received a Letter of Credit Request meeting
the requirements of Section 2.03(a).
The occurrence of the Effective Date and the acceptance of the
proceeds or benefits of each Credit Event shall constitute a representation and
warranty by the Borrower to the Agent and each of the Banks that all the
conditions specified in Section 5 and in this Section 6 and applicable to such
Credit Event are satisfied as of that time (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects as of
such specified date). All of the Notes, certificates, legal opinions and other
documents and papers referred to in Section 5 and in this Section 6, unless
otherwise specified, shall have been delivered to the Agent at the 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 in form and
substance as required in this Agreement.
SECTION 7. Representations, Warranties and Agreements. In order to induce
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the Banks to enter into this Agreement and to make the Loans, and issue (or
participate in) the Letters of Credit as provided herein, the Borrower makes
the following representations, warranties and agreements, in each case after
giving effect to the Transaction, which shall survive the execution and
delivery of this Agreement and the Notes and the making of the Loans and
issuance of the Letters of Credit, with the occurrence of the Effective Date
and each Credit Event on or after the Effective Date being deemed to constitute
a representation and warranty that the matters specified in this Section 7 are
true and correct on and as of the Effective Date and on the date of each such
Credit Event (it being understood and agreed that any representation or
warranty which by its terms is made as of a specified date shall be required to
be true and correct in all material respects only as of such specified date).
7.01 Corporate Status. Each of the Borrower and each Subsidiary of
the Borrower (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, (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
each jurisdiction where the ownership, leasing or operation of its property or
the conduct of its business requires such qualifications, except for failures
to be so qualified which, in the aggregate, could not reasonably be expected to
have a material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries taken as a whole.
7.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Documents to which it is party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents. Each Credit Party has duly executed and
delivered each of the Documents to which it is party, and each of such
Documents constitutes its legal, valid and binding obligation 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 generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
7.03 No Violation. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by it
with the terms and provisions thereof, (i) will contravene any provision of any
law, statute, rule or regulation or any order, writ, injunction or decree of
any court or governmental instrumentality, the contravention of which could
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities,
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condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole, (ii) will conflict with or result in any breach
of any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien (except pursuant to the Pledge Agreement) upon any
of the property or assets of the Borrower or any Subsidiary of the Borrower
pursuant to the terms of any indenture, mortgage, deed of trust, credit
agreement or loan agreement, or any other material agreement, contract or
instrument, to which the Borrower or any Subsidiary of the Borrower is a party
or by which it or any of its property or assets is 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 Subsidiary of the Borrower.
7.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made on or prior to the Effective Date and
which remain in full force and effect on the Effective Date), or exemption by,
any 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 such Document.
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) The statements of financial condition of
the Borrower at December 31, 1996, and the related statements of income and
cash flow and changes in shareholders' equity of the Borrower for the fiscal
year ended on such date and furnished to the Banks prior to the Effective Date
present fairly the financial condition of the Borrower at the date of such
statements of financial condition and the results of the operations of the
Borrower for such fiscal year. All such financial statements have been
prepared in accordance with generally accepted accounting principles and
practices consistently applied. Since December 31, 1996 (after giving effect
to the Transaction), there has been no material adverse change in the business,
operations, property, assets, liabilities, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole.
(b) (i) On and as of the Effective Date, after giving effect to the
Transaction and to all Indebtedness (including the Loans) being incurred or
assumed and Liens created or continued by the Borrower and its Subsidiaries in
connection therewith, (a) the sum of the assets, at a fair valuation, of the
Borrower and its Subsidiaries taken as a whole will exceed its debts; (b) no
Credit Party has incurred and does not intend to incur, and does not believe
that it will incur, debts beyond its ability to pay such debts as such debts
mature; and (c) each such Credit Party will have sufficient capital with which
to conduct its business. For purposes of this Section 7.05(b), "debt" means
any
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liability on a claim, and "claim" means (i) right to payment, whether or not
such a right 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.
(c) Except as fully disclosed in the financial statements delivered
pursuant to Section 7.05(a) or in other documents delivered to the Agent prior
to the Effective Date, there were as of the Effective Date no liabilities or
obligations 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) which, either individually or in aggregate, would be
materially adverse to the Borrower and its Subsidiaries taken as a whole. As
of the Effective Date, the Borrower does not know of any basis for the
assertion against the Borrower or any of its Subsidiaries of any liability or
obligation of any nature whatsoever that is not fully disclosed in the
financial statements delivered pursuant to Section 7.05(a) or in other
documents previously delivered to the Agent which, either individually or in
the aggregate, would be material to the Borrower and its Subsidiaries taken as
a whole.
(d) On and as of the Effective Date, the Projections delivered
pursuant to Section 5.15(b)(i) have been prepared on a basis consistent with
the financial statements referred to in Section 7.05(a) (other than as set
forth in such Projections), and there are no statements or conclusions in any
of the Projections which are based upon or include information known to the
Borrower to be misleading in any material respect or which fail to take into
account material information regarding the matters reported therein. On the
Effective Date, the Borrower believed that the Projections were reasonable and
attainable.
7.06 Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of the Borrower, threatened (i) with respect to the
Transaction or any Document, (ii) with respect to any material Indebtedness of
the Borrower or any of its Subsidiaries or (iii) that if determined adversely
to the Borrower or its Subsidiaries could reasonably be expected to materially
and adversely affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
7.07 True and Complete Disclosure. All factual information (taken as
a whole) furnished by or on behalf of the Borrower 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, the other
Credit Documents or any transaction
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contemplated herein or therein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of the Borrower 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 fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided.
7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the
Revolving Loans shall be utilized (i) to finance, in part, the Existing Senior
Subordinated Notes Tender Offer and the Existing Senior Subordinated Notes
Consent Solicitation, (ii) to finance, in part, the repayment of the Existing
Credit Agreement, (iii) to pay fees and expenses incurred in connection with
the Transaction and (iv) for the Borrower's and its Subsidiaries' working
capital requirements and other general corporate purposes. All proceeds of the
Swingline Loans shall be utilized for the Borrower's and its Subsidiaries'
working capital requirements and other general corporate purposes.
(b) No part of any Credit Event (or the proceeds thereof) will be
used to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any other Credit Event
will violate or be inconsistent with the provisions of Regulation G, T, U or X.
7.09 Tax Returns and Payments. Each of the Borrower and each of its
Subsidiaries has timely filed or caused to be timely filed with the appropriate
taxing authority, all 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. The
returns accurately reflect all material liability for taxes of the Borrower and
its Subsidiaries for the periods covered thereby. Except for the liability
under the Designated Tax Sharing Agreements, each of the Borrower and each of
its Subsidiaries has paid all taxes payable by it other than taxes which are
not established, and other than those contested in good faith and for which
adequate reserves have been established in accordance with generally accepted
accounting principles. Except as disclosed in the financial statements
referred to in Section 7.05(a) delivered to the Agent prior to the Effective
Date, 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. Except as disclosed on Schedule VIII, 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
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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 has provided,
with respect to itself or property held by it, 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.
7.10 Compliance with ERISA. Each Plan is in substantial compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan within the last three calendar years; no Plan is insolvent under Section
4245 of ERISA or in reorganization under Section 4241 of ERISA; 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 an extension of any amortization period within the meaning of
Section 412 of the Code; neither the Borrower, any Subsidiary of the Borrower
nor any ERISA Affiliate has within the last seven calendar years incurred any
material liability to or on account of a Plan pursuant to Section 409, 502(i),
502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
4971 or 4975 of the Code or expects to incur any liability under any of the
foregoing Sections with respect to any Plan; no proceedings have been
instituted to terminate 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 Part 1 of subtitle E of Title IV of ERISA, the
aggregate withdrawal liability under Section 4201 of ERISA of the Borrower, all
Subsidiaries of the Borrower and all 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 any Credit Event, would not exceed
$500,000; 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; neither the Borrower nor any Subsidiary of the
Borrower maintains or contributes 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 on the ability of the Borrower to perform its
obligations under this Agreement.
7.11 The Pledge Agreement. (a) The provisions of the Pledge
Agreement are effective to create in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the
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Credit Parties in the Collateral described therein, and the Pledge Agreement
creates a fully perfected first lien on, and security interest in, all right,
title and interest of the Credit Parties, in all of the Collateral described
therein, subject to no security interests of any other Person. Each Credit
Party has good and marketable title to all Collateral described therein, free
and clear of all Liens. No filings or recordings are required in order to
perfect (or maintain the perfection or priority of) the security interests
created under the Pledge Agreement.
7.12 Representations and Warranties in Documents. All
representations and warranties of any Credit Party set forth in the Documents
were true and correct in all material respects at the time as of which such
representations and warranties were made.
7.13 Properties. The Borrower and each of its Subsidiaries have good
title to all properties owned by them, including all property reflected in the
balance sheet of the Borrower as referred to in Section 7.05(a) and in the pro
forma balance sheet referred to in Section 5.15(a) (except as sold or otherwise
disposed of since the date of such balance sheet in the ordinary course of
business or as otherwise permitted by this Agreement), free and clear of all
Liens, other than (i) as referred to in the balance sheet or in the notes
thereto or in the pro forma balance sheet and (ii) Permitted Liens.
7.14 Capitalization. On the Effective Date, the authorized capital
stock of the Borrower shall consist of (i) 53,000,000 shares of common stock,
$.01 par value per share, 24,772,691 of which shares were issued and
outstanding as of February 27, 1997 and (ii) 1,000,000 shares of preferred
stock, $.01 par value per share, no shares of which are issued and outstanding.
All such outstanding shares have been duly and validly issued, are fully paid
and nonassessable. Except for Stock Options, the Series A Warrants and the
Rights, 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 agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
7.15 Subsidiaries. On the Effective Date, the Persons listed on
Schedule III are the only Subsidiaries of the Borrower. Schedule III correctly
sets forth, as of the Effective Date, the percentage ownership (direct or
indirect) of the Borrower in each class of capital stock of each of its
Subsidiaries and also identifies the direct owner thereof.
7.16 Compliance with Statutes, etc. Each of the Borrower and each of
its Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and
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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), except such noncompliances
as could not, in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
7.17 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.
7.18 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.
7.19 Environmental Matters. (a) Except as disclosed on Schedule IV,
the Borrower and each of its Subsidiaries have complied with, and on the date
of such 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 past or, to the best knowledge of the Borrower after
due inquiry, 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
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries or, to the knowledge of the Borrower, on any property adjoining
any such Real Property that could reasonably be expected (i) to form the basis
of an Environmental Claim against the Borrower or any of its Subsidiaries or
any such 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) Except as disclosed on Schedule IV, Hazardous Materials have not
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 could reasonably be
expected to violate any Environmental Law. Hazardous Materials have not been
Released on or from any Real Property owned or operated by the Borrower or any
of its Subsidiaries where such Release has violated or could reasonably be
expected to violate any applicable Environ-
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mental Law. Except as set forth on Schedule IV, there are not 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 7.19,
the representations made in this Section 7.19 shall only be untrue if the
aggregate effect of all failures and noncompliances of the types described
above could reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.
7.20 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 on the Borrower and its Subsidiaries
taken as a whole. 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 any of them, 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 any of them, (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 Subsidiaries, except (with respect to any matter specified in
clause (i), (ii) or (iii) above, either individually or in the aggregate) such
as could not reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.
7.21 Patents, Licenses, Franchises and Formulas. Each of the
Borrower and its Subsidiaries own all the patents, trademarks, permits, service
marks, trade names, copyrights, licenses, franchises and formulas, or rights
with respect to the foregoing, and has obtained assignments of all leases and
other rights of whatever nature, necessary for the present conduct of its
business, without any known conflict with the rights of others which, or the
failure to obtain which, as the case may be, would result in a material adverse
effect on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole.
7.22 Indebtedness. (a) Schedule V sets forth a true and complete
list of all Indebtedness (other than the Obligations, the New Senior
Subordinated Notes and the
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Existing Senior Subordinated Notes) of the Borrower and its Subsidiaries as of
the Effective Date and which is to remain outstanding after giving effect to
the Transaction (all such Indebtedness excluding the Loans, the Letters of
Credit, the New Senior Subordinated Notes and the Existing Senior Subordinated
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.
(b) The subordination provisions contained in (x) the New Senior
Subordinated Note Indenture and in the New Senior Subordinated Notes and (y) in
each of the Existing Senior Subordinated Note Indentures and in the Existing
Senior Subordinated Notes, in each case are enforceable against the Borrower
and the Subsidiary Guarantors and the holders of the New Senior Subordinated
Notes and the Existing Senior Subordinated Notes, and all Obligations and
Guaranteed Obligations (as defined in the Subsidiaries Guaranty) are within the
definition of "Senior Indebtedness" or "Guarantor Senior Indebtedness", as the
case may be, included in such subordination provisions. In addition, this
Agreement (and only this Agreement) constitutes the "New Bank Credit Facility"
under, and as defined in, the New Senior Subordinated Note Indenture and in
each Existing Senior Subordinated Note Indenture.
7.23 Transaction. At the time of consummation of the Transaction,
the Transaction shall have been consummated in accordance with the terms of the
respective 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 and are or will be in full force and
effect (or effective judicial relief with respect thereto has been obtained).
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 occurrence of any Credit Event or the
performance by the Borrower of its obligations under the respective Documents.
All actions taken by the Borrower pursuant to or in furtherance of and the
consummation of the Transaction have been taken in compliance with the
respective Documents and all applicable laws.
7.24 Existing Senior Subordinated Notes. At the time of consummation
thereof, the Existing Senior Subordinated Notes Tender Offer and the Existing
Senior Subordinated Notes Consent Solicitation shall have been consummated in
accordance with the terms of the respective Documents therefor and all
applicable laws. At the
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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 Existing Senior Subordinated Notes Tender Offer and the Existing
Senior Subordinated Notes Consent Solicitation shall 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). 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 Existing Senior Subordinated Notes Tender Offer and
the Existing Senior Subordinated Notes Consent Solicitation. Additionally,
there shall not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Existing Senior Subordinated Notes Tender
Offer and the Existing Senior Subordinated Notes Consent Solicitation, or the
performance by the Borrower and its Subsidiaries of their obligations under the
respective Documents therefor and all applicable laws.
7.25 Restrictions on or Relating to Subsidiaries. There does not
exist any encumbrance or restriction on the ability of (a) any Subsidiary of
the Borrower to 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 of its Subsidiaries, or to pay any Indebtedness owed to the
Borrower or any Subsidiaries of the Borrower, (b) any Subsidiary of the
Borrower to make loans or advances to the Borrower or any of the Borrower's
Subsidiaries or (c) the Borrower or any Subsidiaries to transfer any of its
properties or assets to the Borrower or any of its Subsidiaries of the
Borrower, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law (including, without limitation, any statutory
restrictions on the ability to pay dividends), (ii) this Agreement and the
other Credit Documents, (iii) customary provisions restricting the subletting
or assignment of any lease governing the leasehold interest of the Borrower or
any of its Subsidiaries, (iv) restrictions existing in the New Senior
Subordinated Note Documents and in the Existing Senior Subordinated Note
Documents or (v) restrictions existing in the documents governing the terms of
the Existing IRB.
7.26 Debarment or Suspension. No event has occurred or, to the best
of the Borrower's knowledge, condition exists, which is likely to result in the
debarment or suspension of the Borrower or any of its Subsidiaries from any
government contracting to the extent that such debarment or suspension could
reasonably be expected to materially and adversely affect the business,
operations, property, assets, liabilities, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole.
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SECTION 8. Affirmative Covenants. The Borrower covenants and agrees
that on and after the Effective Date and until the Total Revolving Loan
Commitment and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other obligations
incurred hereunder and thereunder, are paid in full:
8.01 Information Covenants. The Borrower will furnish to the Agent
and the Agent shall promptly furnish to each of the Banks:
(a) Monthly Reports. Within 45 days after the end of each
fiscal month of the Borrower, the consolidated income statement of the
Borrower and its Subsidiaries 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 the budgeted figures
for such fiscal month as set forth in the respective budget delivered
pursuant to Section 8.01(e).
(b) Quarterly Financial Statements. Within 46 days after the
close of each of the first three quarterly accounting periods in each
fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at the end of such
quarterly accounting period and the related (x) consolidated
statements of income and retained earnings and (y) consolidated
statement of cash flows, in each case for such quarterly accounting
period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly accounting period, in each case setting
forth comparative figures for the related periods in the prior fiscal
year, all of which shall be certified by the chief financial officer
of the Borrower, subject to normal year-end audit adjustments.
(c) Annual Financial Statements. Within 91 days after the
close of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at the end
of such fiscal year and the related consolidated statements of income
and retained earnings and statement of cash flows for such fiscal year
setting forth comparative figures for the preceding fiscal year and
certified by independent certified public accountants of recognized
national standing reasonably acceptable to the Agent, together with a
report of such accounting firm stating that in the course of its
regular audit of the financial statements of the Borrower, which audit
was conducted in accordance with generally accepted auditing
standards, such accounting firm obtained no knowledge of any Default
or Event of Default which has occurred and is continuing or, if in the
opinion of such accounting firm such a Default
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or Event of Default has occurred and is continuing, a statement as to
the nature thereof, provided that such accountants shall not be liable
to any Bank by reason of their failure to obtain knowledge of any
Default or Event of Default which would not be disclosed in the course
of an audit conducted in accordance with generally accepted auditing
standards.
(d) Management Letters. Promptly after the Borrower's
receipt thereof, a copy of any "management letter" received by the
Borrower from its certified public accountants and the management's
responses thereto.
(e) Budgets. No later than 30 days prior to the commencement
of the first day of each fiscal year of the Borrower, a preliminary
summary budget for such fiscal year in form satisfactory to the Agent.
No later than sixty days after the commencement of the first day of
each fiscal year of the Borrower, a final budget in form satisfactory
to the Agent (including budgeted statements of income and sources and
uses of cash and balance sheets) prepared by the Borrower for (x) each
of the twelve months of such fiscal year prepared in detail and (y)
each of the two years immediately following such fiscal year prepared
in summary form, in each case, of the Borrower and its Subsidiaries,
accompanied by the statement of the chief financial officer of the
Borrower to the effect that, to the best of such officer's knowledge,
the budget is a reasonable estimate for the period covered thereby.
(f) Officer's Certificates. (i) At the time of the delivery
of the financial statements provided for in Sections 8.01(b) and (c),
a certificate of the chief financial officer of the Borrower to the
effect that, to the best of such officer's knowledge, no Default or
Event of Default has occurred and is continuing or, if any Default or
Event of Default has occurred and is continuing, specifying the nature
and extent thereof, which certificate shall set forth the calculations
required to establish whether the Borrower was in compliance with the
provisions of Sections 9.07 through 9.10, inclusive, at the end of
such fiscal quarter or year, as the case may be.
(ii) The Banks hereby acknowledge and agree that, except as
otherwise required pursuant to Section 8.11, the Borrower shall only
be required to test compliance with Section 9.08 and Section 9.09 as
of the last day of any fiscal quarter or year of the Borrower,
provided that the Borrower hereby acknowledges and agrees that (x) if
it has actual knowledge of any Default or Event of Default under
Section 9.08 or Section 9.09 at any time it shall give notice thereof
to the Banks pursuant to Section 8.01(g)(i) and (y) if the Agent or
the Required Banks reasonably believe that the Borrower is in default
of
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Section 9.08 or Section 9.09 at any time, the Agent or the Required
Banks, as the case may be, may request that the Borrower demonstrate
(in which case the Borrower hereby agrees to promptly demonstrate) (in
reasonable detail) whether the Borrower is in compliance with Section
9.08 or Section 9.09, as the case may be, at such time.
(g) Notice of Default or Litigation. Promptly upon, and in
any event within three Business Days after, an officer of the Borrower
obtains knowledge thereof, notice of (i) the occurrence of any event
which constitutes a Default or an Event of Default, (ii) any
litigation or governmental investigation or proceeding pending (x)
against the Borrower or any of its Subsidiaries which could reasonably
be expected to materially and adversely affect the business,
operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as
a whole, (y) with respect to any material Indebtedness of the Borrower
or any of its Subsidiaries or (z) with respect to any Document and
(iii) any other event which is likely to materially and adversely
affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
(h) Other Reports and Filings. Promptly, copies of all
financial information, proxy materials and other information and
reports, if any, which the Borrower or any of its Subsidiaries shall
file with the Securities and Exchange Commission or any successor
thereto (the "SEC") or deliver to holders of its Indebtedness which
principal amount equals or exceeds $2,000,000 pursuant to the terms of
the documentation governing such Indebtedness (or any trustee, agent
or other representative therefor).
(i) Environmental Matters. Promptly upon, and in any event
within three Business Days after, an officer of the Borrower or any of
its Subsidiaries obtains knowledge thereof, notice of one or more of
the following environmental matters, unless such environmental matters
could not, individually or when aggregated with all other such
environmental matters, be reasonably expected to materially and
adversely affect the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole: (i) any pending or
threatened 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 or
arising from any Real Property owned or operated by the Borrower or
any of its Subsidiaries that (a) results in noncompliance by the
Borrower or any of its Subsidiaries with any applicable Environmental
Law or
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(b) could reasonably be expected to form the basis of an 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 expected to cause such Real Property to be subject to
any restrictions on the ownership, occupancy, use or transferability
by the Borrower or any of its Subsidiaries of such Real Property under
any Environmental Law; and (iv) the taking of any 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 as required by any Environmental Law or any
governmental or other administrative agency; provided, that in any
event the Borrower shall deliver to the Agent all notices received by
the Borrower or any of its Subsidiaries from any government or
governmental agency under, or pursuant to, CERCLA. 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 or such Subsidiary's response thereto. In addition,
the Borrower will provide the Banks with copies of all material
communications with any government or governmental agency relating to
Environmental Laws, all material communications with any person
relating to Environmental Claims, and such detailed reports of any
Environmental Claim as may reasonably be requested by the Banks.
(j) Other Information. From time to time, such other
information or documents (financial or otherwise) with respect to
Borrower or any of its Subsidiaries as any Bank may reasonably
request.
8.02 Books, Records and Inspections. The Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which true and correct entries in conformity with generally accepted accounting
principles and all requirements of law shall be made of all dealings and
transactions in relation to its business and activities. Subject to the
provisions of Section 13.16, the Borrower will, and will cause each of its
Subsidiaries to, permit officers and designated representatives of the Agent or
any Bank to visit and inspect any of the properties of the Borrower or such
Subsidiary, and to examine the books of account of the Borrower or such
Subsidiary and discuss the affairs, finances and accounts of the Borrower or
such Subsidiary with, and be advised as to the same by, its and their officers,
all at such reasonable times and intervals and to such reasonable extent as the
Agent or such Bank may reasonably request in each case subject to the
limitations imposed by laws governing the national security of the United
States.
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8.03 Insurance. Schedule VI sets forth a complete listing of all
insurance maintained by the Borrower and its Subsidiaries as of the Effective
Date. The Borrower will, and will cause each of its Subsidiaries to, (i) keep
all material property necessary in its business in good working order and
condition (ordinary wear and tear excepted), (ii) maintain insurance on all its
material property in at least such amounts and against at least such risks as
is consistent and in accordance with industry practice and (iii) furnish to
each Bank, upon reasonable written request, full information as to the
insurance carried. At any time that insurance at levels described on Schedule
VI is not being maintained by the Borrower or any Subsidiary of the Borrower,
the Borrower will notify the Banks in writing within three Business Days
thereof and the Borrower or any such Subsidiary, as the case may be, shall
obtain insurance at such levels at least equal to those set forth on Schedule
VI to the extent then generally available.
8.04 Corporate Franchises. The Borrower will, 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, licenses and patents; provided, however, that nothing in this
Section 8.04 shall (i) prevent sales of assets and other transactions by the
Borrower or any of its Subsidiaries in accordance with Section 9.02 or (ii)
require the Borrower to maintain the existence of Tracor Marine, Inc. so long
as the provisions of Section 9.02(vi) are satisfied.
8.05 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, except such noncompliances as could
not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries taken as a whole.
8.06 Compliance with Environmental Laws. (a) The Borrower will
comply, and will cause each of its Subsidiaries to comply, in all material
respects with all Environmental Laws applicable to ownership or use of Real
Property now or hereafter owned or operated by the Borrower or any of its
Subsidiaries, will promptly pay or cause to be paid all costs and expenses
incurred in such compliance, and will keep or cause to be kept all such Real
Property free and clear of any Liens imposed pursuant to such Environmental
Laws. 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 now or
hereafter owned or operated by the Borrower or any of its Subsidiaries, or
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transport or permit the transportation of Hazardous Materials to or from any
such Real Property except for Hazardous Materials used or stored at any such
Real Properties in material compliance with all applicable Environmental Laws
and reasonably required in connection with the operation, use and maintenance
of any such Real Property.
(b) At the written request of the Agent or the Required Banks, which
request shall specify in reasonable detail the basis therefor, at any time and
from time to time, the Borrower will provide, at the Borrower's sole cost and
expense, an environmental site assessment report concerning any Real Property
owned or operated by the Borrower or any of its Subsidiaries, prepared by an
environmental consulting firm approved by the Required Banks, indicating the
presence or absence of Hazardous Materials and the potential cost of any
removal or remedial action in connection with any Hazardous Materials on such
Real Property, provided that in no event shall such request be made more often
than once every two years for any particular Real Property unless either (i)
the Obligations have been declared due and payable pursuant to Section 10 or
(ii) the Banks receive notice under Section 8.01(i) for any event for which
notice is required to be delivered for any such Real Property. If the Borrower
fails to provide the same ninety (90) days after such request was made, the
Agent may order the same, and the Borrower shall grant and hereby grants to the
Agent and the Banks and their agents access to such Real Property and
specifically grants the Agent and the Banks an irrevocable non- exclusive
license, subject to the rights of tenants, to undertake such an assessment, all
at the Borrower's expense.
8.07 ERISA. As soon as possible and, in any event, within 20 days
after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
knows of the occurrence of any of the following, the Borrower will deliver to
each of the Banks a certificate of the chief financial officer of the Borrower,
or the vice president and comptroller 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,
the Subsidiary, the 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 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 a Plan, that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan, or that the Borrower, any
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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 4971
or 4975 of the Code or Section 409 or 502(i) or 502(l) of ERISA. Upon written
request therefor, the Borrower will deliver to each of the Banks a complete
copy of the annual report (Form 5500) of each Plan required to be filed with
the Internal Revenue Service (other than any Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA). In addition to any certificates or
notices delivered to the Banks pursuant to the first sentence hereof, copies of
any material notices received by the Borrower or any Subsidiary of the Borrower
or any ERISA Affiliate from the PBGC, the Internal Revenue Service, the
Department of Labor or any other federal governmental agency with respect to
any Plan shall be delivered to the Banks no later than 20 days after the date
such notice has been received by the Borrower or the Subsidiary or the ERISA
Affiliate, as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. The Borrower will cause
(i) its, and each of its Subsidiaries', fiscal years to end on December 31, and
(ii) each of its, and each of its Subsidiaries', fiscal quarters to end on
March 31, June 30, September 30 and December 31.
8.09 Performance of Obligations. The Borrower will, and will cause
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, indenture, security agreement and other debt instrument by which
it is bound, except such non-performances as could not in the aggregate have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsidiaries taken as a whole.
8.10 Payment of Taxes. The Borrower will pay and discharge or cause
to be paid and discharged, and will cause each of its Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges or levies imposed
upon it or upon any of its income or profits, or upon any properties belonging
to it, or payable by it pursuant to any Tax Sharing Agreement, in each case on
a timely basis, and all lawful claims which, if unpaid, might become a lien 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 generally accepted accounting
principles.
8.11 Permitted Acquisitions. (a) Subject to the remaining
provisions of this Section 8.11 applicable thereto and the requirements
contained in the definition of Permitted Acquisition, the Borrower may from
time to time effect Permitted
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Acquisitions, so long as (x) the aggregate consideration paid in connection
with any Permitted Acquisition or series of related Permitted Acquisitions does
not exceed $50,000,000 (including the fair market value (as determined in good
faith by the Board of Directors of the Borrower) of all common stock of the
Borrower issued as consideration to sellers in connection with such Permitted
Acquisition and any Indebtedness (to the extent permitted by this Agreement)
assumed in connection with any such Permitted Acquisition); (y) immediately
after giving effect to any Permitted Acquisition and the payment of the
consideration therefor, the Borrower's and its Subsidiaries' free cash balances
on hand plus the Total Unutilized Revolving Loan Commitment (exclusive of any
Blocked Commitment) as then in effect shall not be less than $40,000,000; and
(z) with respect to each Permitted Acquisition, (A) no Default or Event of
Default shall be in existence at the time of the consummation of such Permitted
Acquisition or shall exist immediately after giving effect thereto, (B) the
Borrower shall have given the Agent and the Banks at least 10 days prior to the
consummation of any Permitted Acquisition written notice (each such notice, a
"Permitted Acquisition Notice"), which notice shall contain (I) the date such
Permitted Acquisition is scheduled to be consummated, (II) the estimated
purchase price of such Permitted Acquisition, (III) a description of the stock
and/or assets to be acquired in connection with such Permitted Acquisition,
(IV) the sources of cash to be used to effect such Permitted Acquisition and
(V) in the case of common stock issued as consideration to the seller in
connection with a Permitted Acquisition, a description of the common stock to
be issued in connection with the consummation of such Permitted Acquisition and
the estimated fair market value thereof, (C) such Permitted Acquisition and the
collateral and other arrangements described in Section 8.11(b) below with
respect to such Permitted Acquisition shall not violate any term or provisions
of this Agreement, and (D) at least 10 Business Days prior to the consummation
of the respective Permitted Acquisition, the Borrower shall furnish to the
Agent for distribution to each of the Banks an officer's certificate executed
by the chief financial officer or treasurer of the Borrower, setting forth (i)
recalculations of compliance with the covenants contained in Sections 9.08,
9.09 and 9.10, for the period of four consecutive fiscal quarters most recently
ended prior to the date of such Permitted Acquisition, on a pro forma basis as
if the respective Permitted Acquisition had occurred on the first day of such
period, and such recalculations shall show that such covenants would have been
complied with if the Permitted Acquisition had occurred on the first day of
such period and (ii) the Borrower in good faith believes that after giving
effect to the Permitted Acquisition the financial covenants contained in such
Sections 9.08, 9.09 and 9.10, inclusive, will continue to be met for the one
year period following the date of the consummation of the Permitted
Acquisition; provided that, notwithstanding the foregoing, in the case of a
Permitted Acquisition in which the aggregate consideration therefor does not
exceed $15,000,000, the Borrower shall not be required to comply with the
requirements of clauses (z)(B) and (z)(D) above prior
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to the consummation of such Permitted Acquisition (although the Borrower shall
be required to deliver to the Agent an officer's certificate of the type
described in clause (z)(D)(ii) above within 10 days after any such Permitted
Acquisition). The consummation of each Permitted Acquisition shall be deemed
to be a representation and warranty by the Borrower that all conditions thereto
have been satisfied and that same is permitted in accordance with the terms of
this Agreement, which representation and warranty shall be deemed to be a
representation and warranty for all purposes hereunder, including, without
limitation, Sections 7 and 10.
(b) The Borrower will cause (i) each Wholly-Owned Domestic Subsidiary
and (ii) to the extent required by Section 8.13, each Wholly-Owned Foreign
Subsidiary, in each case which is formed to effect, or is acquired pursuant to,
a Permitted Acquisition to execute and deliver, within 10 days after the
respective Permitted Acquisition, a counterpart of (x) the Subsidiaries
Guaranty or a substantially similar guaranty and (y) the Pledge Agreement or a
substantially similar pledge agreement.
8.12 Existing Senior Subordinated Notes Tender Offer and Existing
Senior Subordinated Notes Consent Solicitation. (a) At the time of the
consummation of the Existing Senior Subordinated Notes Tender Offer, the
Borrower will purchase all Existing Senior Subordinated Notes issued by it to
the extent tendered and not withdrawn pursuant to the Existing Senior
Subordinated Notes Tender Offer and will duly cancel all Existing Senior
Subordinated Notes so purchased (it being understood that in any event at least
a majority of the aggregate outstanding principal amount of all Existing Senior
Subordinated Notes shall have been tendered and purchased pursuant to the
Existing Senior Subordinated Notes Tender Offer). The Borrower will consummate
the Existing Senior Subordinated Notes Tender Offer in accordance with all
applicable laws and in accordance with the Existing Senior Subordinated Notes
Tender Offer Documents.
(b) In the event that 100% of the Existing Senior
Subordinated Notes have not been accepted for payment by the Borrower pursuant
to the Existing Senior Subordinated Notes Tender Offer and the Existing Senior
Subordinated Notes Tender Offer has otherwise been consummated, the Borrower
shall have received at such time sufficient Existing Senior Subordinated Notes
Consents pursuant to the Existing Senior Subordinated Notes Consent
Solicitation to authorize the execution and delivery of each of the Existing
Senior Subordinated Notes Indenture Supplements and the Borrower and the
respective trustees under each of the Existing Senior Subordinated Notes
Indentures will duly execute and deliver each of the Existing Senior
Subordinated Notes Indenture Supplements and all conditions to the
effectiveness thereof shall have been satisfied.
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(c) At the time of the consummation of the Existing Senior
Subordinated Notes Tender Offer and the Existing Senior Subordinated Notes
Consent Solicitation, the Borrower will deliver to the Agent evidence in form,
scope and substance reasonably satisfactory to the Agent that the matters set
forth in this Section 8.12 have been satisfied at such time.
8.13 Foreign Subsidiaries Security. If Section 956 of the Code, or
the regulations, rules, rulings, notices or other official pronouncements
issued or promulgated thereunder, change in such a manner that would allow (i)
a pledge of 66-2/3% or more of the total combined voting power of all classes
of capital stock of a Foreign Subsidiary entitled to vote and/or (ii) the
entering into by a Foreign Subsidiary of a guarantee in substantially the form
of the Subsidiaries Guaranty without causing 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 States parent for
Federal income tax purposes in each case as a result of such Foreign Subsidiary
pledging its assets (directly or indirectly) to secure the Obligations of the
Borrower under the Credit Documents, then, within sixty (60) days after a
request from the Agent or the Required Banks, (A) each Foreign Subsidiary of
the Borrower which has not already had all of its stock pledged pursuant to the
Pledge Agreement shall have as much of its stock pledged pursuant to the Pledge
Agreement as may be pledged without causing 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 States parent for
Federal income tax purposes, and (B) such Foreign Subsidiary shall execute and
deliver a counterpart of the Pledge Agreement (or another pledge agreement in
substantially similar form if needed) and a counterpart of the Subsidiaries
Guaranty (or another guaranty in substantially similar form if needed) in each
case if, and to the extent that, the entering into by such Foreign Subsidiary
of such pledge agreement and/or guaranty would not cause 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
States parent for Federal income tax purposes. In determining the foregoing
matters in this Section 8.13, an opinion of counsel for the Borrower in form
and substance (and from counsel) reasonably satisfactory to the Agent shall be
determinative, provided that such opinion is delivered to the Agent within
sixty (60) days after any request is made by the Agent or the Required Banks
pursuant to this Section 8.13.
SECTION 9. Negative Covenants. The Borrower covenants and agrees
that on and after the Effective Date and until the Total Revolving Loan
Commitment and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder and thereunder, are paid in full:
-55-
9.01 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 (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 with recourse to the Borrower or any of
its Subsidiaries), or assign any right to receive income or permit the filing
of any financing statement under the UCC or any other similar notice of Lien
under any similar recording or notice statute; provided that the provisions of
this Section 9.01 shall not prevent the creation, incurrence, assumption or
existence of the following (liens described below are herein referred to as
"Permitted Liens"):
(i) 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 and by appropriate
proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles;
(ii) 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 do not secure Indebtedness for
borrowed money, such as carriers', warehousemen's, materialmen's and
mechanics' liens and other similar Liens arising in the ordinary
course of business, and (x) which do not in the aggregate materially
detract from the value of the Borrower's or such Subsidiary's property
or assets or materially impair the use thereof in the operation of the
business of the Borrower or such Subsidiary or (y) which are being
contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property
or assets subject to any such Lien;
(iii) Liens in existence on the Effective Date which are listed, and
the property subject thereto described, in Schedule VII, but only to
the respective date, if any, set forth in such Schedule VII for the
removal and termination of any such Liens, plus renewals and
extensions of such Liens to the extent set forth on Schedule VII,
provided that (x) the aggregate principal amount of the Indebtedness,
if any, secured by such Liens is not increased from that amount
outstanding at the time of any such renewal or extension and (y) any
such renewals or extensions do not encumber any additional assets or
properties of the Borrower or any of its Subsidiaries;
(iv) Liens created pursuant to the Pledge Agreement;
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(v) leases or subleases granted to other Persons not materially
interfering with the conduct of the business of the Borrower and its
Subsidiaries taken as a whole;
(vi) Liens upon assets subject to Capitalized Lease Obligations to
the extent permitted by Section 9.07, provided that (x) the amount of
such Capitalized Lease Obligations incurred in any one fiscal year of
the Borrower, together with the aggregate principal amount of all
Indebtedness incurred in such fiscal year and secured by Liens
permitted by clause (vii) of this Section 9.01, shall not exceed that
aggregate amount permitted by Section 9.04(vii), (y) such Liens only
serve to secure the payment of Indebtedness arising under such
Capitalized Lease Obligation and (z) the Lien encumbering the asset
giving rise to the Capitalized Lease Obligation does not encumber any
other asset of the Borrower or any Subsidiary of the Borrower;
(vii) Liens placed upon (i) equipment or machinery used in the
ordinary course of business of the Borrower or any of its Subsidiaries
or (ii) Real Property of the Borrower or any of its Subsidiaries, in
each case at the time of acquisition thereof by the Borrower or any
such Subsidiary or within 60 days thereafter to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof,
provided that (x) the aggregate principal amount of all Indebtedness
secured by Liens permitted by this clause (vii) incurred in any fiscal
year of the Borrower, together with the amount of all Capitalized
Lease Obligations incurred in such fiscal year, does not exceed that
aggregate amount permitted by Section 9.04(vii) and (y) in all events,
the Lien encumbering the equipment, machinery or Real Property so
acquired does not encumber any other asset of the Borrower or such
Subsidiary;
(viii) easements, rights-of-way, restrictions, encroachments and
other similar charges or encumbrances, and minor title deficiencies,
in each case not securing Indebtedness and not materially interfering
with the conduct of the business of the Borrower or any of its
Subsidiaries;
(ix) Liens arising from precautionary UCC financing statement
filings regarding operating leases;
(x) Liens arising out of judgments or awards in respect of which
the Borrower or any of its Subsidiaries shall in good faith be
prosecuting an appeal or proceedings for review in respect of which
there shall have been secured a subsisting stay of execution pending
such appeal or proceedings, provided that
-57-
the aggregate amount of all such judgments or awards (and any cash and
the value of any such Liens) does not exceed $15,000,000 at any time
outstanding;
(xi) statutory and common law landlords' liens under leases to
which the Borrower or any of its Subsidiaries is a party; and
(xii) Liens resulting from pledges or deposits to secure payments of
workmen's compensation, unemployment insurance or other social
security programs or securing the performance of surety and bid and
performance bonds, tenders, leases and other obligations of similar
nature, in each case incurred in the ordinary course of business
(exclusive of obligations in respect of the payment for borrowed
money).
9.02 Consolidation, Merger, Purchase or Sale 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, or enter into any 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 unless such
agreement is expressly conditioned upon either (x) obtaining the written
approval of the Banks in accordance with the requirements of Section 13.12 or
(y) the repayment in full of all Obligations and the termination of the Total
Revolving Loan Commitment), except that:
(i) Capital Expenditures by the Borrower and its Subsidiaries
shall be permitted to the extent not in violation of Section 9.07;
(ii) each of the Borrower and its Subsidiaries may, in the ordinary
course of business, sell, lease or otherwise dispose of any assets
which, in the reasonable judgment of such Person, are no longer
necessary in the conduct of such Person's business;
(iii) investments may be made to the extent permitted by Section
9.05;
(iv) each of the Borrower and its Subsidiaries may lease (as
lessee) real or personal property (so long as any such lease does not
create a Capitalized Lease Obligation);
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(v) each of the Borrower and its Subsidiaries may make sales of
inventory in the ordinary course of business;
(vi) provided no investment has been made in Tracor Marine, Inc.,
the Borrower may wind up, liquidate, dissolve or otherwise dispose of
Tracor Marine, Inc.;
(vii) any Subsidiary of the Borrower may be merged or consolidated
with or into, or be liquidated into any Subsidiary Guarantor or the
Borrower (so long as such Subsidiary Guarantor is the surviving
corporation or, in the case of any such transaction involving the
Borrower, the Borrower is the surviving corporation) or all or any
part of such Subsidiary's business, properties and assets may be
conveyed, leased, sold or transferred to a Subsidiary Guarantor or to
the Borrower;
(viii) the Borrower or any Subsidiary of the Borrower may transfer
assets to Rokar in an aggregate amount not to exceed $3,000,000;
(ix) Flight Systems may buy and sell aircraft and engines in the
ordinary course of business;
(x) the Borrower and its Subsidiaries may purchase or acquire
stock, obligations, assets or securities of, or any interests in or
otherwise transfer assets to any Joint Venture Subsidiary and/or Joint
Venture to the extent permitted by Section 9.15(b);
(xi) each of the Borrower and its Subsidiaries may sell other
assets (other than the capital stock of any Subsidiary Guarantor) so
long as (i) no Default or Event of Default then exists or would result
therefrom, (ii) such sales are at fair market value (as determined in
good faith by the Borrower) and (ii) the aggregate amount of proceeds
received from all assets sold pursuant to this clause (xi) shall not
exceed $10,000,000 in any fiscal year of the Borrower; and
(xii) the Borrower may effect Permitted Acquisitions in accordance
with the requirements of Section 8.11.
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted
by this Section 9.02 (in each case excluding sales to the Borrower or any of
its Subsidiaries), such Collateral shall be sold free and clear of the Liens
created by the Pledge Agreement, and the
-59-
Agent and Collateral Agent shall be authorized to take any actions deemed
appropriate in order to effect the foregoing.
9.03 Dividends. The Borrower will not, and will not permit any of
its Subsidiaries to, authorize, declare or pay any Dividends with respect to
the Borrower or any of its Subsidiaries, except that (i) any Subsidiary of the
Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of
the Borrower, (ii) any non-Wholly-Owned Subsidiary of the Borrower may pay cash
Dividends to its shareholders generally so long as the Borrower or its
respective Subsidiary which owns the equity interest in the Subsidiary paying
such Dividends receives at least its proportionate share thereof (based upon
its relative holding of the equity interest in the Subsidiary paying such
Dividends and taking into account the relative preferences, if any, of the
various classes of equity interests of such Subsidiary) and (iii) so long as
there shall exist no Default or Event of Default (a) the Borrower may pay
Dividends in kind to purchase or redeem shares of common stock or options to
purchase shares of common stock of the Borrower held by employees and/or former
employees of the Borrower following retirement, death, total disability, the
termination of their employment by the Borrower or any of its Subsidiaries or a
"change of control" (as defined in any Company Stock Plan) of the Borrower,
such purchases to be made in accordance with the terms of such Company Stock
Plan, (b) the Borrower may grant awards under any Company Stock Plan requiring
cash payments upon the settlement of any stock appreciation right, provided
that the aggregate amount of cash Dividends paid pursuant to this clause (iii)
shall not exceed $3,000,000 in any one fiscal year of the Borrower or
$6,000,000 in the aggregate and (c) beginning on the date occurring after the
Effective Date on which the financial statements are delivered pursuant to
Section 8.01(c) and on and after each date thereafter on which such financial
statements are delivered, the Borrower may pay cash Dividends in an amount not
to exceed in any fiscal year 30% of Consolidated Net Income for the immediately
preceding fiscal year.
9.04 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:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness under the New Senior Subordinated Notes and the
other New Senior Subordinated Note Documents in an aggregate principal
amount not to exceed $250,000,000 (as reduced by any repayments of
principal thereof);
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(iii) Indebtedness under the Existing Senior Subordinated Notes and
the other Existing Senior Subordinated Note Documents in an aggregate
principal amount not to exceed $115,947,000 (as reduced by any
repayments of principal thereof, including pursuant to the Existing
Senior Subordinated Notes Tender Offer);
(iv) Existing Indebtedness shall be permitted to the extent the
same is listed on Schedule V, without giving effect to any
refinancings or renewals thereof except to the extent set forth on
Schedule V, provided that the aggregate principal amount of the
Indebtedness to be extended, renewed or refinanced does not increase
from that amount outstanding at the time of any such extension,
renewal or refinancing;
(v) accrued expenses and current trade accounts payable incurred
in the ordinary course;
(vi) Indebtedness under Interest Rate Protection Agreements
relating to Indebtedness otherwise permitted under this Section 9.04;
(vii) Indebtedness subject to Liens permitted under Section
9.01(vii) or evidenced by Capitalized Lease Obligations to the extent
permitted pursuant to Section 9.07, provided that in no event shall
the aggregate principal amount of such Indebtedness and Capitalized
Lease Obligations incurred in any fiscal year of the Borrower exceed
$5,000,000;
(viii) intercompany Indebtedness to the extent permitted by Sections
9.05(ii), (iv) and (vii);
(ix) Indebtedness of the Borrower represented by the obligations of
the Borrower to make payments with respect to the cancellation or
repurchase of certain stock, stock appreciation rights or stock
options in respect of any Company Stock Plan;
(x) Indebtedness owing by Rokar to the Israeli government to the
extent such Indebtedness is incurred by Rokar in connection with
grants issued to Rokar by the Israeli government in an aggregate
amount not to exceed $5,000,000;
(xi) Indebtedness owing by the Borrower or any Subsidiary of the
Borrower to Rokar, provided that the amount of such Indebtedness,
together with the amount of assets transferred to Rokar pursuant to
Section 9.02 (viii), shall not exceed $5,000,000, at any time
outstanding;
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(xii) Contingent Obligations of the Borrower and its Subsidiaries in
respect of Indebtedness and other obligations of the Borrower or any
of its Subsidiaries incurred in the ordinary course of business and
which are permitted under the provisions of this Section 9.04 or the
other provisions of this Agreement; and
(xiii) additional Indebtedness not otherwise permitted by clauses (i)
through (xii) above in an amount not to exceed $10,000,000 at any time
outstanding.
9.05 Advances, Investments and Loans. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, 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 other 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 or Cash Equivalents (each of the foregoing, an "Investment"), except that
the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
accounts receivables owing to any of them, if created or acquired in
the ordinary course of business and payable or dischargeable in
accordance with customary terms;
(ii) the Borrower and the Subsidiary Guarantors may make
intercompany loans and advances between or among one another;
(iii) the Borrower may make other cash investments in the Subsidiary
Guarantors, and each Subsidiary Guarantor may make other cash
investments in any other Subsidiary Guarantor;
(iv) the Borrower and the Subsidiary Guarantors may make
intercompany loans and advances to Subsidiaries of the Borrower that
are not Subsidiary Guarantors so long as the aggregate principal
amount of all intercompany loans and advances outstanding at any time
pursuant to this clause (iv) shall not exceed $5,000,000 (determined
without regard to any write-downs or write-offs thereof);
(v) intercompany Indebtedness to the extent permitted by Section
9.04(xi);
(vi) the Borrower and its Subsidiaries may acquire and hold cash
and Cash Equivalents, provided that during any time that Swingline
Loans are outstanding or Revolving Loans of Non-Defaulting Banks are
outstanding the aggregate amount of cash and Cash Equivalents
permitted to be held by the Borrower and
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its Subsidiaries shall not exceed $20,000,000 for any period of five
consecutive Business Days;
(vii) the Borrower and its Subsidiaries may make loans or advances
to, or investments in, Joint Venture Subsidiaries and/or Joint
Ventures to the extent permitted by Section 9.15(b);
(viii) Permitted Acquisitions may be effected in accordance with the
requirements in Section 8.11;
(ix) the Borrower and its Subsidiaries may hold promissory notes
received in connection with sales or other dispositions of assets
permitted by Section 9.02 so long as the aggregate principal amount of
all such promissory notes does not exceed $10,000,000, provided that
not more than $5,000,000 of such promissory notes shall constitute
unsecured obligations owing to the Borrower or its Subsidiaries at any
one time outstanding (determined without regard to any write-downs or
write-offs thereof); and
(x) the Borrower may make loans from time to time to its 401(k)
Savings Plan in accordance with Prohibited Transaction Class Exemption
80-26 so long as the aggregate amount of such loans outstanding at any
time does not exceed $1,000,000.
9.06 Transactions with Affiliates. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
related transactions with any Affiliate of the Borrower or any of its
Subsidiaries, other than in the ordinary course of business and on terms and
conditions substantially as favorable to the Borrower or such Subsidiary as
would reasonably be obtained by the Borrower or such Subsidiary at that time in
a comparable arm's-length transaction with a Person other than an Affiliate,
except that (i) Dividends may be paid to the extent provided in Section 9.03,
(ii) loans may be made and other transactions may be entered into by the
Borrower and its Subsidiaries to the extent permitted by Sections 9.04 and 9.05
and (iii) the Borrower may perform its obligations under the Designated Tax
Sharing Agreements.
9.07 Capital Expenditures. The Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
during any fiscal year of the Borrower set forth below (taken as one accounting
period) the Borrower and its Subsidiaries may make Capital Expenditures so long
as the aggregate amount of such Capital Expenditures does not exceed in any
such fiscal year the amount set forth opposite such fiscal year below:
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Fiscal Year Amount
----------- ------
December 31, 1997 $27,500,000
December 31, 1998 $27,500,000
December 31, 1999 $27,500,000
December 31, 2000 $30,000,000
December 31, 2001 $30,000,000
December 31, 2002 $30,000,000
Notwithstanding anything to the contrary contained above, (i) to the
extent that Capital Expenditures made during any fiscal year of the Borrower
set forth in the table above are less than the amount set forth opposite such
fiscal year above, 100% of such unutilized amount may be carried forward to the
immediately succeeding fiscal year and utilized to make Capital Expenditures in
excess of the amount permitted above in such immediately succeeding fiscal
year, provided that (x) any amount carried forward from the immediately
preceding fiscal year, if any, shall not be utilized during a fiscal year to
make Capital Expenditures unless and until the relevant amount set forth in the
table above opposite such fiscal year shall have been utilized in full to make
Capital Expenditures during such fiscal year and (y) no amounts once carried
forward to the next fiscal year may be carried forward to any fiscal year
thereafter, (ii) the Borrower and/or its Subsidiaries may in any fiscal year
set forth in the table above utilize cash advance payments received by it with
respect to contracts to make Capital Expenditures and any such amounts utilized
by the Borrower and/or its Subsidiaries shall not be included as Capital
Expenditures during such fiscal year in making the foregoing determinations of
compliance with this Section 9.07 and (iii) Permitted Acquisitions may be made
in accordance with Section 8.11.
9.08 Minimum Consolidated Net Worth. The Borrower will not permit
Consolidated Net Worth at any time during a fiscal year set forth below to be
less than the amount set forth opposite such fiscal year below:
Fiscal Year Amount
----------- ------
December 31, 1997 $190,000,000
December 31, 1998 $215,000,000
December 31, 1999 $240,000,000
December 31, 2000 $270,000,000
December 31, 2001 $300,000,000
December 31, 2002 $335,000,000
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9.09 Maximum Leverage Ratio. The Borrower will not permit the
Leverage Ratio at any time during a fiscal year set forth below to be greater
than the ratio set forth opposite such fiscal year below:
Fiscal Year Ratio
----------- -----
December 31, 1997 3.25:1.00
December 31, 1998 2.75:1.00
December 31, 1999 2.50:1.00
December 31, 2000 2.50:1.00
December 31, 2001 2.50:1.00
December 31, 2002 2.50:1.00
9.10 Minimum Consolidated Interest Coverage Ratio. The Borrower will
not permit the Consolidated Interest Coverage Ratio for any Test Period ending
on the last day of a fiscal quarter set forth below to be less than the ratio
set forth opposite such fiscal quarter below:
Fiscal Quarter Ratio
-------------- -----
March 31, 1997 4.00:1.00
June 30, 1997 4.00:1.00
September 30, 1997 4.00:1.00
December 31, 1997 4.00:1.00
March 31, 1998 4.50:1.00
June 30, 1998 4.50:1.00
September 30, 1998 4.50:1.00
December 31, 1998 4.50:1.00
March 31, 1999 5.25:1.00
June 30, 1999 5.25:1.00
September 30, 1999 5.25:1.00
December 31, 1999 5:25:1.00
March 31, 2000
and the last day of each
fiscal quarter thereafter 6.25:1.00
9.11 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements;
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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, or any prepayment
or redemption as a result of any asset sale, change of control or similar event
of (including, in each case, without limitation, by way of depositing with the
trustee with respect thereto money or securities before due for the purpose of
paying when due), any New Senior Subordinated Notes, (ii) amend or modify, or
permit the amendment or modification of, any provision of any New Senior
Subordinated Note Document, any Existing Senior Subordinated Note Document
(other than pursuant to the Existing Senior Subordinated Notes Consent
Solicitation) or of any agreement (including, without limitation, any purchase
agreement, indenture, loan agreement or security agreement) relating thereto in
each case to the extent any such amendment would be adverse to the Banks,
provided that, in no event, shall the subordination provisions (and the related
definitions) contained in the New Senior Subordinated Note Documents and in the
Existing Senior Subordinated Note Documents be amended or modified, (iii)
amend, modify or change in any manner adverse to the Banks 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, or enter into any new agreement with
respect to its capital stock which would be adverse to the Banks, or (iv)
amend, modify or change in any manner adverse to the Banks any Tax Sharing
Agreement, or enter into any new tax sharing agreement which would be adverse
to the Banks.
9.12 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, or grant liens in
favor of, the Borrower or any of the Borrower's Subsidiaries or (c) transfer
any of its properties or assets to the Borrower, 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) restrictions
existing in the New Senior Subordinated Note Documents and in the Existing
Senior Subordinated Note Documents and (v) restrictions existing in the
documents governing the terms of the Existing IRB.
9.13 Limitation on Issuance of Capital Stock. (a) The Borrower will
not permit any of its Subsidiaries to issue any capital stock (including by way
of sales of
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treasury stock) or any options or warrants to purchase, or securities
convertible into, capital stock, except (i) for transfers and replacements of
then outstanding shares of capital stock, (ii) for stock splits, stock
dividends and similar issuances which do not decrease the percentage ownership
of the Borrower or any of its Subsidiaries in any class of the capital stock of
such Subsidiary, (iii) to qualify directors to the extent required by
applicable law, (iv) for issuances of capital stock by any Wholly-Owned
Subsidiary of the Borrower created under Section 9.15(a) and (v) for issuance
of capital stock by any Joint Venture that is a Subsidiary of the Borrower
created under Section 9.15(b).
(b) The Borrower will not issue any capital stock, except (i) for
issuances of common stock where, after giving effect to such issuance, no Event
of Default will exist under Section 10.10, (ii) that the Borrower may issue the
Stock Options, the Series A Warrants and common stock in connection therewith
to the extent otherwise permitted by this Agreement and (iii) for issuances of
shares of its Series A Junior Participating Preferred Stock (as designated on
the Effective Date) in accordance with the terms of the Rights Agreement so
long as no Event of Default will exist under Section 10.10 after the issuance
thereof.
9.14 Business. The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business other than the
business in which the Borrower or any of its Subsidiaries is engaged on the
Effective Date and any other reasonably related businesses or businesses that
share common technology.
9.15 Limitation on Creation of Subsidiaries and Entering into
Partnerships and Joint Ventures. (a) The Borrower will not establish, create
or acquire any Subsidiary unless such newly formed Subsidiary (x) is a
Wholly-Owned Subsidiary (except to the extent permitted by Section 9.15(b)),
(y) executes a counterpart of the Subsidiaries Guaranty and (y) secures such
Subsidiary's obligations pursuant to the Subsidiaries Guaranty by executing a
counterpart of the Pledge Agreement, provided that (i) a Foreign Subsidiary
shall only be required to comply with the foregoing provisions of this Section
9.15 to the extent required by Section 8.13 and (ii) any special purpose
Subsidiary formed to effect a Permitted Acquisition shall not be required to
comply with the foregoing provisions of this Section 9.15 so long as (A) such
Subsidiary has no assets (including owning any capital stock of any Person, but
excluding a de minimis amount of cash necessary to initially capitalize such
Subsidiary) and (B) at the time such Permitted Acquisition is consummated, such
Subsidiary (to the extent it survives any such Permitted Acquisition) otherwise
complies with the foregoing provisions of this Section 9.15. The capital stock
of any Subsidiary established, created or acquired as provided in this Section
9.15 shall be pledged to the Collateral Agent as, and to the extent, required
by the Pledge Agreement.
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(b) The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any partnerships or joint ventures; provided,
however, that (i) the Borrower may contribute capital to GDE Systems Imaging,
Inc. in an amount not to exceed $3,000,000, (ii) the Borrower may contribute
capital to LH Systems, LLC in an amount not to exceed $3,000,000 and (iii) the
Borrower may organize, and permit to exist, one or more Wholly-Owned
Subsidiaries, each of which must be a corporation (each a "Joint Venture
Subsidiary") formed for the specific purpose of having such Wholly- Owned
Subsidiary enter into a joint venture formed for purposes permitted by Section
9.14 (each a "Joint Venture") with another Person (whether by partnership
between, or stock ownership in a third corporation by, such Joint Venture
Subsidiary and such other Person), and such Joint Venture Subsidiary may enter
into and permit to exist, and the Borrower may permit to exist, such Joint
Venture, if (I) the formation of such Joint Venture is or was necessary or
preferable to obtain a contract from a governmental authority, corporation or
other entity, (II) neither the Borrower nor any Subsidiary thereof (other than
such Joint Venture Subsidiary) has any Contingent Obligation whatsoever in
respect of any Indebtedness or contractual obligation of such Joint Venture
Subsidiary or such Joint Venture, (III) such Joint Venture Subsidiary is
adequately capitalized to undertake such Joint Venture and (IV) the Borrower's
and/or any of its Subsidiaries' contribution to capitalization shall not (x)
exceed $5,000,000 in any fiscal year of the Borrower in the aggregate with
respect to all Joint Venture Subsidiaries and/or Joint Ventures and (y) exceed
$3,000,000 at any time with respect to any one Joint Venture and/or Joint
Venture Subsidiary.
SECTION 10. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for two or more Business Days, in the payment when
due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any
other amounts owing hereunder or thereunder; or
10.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any 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 as provided
in Section 6 or Section 7; or
10.03 Covenants. The Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(g)(i), 8.08, 8.11, 8.12, 8.13 or 9 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement and such default
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shall continue unremedied for a period of 30 days after written notice to the
Borrower by the Agent or any Bank; or
10.04 Default Under Other Agreements. (i) The Borrower or any
Subsidiary of the Borrower shall (x) default in any payment of any Indebtedness
with an outstanding principal balance of $7,500,000 or more (any such
Indebtedness, "Material Indebtedness") (other than the Notes) beyond the period
of grace, if any, provided in the instrument or agreement under which such
Material Indebtedness was created or (y) default in the observance or
performance of any agreement or condition relating to any Material Indebtedness
(other than the Notes) 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 Material Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without regard
to whether any notice is required), any such Indebtedness to become due prior
to its stated maturity, or (ii) any Material Indebtedness (other than the
Notes) shall be declared to be due and payable, or required to be prepaid other
than by a regularly scheduled required prepayment, prior to the stated maturity
thereof; or
10.05 Bankruptcy, etc. The Borrower or any Subsidiary of the
Borrower 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 Subsidiary of the Borrower, 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 Subsidiary of the Borrower; or the
Borrower or any Subsidiary of the Borrower 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 Subsidiary
of the Borrower, or there is commenced against the Borrower or any Subsidiary
of the Borrower any such proceeding which remains undismissed for a period of
60 days; or the Borrower or any Subsidiary of the Borrower 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 Subsidiary of the
Borrower 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 Subsidiary of the Borrower makes a
general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any Subsidiary of the Borrower for the purpose of
effecting any of the foregoing; or
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10.06 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 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, 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 4971 or 4975 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); and (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 which lien, security interest or liability, in the opinion of the
Required Banks, could reasonably be expected to have a material adverse effect
upon the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole; or
10.07 Pledge Agreement. At any time after the execution and delivery
thereof, the Pledge Agreement shall cease to be in full force and effect, or
shall cease to give the Collateral Agent for the benefit of the Secured
Creditors the Liens, rights, powers and privileges purported to be created
thereby (including, without limitation, a perfected security interest in, and
Lien on, all of the Collateral), in favor of the Collateral Agent, superior to
and prior to the rights of all third Persons, and subject to no other Liens
(except as permitted by Section 9.01(i)), or the Borrower or any Subsidiary
shall default in the due performance or observance of any material term,
covenant or agreement on its part to be performed or observed pursuant the
Pledge Agreement and such default shall continue beyond any grace period
specifically applicable thereto pursuant to the terms of the Pledge Agreement;
or
10.08 Subsidiaries Guaranty. The Subsidiaries Guaranty or any
provision thereof shall cease to be in full force or effect as to any
Subsidiary Guarantor (except in accordance with Section 22 of the Subsidiaries
Guaranty), or any Subsidiary Guarantor or any Person acting by or on behalf of
any Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor's
obligations under the Subsidiaries Guaranty, or any Subsidiary Guarantor shall
default in the due performance or observance of any material term, covenant or
agreement on its part to be performed or observed pursuant to the Subsidiaries
Guaranty; or
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10.09 Judgments. One or more judgments or decrees shall be entered
against the Borrower or any Subsidiary of the Borrower involving in the
aggregate for the Borrower and its Subsidiaries a liability (not paid or fully
covered by a reputable and solvent insurance company) and such judgments and
decrees either shall be final and non-appealable or shall not be vacated,
discharged or stayed or bonded pending appeal, for any period of 60 consecutive
days after notice has been given by the Agent acting at the direction of the
Required Banks, and the individual or aggregate amount of all such judgments
equals or exceeds $7,500,000; or
10.10 Change of Control. A Change of Control shall occur; or
10.11 Debarment or Suspension. The Borrower or any of its
Subsidiaries shall at any time be debarred or suspended from any government
contracting, and the continuance of such debarment or suspension for any period
of 60 consecutive days during which such debarment or suspension shall not be
terminated, discharged or stayed pending appeal and the effect of such
debarment or suspension could reasonably be expected to materially and
adversely affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent, upon the written request of the
Required Banks, shall by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent, any Bank or
the holder of any Note to enforce its claims against any Credit Party
(provided, that, if an Event of Default specified in Section 10.05 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Agent to the Borrower 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 Commission 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 the Notes and all Obligations owing
hereunder and thereunder 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 each Credit Party; (iii) terminate any Letter
of Credit, which may be terminated, in accordance with its terms; (iv) direct
the Borrower to pay (and the Borrower agrees that upon receipt of such notice,
or upon the occurrence of an Event of Default specified in Section 10.05 with
respect to the Borrower, it will pay) to the Collateral Agent at the Payment
Office such additional amount of cash, to be held as security by the Collateral
Agent, as is equal to the aggregate Stated Amount of all Letters of Credit
issued
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for the account of the Borrower and then outstanding; and (v) enforce, as
Collateral Agent, all of the Liens and security interests created pursuant to
the Pledge Agreement.
SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"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
the Agent to the Federal Deposit Insurance Corporation for insuring three-month
certificates of deposit.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Loan Commitment at such time by the Adjusted Total
Revolving Loan Commitment at such time, it being understood that all references
herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan
Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total
Revolving Loan Commitment, as the case may be, has been terminated shall be
references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect immediately prior to such
termination, provided that (A) no Bank's Adjusted Percentage shall change upon
the occurrence of a Bank Default from that in effect
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immediately prior to such Bank Default if after giving effect to such Bank
Default, and any repayment of Revolving Loans at such time pursuant to Section
4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal amount
of Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate
outstanding principal amount of Swingline Loans plus (iii) the Letter of Credit
Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted Percentage that would have become effective upon the
occurrence of a Bank Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks
plus (ii) the aggregate outstanding principal amount of Swingline Loans plus
(iii) the Letter of Credit Outstandings is equal to or less than the Adjusted
Total Revolving Loan Commitment; and (C) if (i) a Non- Defaulting Bank's
Adjusted Percentage is changed pursuant to the preceding clause (B) and (ii)
any repayment of such Bank's Revolving Loans, or of Unpaid Drawings or of
Swingline Loans that were made during the period commencing after the date of
the relevant Bank Default and ending on the date of such change to its Adjusted
Percentage must be returned to the Borrower as a preferential or similar
payment in any bankruptcy or similar proceeding of the Borrower, then the
change to such Non-Defaulting Bank's Adjusted Percentage effected pursuant to
said clause (B) shall be reduced to that positive change, if any, as would have
been made to its Adjusted Percentage if (x) such repayments had not been made
and (y) the maximum change to its Adjusted Percentage would have resulted in
the sum of the outstanding principal of Revolving Loans made by such Bank plus
such Bank's new Adjusted Percentage of the outstanding principal amount of
Swingline Loans and of Letter of Credit Outstandings equalling such Bank's
Revolving Loan Commitment at such time.
"Adjusted Total Available Revolving Loan Commitment" shall mean, at
any time, the Total Available Revolving Loan Commitment at such time less the
aggregate Revolving Loan Commitments of all Defaulting Banks at such time.
"Adjusted Total Revolving Loan Commitment" shall mean, at any time,
the Total Revolving Loan Commitment at such time less the aggregate Revolving
Loan Commitments of all Defaulting Banks at such time.
"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; provided, however, that for purposes
of Section 9.06, an Affiliate of the Borrower shall include any Person that
directly or indirectly owns more than 5% of any class of the capital stock of
the Borrower and any officer or director of the Borrower or any such
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Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" shall mean Bankers Trust Company, in its capacity as Agent for
the Banks hereunder, and shall include any successor to the Agent appointed
pursuant to Section 12.09.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Applicable Base Rate Margin" shall mean a percentage per annum equal
to 3/4 of 1%, less the then applicable Interest Reduction Discount, if any,
provided that notwithstanding anything to the contrary in this definition or in
the definition of Interest Reduction Discount, in no event shall the Applicable
Base Rate Margin be less than zero.
"Applicable Commitment Commission Percentage" shall mean a percentage
per annum equal to 3/8 of 1%, provided that so long as no Default or Event of
Default shall exist, the Applicable Commitment Commission Percentage shall be
1/4 of 1% at any time (and for so long as) the Interest Reduction Discount is
determined by reference to clause (C) or (D) of the definition thereof.
"Applicable Eurodollar Margin" shall mean a percentage per annum equal
to 1-3/4% less the then applicable Interest Reduction Discount, if any.
"Applicable L/C Percentage" shall mean a percentage per annum equal to
the Applicable Eurodollar Margin as in effect from time to time less 1/4 of 1%,
provided that in no event shall the Applicable L/C Percentage at any time be
less than 5/8 of 1%.
"Assignment and Assumption Agreement" shall mean an Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed) entered into pursuant to the terms hereof.
"Available Revolving Loan Commitment" shall mean, at any time and for
any Bank, the Revolving Loan Commitment of such Bank as then in effect less
such Bank's Percentage of the amount of the Blocked Commitment, if any, at such
time.
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"Bank" shall mean each financial institution listed on Schedule I, as
well as any Person which becomes a "Bank" hereunder pursuant to 13.04(b).
"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 in writing the Borrower and/or the Agent that it does not
intend to comply with its obligations under Section 1.01 or Section 2, in any
case as a result of any takeover of such Bank by any regulatory authority or
agency.
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in
excess of the Adjusted Certificate of Deposit Rate and (ii) the Prime Lending
Rate.
"Base Rate Loan" shall mean (i) each Revolving Loan designated or
deemed designated as such by the Borrower at the time of the incurrence thereof
or conversion thereto and (ii) each Swingline Loan.
"Blocked Commitment" shall mean (i) at any time during the period from
and including the Effective Date through but not including the date on which
all outstanding Existing Senior Subordinated Notes are repaid, prepaid,
purchased, defeased or redeemed in full, that aggregate amount necessary to
repay, prepay, purchase, defease or redeem in full such Existing Senior
Subordinated Notes (including any premium or consent payments in connection
therewith but excluding any interest on the Existing Senior Subordinated Notes)
and (ii) any time thereafter, 0. The Blocked Commitment shall be reduced at
such time or times as Revolving Loans are incurred for the purpose of repaying,
prepaying, purchasing, defeasing or redeeming outstanding Existing Senior
Subordinated Notes (whether pursuant to the Existing Senior Subordinated Notes
Tender Offer or otherwise), with such reduction to be in the amount of
Revolving Loans so incurred.
"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 the Banks on a given date (or resulting from a conversion or
conversions on such 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 the related Borrowing of Eurodollar Loans.
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"BTCo" shall mean Bankers Trust Company in its individual capacity.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall
be in New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action 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) above and which is also a day for trading by and
between banks in the New York interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including 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
generally accepted accounting principles) and the amount of Capitalized Lease
Obligations incurred by such Person.
"Capitalized Lease Obligations" shall mean, with respect to any
Person, all rental obligations of such Person which, under generally accepted
accounting principles, are or will be required to be capitalized on the books
of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities of not more than
one year from the date of acquisition, (ii) time deposits, bankers' acceptances
and certificates of deposit of any commercial bank having, or which is the
principal banking subsidiary of a bank holding company having, a long-term
unsecured debt rating of at least "A" or the equivalent thereof from Standard &
Poor's Ratings Services or "A2" or the equivalent thereof from Moody's
Investors Service, Inc. with maturities of not more than one year from the date
of acquisition by such Person, (iii) 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 (ii) above, (iv) commercial paper issued by any Person incorporated in
the United States rated at least A-1 or the equivalent thereof by Standard &
Poor's Ratings Services or at least P-1 or the equivalent thereof by Moody's
Investors Service, Inc. and in each case maturing not more than one year after
the date of acquisition by such Person and (v) investments in money market
funds substantially all of whose assets are comprised of securities of the
types described in clauses (i) through (iv) above.
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"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. Section 9601 et seq.
"Change of Control" shall mean and include the occurrence of any of
the following events: (x) any Person, entity or "group" (within the meaning of
Sections 13(d) or 14(d) of the Securities Exchange Act) (A) shall have acquired
beneficial ownership of 25% or more of any outstanding class of capital stock
of the Borrower having ordinary voting power in the election of directors
(excluding Permitted Holders), provided that any Person, entity or group
(excluding Permitted Holders, whose percentages are not restricted) shall be
permitted to acquire up to 30% of the outstanding capital stock of any such
class in a transaction approved before the consummation of same by a majority
of the directors (and a majority of Continuing Directors) of the Borrower or
(B) shall have obtained the power (whether or not exercised) to elect the
majority of the Board of Directors of the Borrower, (y) a majority of the Board
of Directors of the Borrower shall not consist of Continuing Directors or (z)
any "change of control" or similar event shall occur under, and as defined in,
the New Senior Subordinated Note Indenture or any Existing Senior Subordinated
Notes Indenture.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of
this Agreement, and to any subsequent provision of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all property with respect to which any
security interests have been granted (or purport to be granted) pursuant to the
Pledge Agreement and all cash and Cash Equivalents delivered as collateral
pursuant to Section 4.02 or 10.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors pursuant to the Pledge Agreement.
"Commitment Commission" shall have the meaning provided in Section
3.01(a).
"Company Stock Plans" shall mean the stock plans for employees,
officers and/or directors of the Borrower and its Subsidiaries adopted by the
Borrower from time to time, and as amended, modified or supplemented from time
to time in accordance with the terms hereof and thereof.
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"Consolidated Debt" shall mean, at any time, the sum of the aggregate
outstanding principal amount of all Indebtedness (including, without
limitation, the principal component of Capitalized Lease Obligations, but
excluding (x) Interest Rate Protection Agreements, (y) the two promissory notes
which were issued in connection with the acquisition by the Borrower of Cordant
Holdings Corporation (now known as Tracor Information Systems Company) and (z)
Indebtedness of the type described in clause (ii) of the definition thereof) of
the Borrower and its Consolidated Subsidiaries.
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income of the Borrower and its Consolidated Subsidiaries for such period,
before Consolidated Net Interest Expense and provision for income taxes for
such period and without giving effect to any extraordinary gains or losses, or
any nonrecurring charges for such period resulting from the acquisition by the
Borrower of TAESI to the extent included in Consolidated Net Income for such
period.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all amortization of intangibles
(including amortization of debt issuance costs) and depreciation that were
deducted in arriving at Consolidated EBIT for such period.
"Consolidated Interest Coverage Ratio" shall mean, for any period, the
ratio of Consolidated EBITDA to Consolidated Net Interest Expense for such
period.
"Consolidated Net Income" shall mean, for any period, the aggregate
net income or loss of the Borrower and its Consolidated Subsidiaries for such
period determined on a consolidated basis, as determined in accordance with
generally accepted accounting principles.
"Consolidated Net Interest Expense" shall mean, for any period, the
total consolidated interest expense (excluding amortization of debt issuance
costs but including Letter of Credit Fees and Facing Fees) of the Borrower and
its Consolidated Subsidiaries for such period (calculated without regard to any
limitations on the payment thereof) plus, without duplication, that portion of
Capitalized Lease Obligations of the Borrower and its Consolidated Subsidiaries
representing the interest factor for such period, in each case net of the total
consolidated interest income of the Borrower and its Consolidated Subsidiaries
for such period.
"Consolidated Net Worth" shall mean, at any time, the aggregate
shareholders' equity of the Borrower and its Consolidated Subsidiaries on a
consolidated basis at such time, as determined in accordance with generally
accepted accounting principles.
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"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with generally accepted accounting
principles.
"Contingent Obligation" 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,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) 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, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless the
holder of 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 in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation 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.
"Continuing Directors" shall mean the directors of the Borrower on the
Effective Date and each other director, if such other director's nomination for
election to the Board of Directors of the Borrower is recommended by a majority
of the then Continuing Directors.
"CoreStates" shall mean CoreStates Bank, N.A., a national banking
association.
"Credit Documents" shall mean this Agreement, each Note, the Pledge
Agreement and the Subsidiaries Guaranty.
"Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit.
"Credit Party" shall mean the Borrower and each Subsidiary Guarantor.
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"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.
"Designated Tax Sharing Agreements" shall mean collectively (i) the
Tax Indebtedness Sharing Agreement, dated as of December 27, 1991 among
Littlefuse, Inc., the Borrower, Elsin Corporation, General Image Corporation,
RMC, Inc., Ultron Labs Corporation and certain Subsidiaries of the Borrower, as
the same has been amended, modified or supplemented through the Effective Date
and (ii) the Tax Sharing Agreement, dated as of November 20, 1992, among
General Dynamics Corporation, General Dynamics H.A. and GDE Systems, Inc.
"Dividend" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other distribution, payment or delivery of property
(other than common stock of such Person) or cash to its stockholders as such,
or redeemed, retired, purchased or otherwise acquired, directly or indirectly,
for consideration any shares of any class of its capital stock outstanding on
or after the Effective Date (or any options or warrants issued by such Person
with respect to its capital stock), or set aside any funds for any of the
foregoing purposes, or shall have permitted any of its Subsidiaries to purchase
or otherwise acquire for consideration any shares of any class of the capital
stock of such Person outstanding on or after the Effective Date (or any options
or warrants issued by such Person with respect to its capital stock). Without
limiting the foregoing, "Dividends" with respect to any Person shall also
include all payments made or required to be made by such Person with respect to
any stock appreciation rights, plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing purposes.
"Documents" shall mean the Credit Documents, the Existing Senior
Subordinated Notes Documents, the Existing Senior Subordinated Notes Tender
Offer Documents, the Existing Senior Subordinated Notes Consent Solicitation
Documents and the New Senior Subordinated Note Documents.
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated or organized in the United States or any State thereof.
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"Drawing" shall have the meaning provided in Section 2.05(b).
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation
D of the Securities Act).
"End Date" shall have the meaning provided in the definition of
"Interest Reduction Discount."
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereafter, "Claims"),
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 in connection
with alleged injury or threat of injury to health, safety or the environment
due to the presence of Hazardous Materials.
"Environmental Law" shall mean any Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, guideline, written policy and
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, relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act
of 1990, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and the
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the
Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq. and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; and any
state and local or foreign counterparts or equivalents, in each case as amended
from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this
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Agreement, and to 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.
"Eurodollar Loan" shall mean each Revolving Loan designated as such by
the Borrower at the time of the incurrence thereof or conversion thereto.
"Eurodollar Rate" shall mean (a) the offered quotation to first-class
banks in the New York interbank Eurodollar market by BTCo for Dollar deposits
of amounts in immediately available funds comparable to the outstanding
principal amount of the Eurodollar Loan of BTCo with maturities comparable to
the Interest Period applicable to such Eurodollar Loan commencing two Business
Days thereafter 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 off to the nearest 1/16 of 1%) by (b) 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
required by applicable law) applicable to any member bank of the Federal
Reserve System in respect of Eurocurrency funding or 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 10.
"Existing Corestates IRB Letter of Credit" shall mean that Existing
Corestates Letter of Credit designated as such on Schedule II.
"Existing CoreStates IRB Letter of Credit Reimbursement Agreement"
shall mean and include the Letter of Credit, Indemnity and Reimbursement
Agreement, dated as of September 1, 1990, between TAESI and CoreStates (as
successor to Meridian Bank), as amended.
"Existing CoreStates Letters of Credit" shall mean the Existing
CoreStates IRB Letter of Credit and the other Existing Letters of Credit issued
by CoreStates (as successor to Meridian Bank).
"Existing Credit Agreement" shall mean the Credit Agreement dated as
of August 25, 1993 and amended and restated as of November 17, 1994 and further
amended and restated as of February 22, 1996 (as the same has been amended,
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modified or supplemented to, but not including, the Effective Date) among the
Borrower, the lenders party thereto and BTCo, as the agent thereunder.
"Existing Indebtedness" shall have the meaning provided in Section
7.22(a).
"Existing IRB" shall mean that Existing Indebtedness designated as
such on Schedule V.
"Existing Letters of Credit" shall have the meaning provided in Section
2.01(d).
"Existing Senior Subordinated Notes" shall mean the $115,947,000
remaining aggregate principal amount of the Borrower's 10-7/8% Senior
Subordinated Notes due 2001 which were issued pursuant to the Existing Senior
Subordinated Notes Indentures.
"Existing Senior Subordinated Notes Consent" shall mean each written
consent permitting the Borrower to enter into the Existing Senior Subordinated
Notes Indenture Supplements from a holder of one or more Existing Senior
Subordinated Notes outstanding on the record date for determining those holders
entitled to consent to such Existing Senior Subordinated Notes Indenture
Supplement.
"Existing Senior Subordinated Notes Consent Solicitation" shall mean
the solicitation of the Existing Senior Subordinated Notes Consents from the
holders of the Existing Senior Subordinated Notes.
"Existing Senior Subordinated Notes Consent Solicitation Documents"
shall mean the Existing Senior Subordinated Notes Consents, the Existing Senior
Subordinated Notes Indenture Supplements and each of the other agreements and
documents entered into in connection with the Existing Senior Subordinated
Notes Consent Solicitation.
"Existing Senior Subordinated Notes Documents" shall mean the Existing
Senior Subordinated Notes Indentures, the Existing Senior Subordinated Notes
Indenture Supplements, the Existing Senior Subordinated Notes and each of the
other agreements and documents entered into in connection therewith.
"Existing Senior Subordinated Notes Indentures" shall mean (i) the
Indenture, dated as of August 15, 1993, among the Borrower, as issuer, certain
of its Subsidiaries, as guarantors, and the U.S. Trust Company of Texas, N.A.,
as trustee and (ii) the Indenture, dated as of November 17, 1994, among the
Borrower, as issuer, certain of its Subsidiaries, as guarantors, and the U.S.
Trust Company of Texas, N.A., as trustee.
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"Existing Senior Subordinated Notes Indenture Supplements" shall mean
each of the Supplement Indentures to the Existing Senior Subordinated Notes
Indentures in the forms delivered to the Agent pursuant to Section 5.17 and
entered into by the Borrower and the trustees for the Existing Senior
Subordinated Notes in connection with the Existing Senior Subordinated Notes
Consents.
"Existing Senior Subordinated Notes Tender Offer" shall mean the
tender offer by the Borrower to repurchase all outstanding Existing Senior
Subordinated Notes pursuant to the Existing Senior Subordinated Notes Tender
Offer Documents.
"Existing Senior Subordinated Notes Tender Offer Documents" shall mean
the Borrower's Offer to Purchase and Consent Solicitation, dated February 13,
1997, and each of the other agreements and documents entered into in connection
with the Existing Senior Subordinated Notes Tender Offer.
"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 February 28, 2002.
"Flight Systems" shall mean Tracor Flight Systems, Inc., a Delaware
corporation.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is not a Domestic Subsidiary.
"Hazardous Materials" shall mean (a) any petroleum 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; (b) any chemicals,
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materials or substances defined as or included in the definition of "hazardous
substances,"hazardous waste,"hazardous materials,"extremely hazardous
substances,"restricted hazardous waste,"toxic substances,"toxic
pollutants,"contaminants," or "pollutants," or words of similar import, under
any applicable Environmental Law; and (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Indebtedness of the types described in
clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person, (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person and (vii) all
obligations under any Interest Rate Protection Agreement or under any similar
type of agreement entered into with a Person not a Bank.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreements" shall mean any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, interest rate flow agreement or other similar
agreements.
"Interest Reduction Discount" shall mean (i) for the period from the
Effective Date through but not including the first day of the first Margin
Reduction Period occurring after the Effective Date, 1/2 of 1% and (ii)
thereafter zero, provided that from and after the first day of any Margin
Reduction Period (the "Start Date") to and including the last day of such
Margin Reduction Period (the "End Date"), the Interest Reduction Discount shall
be the respective percentage per annum set forth in clause (A), (B), (C) or (D)
below if, but only if, as of the last day of the most recent fiscal quarter or
year of the Borrower, as the case may be, ended immediately prior to such
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Start Date (the "Test Date"), the applicable conditions set forth in clause
(A), (B), (C) or (D) below, as the case may be, are met:
(A) 1/4 of 1% if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test
Date shall be less than 4.00:1.00 and none of the conditions set forth
in clause (B), (C) or (D) below are satisfied;
(B) 1/2 of 1% if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test
Date shall be less than 3.25:1.00 and none of the conditions set forth
in clause (C) or (D) below are satisfied;
(C) 3/4 of 1% if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test
Date shall be less than 2.25:1.00 and the condition set forth in
clause (D) below is not met; or
(D) 1-1/8% if, but only if, as of the Test Date for such
Start Date the Leverage Ratio for the Test Period ended on such Test
Date shall be less than 1.25:1.00.
Notwithstanding anything to the contrary in this definition,
the Interest Reduction Discount shall be reduced to zero at all times when
there shall exist a Default or an Event of Default.
"Investment" shall have the meaning provided in Section 9.05.
"Issuing Bank" shall mean BTCo, CoreStates (in the case of the
Existing CoreStates Letters of Credit) and any other Bank (including
CoreStates) which at the request of the Borrower and with the consent of the
Agent agrees, in such Bank's sole discretion, to become an Issuing Bank for the
purpose of issuing Letters of Credit pursuant to Section 2.
"Joint Venture" shall have the meaning set forth in Section 9.15(b).
"Joint Venture Subsidiary" shall have the meaning set forth in Section
9.15(b).
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business with
respect to workers compensation, advance payment bonds, performance bonds,
surety bonds and other similar performance or statutory obligations and (ii)
such other obligations of the
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Borrower or any of its Subsidiaries as are reasonably acceptable to the Agent,
the respective Issuing Bank and otherwise permitted to exist pursuant to the
terms of this Agreement.
"Leaseholds" of any Person means all 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).
"Letter of Credit Outstandings" shall mean, at anytime, the sum of (i)
the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the
amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in Section
2.03(a).
"Leverage Ratio" shall mean on any date for the determination thereof
the ratio of (i) Consolidated Debt on such date to (ii) Consolidated EBITDA for
the Test Period then most recently ended; provided, however, that for purposes
of determining the Interest Reduction Discount as of any Test Date, the term
"Consolidated Debt" as used in the foregoing clause (i) of this definition
shall be the sum of (I) Consolidated Debt (other than Revolving Outstandings)
on such Test Date plus (II) the average Revolving Outstandings for the
quarterly period ending on such Test Date (or, in the case of the quarterly
period ending on March 31, 1997, the average Revolving Outstandings for the
period from the Effective Date through and including March 31, 1997).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Revolving Loan and each Swingline Loan.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(c).
"Margin Reduction Period" shall mean each period which shall commence
on a date on which the financial statements are delivered pursuant to Section
8.01(b) or
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(c), as the case may be, and which shall end on the earlier of (i) the date of
actual delivery of the next financial statement pursuant to Section 8.01(b) or
(c), as the case may be, and (ii) the latest date on which the next financial
statements are required to be delivered pursuant to Section 8.01(b) or (c), as
the case may be, provided that the first Margin Reduction Period shall commence
with the delivery of the financial statements in respect of the Borrower's
fiscal quarter ending March 31, 1997.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Indebtedness" shall have the meaning set forth in Section
10.04.
"Maximum Swingline Amount" shall mean $5,000,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans (x)
maintained as Eurodollar Loans $2,000,000 and (y) maintained as Base Rate
Loans, $2,000,000, and (ii) for Swingline Loans, $500,000.
"Net Sale Proceeds" shall mean for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of reasonable transaction costs and
payments of unassumed liabilities relating to the assets sold at the time of,
or within 60 days after, the date of such sale, the amount of such gross cash
proceeds required to be used to repay any Indebtedness (other than Indebtedness
of the Banks pursuant this Agreement) which is secured by the respective assets
which were sold and the net tax payments required to be made by the Borrower as
a result of such sale.
"New Senior Subordinated Note Documents" shall mean and include each
of the documents and other agreements entered into (including, without
limitation, the New Senior Subordinated Note Indenture) relating to the
issuance by the Borrower of the New Senior Subordinated 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.
"New Senior Subordinated Note Indenture" shall mean the Indenture,
dated as of March 1, 1997, among the Borrower, the Subsidiary Guarantors and
U.S. Trust Company of Texas, N.A., 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.
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"New Senior Subordinated Notes" shall mean the Borrower's 8-1/2%
Senior Subordinated Notes due 2007 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.
"Non-Defaulting Bank" shall mean and include 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(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at 130
Liberty Street, New York, New York 10006, Attention: Robert Telesca, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"Obligations" shall mean all amounts owing to the Agent, the
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at 130
Liberty Street, New York, New York 10006, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction (expressed
as a percentage) the numerator of which is the Revolving Loan Commitment of
such Bank at such time and the denominator of which is the Total Revolving Loan
Commitment at such time, provided that if the Percentage of any Bank is to be
determined after the Total Revolving Loan Commitment has been terminated, then
the Percentages of the Banks shall be determined immediately prior (and without
giving effect) to such termination.
"Permitted Acquisition" shall mean the acquisition by the Borrower or
any of its Wholly-Owned Subsidiaries of all or substantially all of the assets
of any Person (or all or substantially all of the assets of a product line or
division of any Person) not
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already a Subsidiary of the Borrower or 100% of the capital stock of any such
Person, provided, that any such acquisition shall only be a Permitted
Acquisition so long as (A) the consideration therefor consists solely of cash
and/or common stock of the Borrower (issued for at least fair market value as
determined as of the date of the definitive agreement of such Permitted
Acquisition) and (B) the assets acquired will be used solely in, or the
business of the Person whose stock is acquired consists solely of, any or all
of the same or reasonably related business lines to the extent permitted by
Section 9.14. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, an acquisition shall be a Permitted Acquisition
only if all requirements of Section 8.11 with respect to Permitted Acquisitions
are met with respect thereto.
"Permitted Acquisition Notice" shall have the meaning provided in
Section 8.11.
"Permitted Holders" shall mean management of the Borrower.
"Permitted Liens" shall have the meaning provided in Section 9.01.
"Person" shall mean any individual, partnership, limited liability
company, joint venture, firm, corporation, 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 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), the Borrower or a Subsidiary
of the Borrower or an ERISA Affiliate, and each multiemployer or single
employer plan for the 5-year period immediately following the latest date on
which the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such
multiemployer or single employer plan, other than a multiemployer or single
employer plan, as defined in Section 4001 of ERISA, that was contributed to or
for which there was an obligation to contribute to, as opposed to maintained,
by a Subsidiary of the Borrower or ERISA Affiliate prior to the time they
became a Subsidiary of the Borrower or ERISA Affiliate, and which such
Subsidiary of the Borrower or ERISA Affiliate no longer contributes to or has
an obligation to contribute to.
"Pledge Agreement" shall have the meaning provided in Section 5.07.
"Pledged Stock" shall have the meaning provided in the Pledge
Agreement.
"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
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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.
"Projections" shall have the meaning provided in Section 5.15(b).
"Quarterly Payment Date" shall mean the last Business Day of each
January, April, July and October occurring after the Effective Date.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. Section 6901 et seq.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any cash insurance proceeds or condemnation award payable (i)
by reason of theft, loss, physical destruction or damage or any other similar
event with respect to any property or assets of the Borrower or any of its
Subsidiaries and (ii) under any policy of insurance required to be maintained
by the Borrower under Section 8.03.
"Register" shall have the meaning provided in Section 13.17.
"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 a portion thereof.
"Regulation T" shall mean Regulation T 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.
"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.
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"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 a portion thereof.
"Release" shall mean any 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 as to which the 30-day notice requirement has not
been waived by the PBGC.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
Revolving Loan Commitments (or after the termination thereof, outstanding
Revolving Loans and Adjusted Percentage of Swingline Loans and Letter of Credit
Outstandings at such time) represent an amount greater than 50% of the Adjusted
Total Revolving Loan Commitment (or after the termination thereof, the sum of
the then total outstanding Revolving Loans of Non-Defaulting Banks and the
aggregate Adjusted 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 7.09.
"Revolving Loan" shall have the meaning provided in Section 1.01(a).
"Revolving Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I directly below the column
entitled "Revolving Loan Commitment," as same may be (x) reduced from time to
time pursuant to Sections 3.02, 3.03, and/or 10 or (y) adjusted from time to
time as a result of assignments to or from such Bank pursuant to Section 1.13
or 13.04(b).
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Revolving Outstandings" shall mean, at any time, the sum of (I) the
aggregate principal amount of Revolving Loans then outstanding plus (II) the
aggregate principal amount of Swingline Loans then outstanding.
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"Rights" shall mean the preferred share purchase rights issued by the
Borrower which entitle the holders thereof to purchase shares of the Borrower's
Series A Junior Participating Preferred Stock.
"Rights Agreement" shall mean the Rights Agreement, dated as of
February 17, 1997, between the Borrower and Harris Trust and Savings Bank, as
rights agent.
"Rokar" shall mean Rokar International Limited, an Israeli
corporation.
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(iii) Certificate" shall have the meaning provided
in Section 4.04(b).
"Secured Creditors" shall have the meaning provided in the Pledge
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Series A Junior Participating Preferred Stock" shall mean the
Borrower's Series A Junior Participating Preferred Stock, par value $.01 per
share, as designated on the Effective Date.
"Series A Warrants" shall mean the Series A warrants issued by the
Borrower which entitle the holders thereof to purchase shares of common stock
of the Borrower.
"Significant Subsidiary" shall mean each Subsidiary of the Borrower
that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X
under the Securities Act and the Securities Exchange Act (as such regulation is
in effect on the Effective Date).
"Standby Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Start Date" shall have the meaning provided in the definition of
"Interest Reduction Discount".
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"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
"Stock Options" shall mean options in respect of common stock of the
Borrower granted or to be granted to certain employees, officers or directors
of the Borrower or any of its Subsidiaries pursuant to the Company Stock Plans.
"Subsidiary" shall mean, as to any Person, (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 and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Subsidiary Guarantor" shall mean each Wholly-Owned Domestic
Subsidiary of the Borrower and, to the extent provided in Section 8.13, each
Wholly-Owned Foreign Subsidiary of the Borrower.
"Subsidiaries Guaranty" shall have the meaning provided in Section
5.08, and shall include any other guaranty issued by a Wholly-Owned Foreign
Subsidiary pursuant to Section 8.13.
"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).
"TAESI" shall mean Tracor Aerospace Electronic Systems, Inc., a
Pennsylvania corporation and formerly known as AEL Industries, Inc.
"Tax Sharing Agreements" shall have the meaning provided in Section
5.05.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Test Date" shall have the meaning provided in the definition of
"Interest Reduction Discount".
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"Test Period" shall mean for any determination under this Agreement
the four consecutive fiscal quarters of the Borrower then last ended, taken as
one accounting period.
"Total Available Revolving Loan Commitment" shall mean, at any time,
the Total Revolving Loan Commitment less the Blocked Commitment, if any, at
such time.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment less (y) the sum of the aggregate principal amount of outstanding
Revolving Loans and Swingline Loans then outstanding plus the then aggregate
amount of the Letter of Credit Outstandings at such time.
"Trade Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Transaction" shall mean the issuance of the New Senior Subordinated
Notes and the repayment of all obligations under, and the termination of all
commitments under, the Existing Credit Agreement.
"Type" shall mean the type of Revolving Loan determined with regard to
the interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any, by
which the actuarial present value of the accumulated benefits under the Plan as
of the close of its most recent plan year, 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, exceeds the fair market value of the assets allocable thereto,
determined in accordance with Section 412 of the Code.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided for in Section
2.05(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
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of (i) the aggregate outstanding principal amount of Revolving Loans made by
such Bank and (ii) such Bank's Adjusted Percentage of the Letter of Credit
Outstandings at such time.
"Wholly-Owned Domestic Subsidiary" shall mean each Domestic Subsidiary
of the Borrower that is also a Wholly- Owned Subsidiary of the Borrower.
"Wholly-Owned Foreign Subsidiary" shall mean each Foreign Subsidiary
of the Borrower that is also a Wholly- Owned Subsidiary of the Borrower.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, 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 at such time.
SECTION 12. The Agent.
12.01 Appointment. The Banks hereby designate Bankers Trust Company
as Agent (for purposes of this Section 12, the term "Agent" shall also include
Bankers Trust Company in its capacity as Collateral Agent pursuant to the
Pledge Agreement). Each Bank hereby irrevocably authorizes, and each holder of
any Note by the acceptance of such Note shall be deemed irrevocably to
authorize, the Agent to take such action on its behalf under the provisions of
this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof and such other powers
as are reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its respective officers, directors, agents or
employees.
12.02 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Credit Documents. Neither the Agent nor any of its respective officers,
directors, agents or employees shall be liable for any action taken or omitted
by it or them hereunder or under any other Credit Document or in connection
herewith or therewith, unless caused by its or their gross negligence or
willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Credit Document a fiduciary relationship in respect of any Bank or
the holder of any Note; and nothing in this Agreement or any other Credit
Document, expressed
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or implied, is intended to or shall be so construed as to impose upon the Agent
any obligations in respect of this Agreement or any other Credit Document
except as expressly set forth herein or therein.
12.03 Lack of Reliance on the Agent. Independently and without
reliance upon the Agent, each Bank and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the
Borrower in connection with the making and the continuance of the Loans and the
taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of the Borrower and, except as expressly
provided in this Agreement, the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Bank
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or
at any time or times thereafter. The Agent shall not be responsible to any
Bank or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of this Agreement or any other Credit Document or the financial
condition of the Borrower or any of its Subsidiaries or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of the Borrower or any of its Subsidiaries or the existence
or possible existence of any Default or Event of Default.
12.04 Certain Rights of the Agent. If the Agent shall request
instructions from the Required Banks (or, to extent required by Section 13.12,
all of the Banks) with respect to any act or action (including failure to act)
in connection with this Agreement or any other Credit Document, the Agent shall
be entitled to refrain from such act or taking such action unless and until the
Agent shall have received instructions from the Required Banks (or all of the
Banks, as the case may be), and the Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the foregoing, no Bank or
the holder of any Note shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder or
under any other Credit Document in accordance with the instructions of the
Required Banks.
12.05 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Agent believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement
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and any other Credit Document and its duties hereunder and thereunder, upon
advice of counsel selected by the Agent.
12.06 Indemnification. To the extent the Agent is not reimbursed and
indemnified by the Borrower, each Bank will reimburse and indemnify the Agent,
in proportion to its "percentage" as used in determining the Required Banks
(determined as if there were no Defaulting Banks), for and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by the Agent in performing
their respective duties hereunder or under any other Credit Document, in any
way relating to or arising out of this Agreement or any other Credit Document;
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct.
12.07 The Agent in Its Individual Capacity. With respect to its
obligation to make Loans under this Agreement, the Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks,"Required Banks,"holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any
Credit Party or any Subsidiary or Affiliate of any Credit Party as if it were
not performing the duties specified herein, and may accept fees and other
consideration from the Borrower or any other Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
12.08 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
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.
12.09 Resignation by the Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 15 Business Days' prior written notice
to the Borrower and the Banks. In the case of the resignation by the Agent,
such resignation shall take effect
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upon the appointment of a successor Agent pursuant to clauses (b) and (c) below
or as otherwise provided below.
(b) Upon any such notice of resignation by the Agent, the Required
Banks shall appoint a successor Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower (it
being understood and agreed that any Non-Defaulting Bank is deemed to be
acceptable to the Borrower).
(c) If a successor Agent shall not have been so appointed within such
15 Business Day period, the Agent, with the consent of the Borrower, shall then
appoint a successor Agent who shall serve as Agent hereunder or thereunder
until such time, if any, as the Required Banks appoint a successor Agent as
provided above.
(d) If no successor Agent has been appointed pursuant to clause (b)
or (c) above by the 20th Business Day 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 the duties of the Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Banks
appoint a successor Agent as provided above.
SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. The Borrower shall: (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) in connection with the
preparation, execution and delivery of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein and
any amendment, waiver or consent relating hereto or thereto, of the Agent in
connection with its syndication efforts with respect to this Agreement and of
the Agent and each of the Banks in connection with the enforcement of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Agent and for each of the Banks
(including the allocated costs of internal counsel, although no Bank shall be
entitled to reimbursement for the fees and disbursements of both external
counsel and internal counsel)); (ii) pay and hold each of the Banks harmless
from and against any and all present and future stamp, excise 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 (iii) indemnify the Agent and each Bank, and each of their
respective officers, directors, employees, representatives and
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agents from and hold each of them harmless against any and all liabilities,
obligations (including removal or remedial actions), losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses and disbursements
(including reasonable attorneys' and consultants' fees and disbursements)
incurred by, imposed on or assessed against 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 or any
Bank is a party thereto) related to the entering into and/or performance of
this Agreement or any other Credit Document or the use of any Letter of Credit
or the proceeds of any Loans hereunder or the consummation of any transactions
contemplated herein or in any other Credit Document or the exercise of any of
their rights or remedies provided herein or in the other Credit Documents, 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 owned
or operated by the Borrower or any of its Subsidiaries, the generation,
storage, transportation, handling or disposal of Hazardous Materials at any
location, whether or not owned or operated by the Borrower or any of its
Subsidiaries, the non-compliance of any Real Property with foreign, federal,
state and local laws, regulations, and ordinances (including applicable permits
thereunder) applicable to any Real Property, or any Environmental Claim
asserted against the Borrower, any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries, including, in
each case, without limitation, the reasonable fees and disbursements of counsel
and other consultants incurred in connection with any such investigation,
litigation or other proceeding (but excluding any 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). To the extent that the
undertaking to indemnify, pay or hold harmless the Agent or any Bank set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
13.02 Right of Setoff. 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 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 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 agencies of such Bank wherever located) to or for the credit or the account
of the Borrower against and on account of the Obligations and liabilities of
the Borrower to such Bank under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations
purchased by such
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Bank pursuant to Section 13.06(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, liabilities or claims, or any of them,
shall be contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, at
the Borrower's address specified opposite its signature below; if to any Bank,
at its address specified opposite its name below; and if to the Agent, at its
Notice Office; or, as to the Borrower or the Agent, at such other address as
shall be designated by such party in a written notice to the other parties
hereto and, as to each Bank, at such other address as shall be designated by
such Bank in a written notice to the Borrower and the Agent. All such notices
and communications relating to Defaults, Events of Default or interest rate
determinations, shall be telecopied or delivered by messenger or overnight
courier service and all such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective when delivered to the telegraph company, cable company or overnight
courier, as the case may be, or sent by telex or telecopier and when mailed
shall be effective three Business Days following deposit in the mail with
proper postage, except that notices and communications to the Agent shall not
be effective until received by the Agent.
13.04 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, the Borrower
may not assign or transfer any of its rights, obligations or interest hereunder
or under any other Credit Document without the prior written consent of all of
the Banks and, provided further, that, although any Bank may transfer, assign
or grant participations in its rights hereunder, such Bank shall remain a
"Bank" for all purposes hereunder (and may not transfer or assign all or any
portion of its Revolving Loan Commitment hereunder except as otherwise provided
in Section 13.04(b)) and the transferee, assignee or participant, as the case
may be, shall not constitute a "Bank" hereunder and, provided further, that no
Bank shall transfer or 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)
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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, that an increase in the 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, and that
any modification or amendment to scheduled reductions of the Total Revolving
Commitment shall be permitted without the consent of any participant), (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 the Pledge Agreement (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 $5,000,000 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 Schedule I shall be deemed modified to reflect the Revolving Loan
Commitment of such new Bank and of the existing Banks, (ii) new Notes will be
issued at the Borrower's expense to such new Bank and to the assigning Bank
upon the request of such new Bank or assigning Bank, such new Notes to be in
conformity with the requirements of Section 1.05 to the extent needed to
reflect the revised Revolving Loan Commitments, (iii) the consent of the Agent
and each Issuing Bank shall be required in connection with any assignment
pursuant to clause (y) above (which consent shall not be unreasonably
withheld), and (iv) the Agent shall receive at the time of each such
assignment, from the assigning or the assignee Bank, the payment of a
non-refundable assignment fee of $3,500; provided further, that any such
assignment will not be effective until recorded by the Agent on the Register
pursuant to Section 13.17. To the extent of any assignment pursuant to this
Section 13.04(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
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Section 13.04(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,
to the extent legally entitled to do so, provide to the Borrower in the case of
a Bank described in clause (ii) or (iv) of Section 4.04(b), the forms described
in such clause (ii) or (iv), as the case may be. 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
13.04(b) would, at the time of such assignment, result in increased costs under
Section 1.10, 1.11, 2.06 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.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Bank or any holder of any Note in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between the Borrower or any other Credit Party and the Agent
or any Bank or the holder of any Note 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, powers and remedies herein or in any other Credit
Document expressly provided are cumulative and not exclusive of any rights,
powers or remedies which the Agent or any Bank or the holder of any Note 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 any
Bank or the holder of any Note to any other or further action in any
circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Agent agrees that promptly after its receipt of each payment
from or on behalf of the Borrower in respect of any Obligations hereunder, it
shall distribute such payment to the Banks (other than any Bank that has
consented in writing to waive its pro rata share of any such payment) pro rata
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
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(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, Commitment Commission or Letter of Credit 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 Obligations then owed and due
to such Bank bears to the total of such Obligations 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 party to such
Banks in such amount as shall result in a proportional participation by all 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.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
13.07 Calculations; Computations. (a) The financial statements to
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
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, except as otherwise specifically provided herein, all
computations of the Interest Reduction Discount and all computations
determining compliance with Sections 9.08 through 9.10, inclusive, shall
utilize accounting principles and policies in conformity with those used to
prepare the historical financial statements delivered to the Banks pursuant to
Section 7.05(a).
(b) All computations of interest, Commitment Commission and Fees
hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest, Commitment Commission or Fees are
payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (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
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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, THE BORROWER ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND
EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633
BROADWAY, NEW YORK, NEW YORK 10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH OR A
CREDIT PARTY DESIRES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT, THE
BORROWER AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK
CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE
AGENT UNDER THIS AGREEMENT. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS
SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT UNDER THIS AGREEMENT, 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 THE
BORROWER ANY OTHER JURISDICTION.
(b) THE BORROWER 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
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SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) 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.
13.09 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 set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
13.10 Effectiveness. (a) This Agreement shall become effective on
the date (the "Effective Date") on which (i) the Borrower and each of the Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile device)
the same to the Agent at its Notice Office and (ii) the 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
contained in Section 5 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 been 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.
13.11 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.
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13.12 Amendment or Waiver. (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 (or the Agent or Collateral Agent on behalf of, and with the
prior written consent of, 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 (it being understood that
any amendments or modification to the financial definitions in this Agreement
or to Section 13.07(a) shall not constitute a reduction in the rate of interest
for purposes of this clause (i)), (ii) release all or substantially all of the
Collateral under the Pledge Agreement (except as expressly provided in the
Pledge Agreement), (iii) release a Subsidiary Guarantor which is a Significant
Subsidiary from the Subsidiaries Guaranty (except as expressly provided in the
Subsidiaries Guaranty or in the other Credit Documents), (iv) amend, modify or
waive any provision of this Section 13.12, (v) 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 Required Banks on
substantially the same basis as the Revolving Loan Commitments are included on
the Effective Date) or (vi) 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 increase
the Revolving Loan Commitment 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), (w) without the consent of each Issuing Bank, amend, modify or waive any
provision relating to its rights or obligations with respect to Letters of
Credit, (x) without the consent of BTCo, amend, modify or waive any provision
relating to its rights or obligations with respect to Swingline Loans, (y)
without the consent of the Agent, amend, modify or waive any provision of
Section 12 as same applies to the Agent or any other provision as same relates
to the rights or obligations of the Agent, (z) without the consent of the
Collateral Agent, amend, modify or waive any provision relating to the rights
or obligations of the Collateral Agent. The Borrower shall, to the extent
requested by the Agent or the Required Banks, cause each Subsidiary Guarantor
to acknowledge and agree to any amendment, modification or waiver with respect
to
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this Agreement or any other Credit Document, although the failure to obtain any
such acknowledgement and agreement shall neither affect the effectiveness of
any such amendment, modification or waiver nor affect the obligations of any
such Subsidiary Guarantor under the Subsidiaries Guaranty.
(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 (vi), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Banks is obtained but the consent of one or more
other Banks whose consent is required is not obtained, then the Borrower shall
have the right to either (A) replace each such non-consenting Bank or Banks (so
long as all non-consenting Banks are so replaced) 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, repay in full its outstanding Revolving Loans and cash
collateralize outstanding Letters of Credit in accordance with Sections 3.02(b)
and/or 4.01(b), provided that, unless the Revolving Loan Commitment terminated,
and Revolving Loans 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 Commitment and/or outstanding Revolving Loans of existing
Banks (which in each case must specifically consent with respect to such
increase in respect of itself), 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 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 13.12(a).
13.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
13.14 Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from
those being charged by the respective Bank prior to such transfer, 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
transfer).
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13.15 Information. The Borrower hereby acknowledges and agrees that
each Bank may share with any of its affiliates who agrees in writing to be
bound by the provisions of Section 13.16 any information related to the
Borrower and its Subsidiaries including, without limitation, any non-public
customer information regarding the creditworthiness of the Borrower.
13.16 Confidentiality. Subject to Sections 13.04(a) and 13.15, each
Bank shall use its best efforts to hold all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as
such by the Borrower in accordance with its customary procedure for handling
confidential information of this nature and in accordance with safe and sound
investment practices. Each Bank may in any event make disclosure reasonably
required by any bona fide transferee or participant or affiliate who agrees to
be bound by the provisions of this Section 13.16 in connection with the
contemplated transfer of any Loans or participation therein or as required or
requested by any court or other governmental agency or representative thereof
or pursuant to legal process, provided that, unless specifically prohibited by
applicable law or court order, each Bank shall notify the Borrower of any
request by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Bank by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information and provided further that,
in no event shall any Bank be obligated or required to return any materials
furnished by the Borrower or any Subsidiary.
13.17 Register. The Borrower hereby designates the Agent to serve as
the Borrower's agent, solely for purposes of this Section 13.17, to maintain a
register (the "Register") on which it will record the Revolving Loan Commitment
from time to time of each of the Banks, the Revolving Loans made by each of the
Banks and each repayment in respect of the principal amount of the Revolving
Loans of each Bank. Failure to make any such recordation, or any error in such
recordation 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 13.04(b).
Coincident with the delivery of such an Assignment and Assumption Agreement to
the
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Agent for acceptance and registration of assignment or transfer of all or part
of a Revolving Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Revolving Note evidencing such Revolving
Loan, and thereupon one or more new 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 13.17 other than those resulting from the Agent's willful misconduct or
gross negligence. The Agent will make the Register available for review by the
Borrower and the Banks at such times and intervals as the Borrower or any Bank
may reasonably request.
* * *
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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.
Addresses:
6500 Tracor Lane TRACOR, INC.
Austin, TX 78725-2000
Tel: (512) 929-2281/4680
Fax: (512) 929-2257 By /s/ Robert K. Floyd
-----------------------------
Attention: James B. Skaggs Title: Vice President
130 Liberty Street BANKERS TRUST COMPANY,
New York, New York 10006 Individually and as Agent
Tel: (212) 250-5175
Fax: (212) 250-7218
By /s/ Gene S. Thompson
-----------------------------
Attention: Patricia Hogan Title: Vice President
2200 Ross Avenue, Suite 4400W CREDIT LYONNAIS NEW YORK BRANCH,
Dallas, Texas 75201 Individually and as Co-Agent
Tel: (214) 220-2300
Fax: (214) 220-2323
By /s/ Mark Koneval
-----------------------------
Attention: Brian Brown Title: Vice President
One First National Plaza THE FIRST NATIONAL BANK
10th Floor OF CHICAGO,
Chicago, Illinois 60670-0167 Individually and as Co-Agent
Tel: (312) 732-7894
Fax: (312) 732-5435
By /s/ Kathy Comella
-----------------------------
Attention: Kathy Comella Title: Vice President
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100 Congress WELLS FARGO BANK (TEXAS),
Suite 150 NATIONAL ASSOCIATION,
Austin, Texas 78701 Individually and as Co-Agent
Tel: (512) 469-3335
Fax: (512) 469-3324
By /s/ Keith Smith
------------------------------
Attention: Keith Smith Title: Vice President
221 West Sixth Street, #200 BANK ONE, TEXAS, N.A.
Austin, Texas 78780
Tel: (512) 479-5730
Fax: (512) 479-1565
By /s/ Edward W. Lick
------------------------------
Attention: Ed Lick Title: Vice President
333 Clay Street, Suite 4340 BANQUE FRANCAISE DU COMMERCE
Houston, Texas 77002 EXTERIEUR
Tel: (713) 759-9401
Fax: (713) 759-9908
By /s/ Mark A. Harrington
------------------------------
Attention: Mark Harrington Title: Vice President and
Regional Manager
1339 Chestnut Street CORESTATES BANK, N.A.
FC 1-8-3-14
P.O. Box 7618
Philadelphia, Pennsylvania 19101-7618
Tel: (215) 973-1259
Fax: (215) 973-6745
By /s/ Joseph Finley
------------------------------
Attention: Joseph Finley Title: Vice President
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Mail Code 101-745 THE FIRST NATIONAL BANK OF
25 South Charles Street MARYLAND
Baltimore, Maryland 21201
Tel: (410) 244-4598
Fax: (410) 244-4239
By /s/ Andrew W. Fish
------------------------------
Attention: Susan McCardell Title: Vice President
1 Houston Center THE FUJI BANK, LIMITED - HOUSTON
Suite 4100 AGENCY
1221 McKinney Street
Houston, Texas 77010
Tel: (713) 650-7855
Fax: (713) 759-0048
By /s/ David Kelley
------------------------------
Attention: Jay Fort Title: Senior Vice President
301 Congress Avenue GUARANTY FEDERAL BANK, F.S.B.
Suite 1500
Austin, Texas 78701
Tel: (512) 320-1205
Fax: (512) 320-1041
By /s/ Chris Harkrider
------------------------------
Attention: Chris Harkrider Title:
901 Main Street NATIONSBANK OF TEXAS, N.A.
67th Floor
Dallas, Texas 75202
Tel: (214) 508-0964
Fax: (214) 508-0980
By /s/ Jeff Susman
------------------------------
Attention: Jeff Susman Title: Senior Vice President
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249 Fifth Avenue PNC BANK, NATIONAL ASSOCIATION
Pittsburgh, Pennsylvania 15222-2707
Tel: (412) 762-2539
Fax: (412) 762-6484
By /s/ Rose M. Crump
---------------------------------
Attention: Rose Crump Title: Vice President
1111 Bagby SOCIETE GENERALE, SOUTHWEST AGENCY
Suite 2020
Houston, Texas 77002
Tel: (713) 759-6315
Fax: (713) 650-0824
By /s/ Thierry Namuroy
---------------------------------
Attention: Mark Cox Title: Vice President
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SCHEDULE I
COMMITMENTS
Bank Revolving Loan Commitment
---- -------------------------
Bankers Trust Company $18,500,000
Credit Lyonnais New York Branch $17,000,000
The First National Bank of Chicago $17,000,000
Wells Fargo Bank (Texas), National Association $17,000,000
Bank One, Texas, N.A. $14,500,000
Banque Francaise Du Commerce Exterieur $14,500,000
CoreStates Bank, N.A. $14,500,000
The First National Bank of Maryland $14,500,000
The Fuji Bank, Limited - Houston Agency $14,500,000
Guaranty Federal Bank, F.S.B. $14,500,000
NationsBank of Texas, N.A. $14,500,000
PNC Bank, National Association $14,500,000
Societe Generale, Southwest Agency $14,500,000
____________
Total: $200,000,000
SCHEDULE II
EXISTING LETTERS OF CREDIT
SCHEDULE III
SUBSIDIARIES
SCHEDULE IV
ENVIRONMENTAL MATTERS
SCHEDULE V
EXISTING INDEBTEDNESS
SCHEDULE VI
INSURANCE
SCHEDULE VII
EXISTING LIENS
SCHEDULE OF PERMITTED FILINGS
<TABLE>
<CAPTION>
ORIGINAL FILE
LOCATION SECURED PARTY/IES DATE NUMBER DESCRIPTION OF COLLATERAL PERMITTED
- -------- ----------------- ------------- ------ ------------------------- ---------
<S> <C> <C> <C> <C> <C>
SCHEDULE VIII
TAX MATTERS
</TABLE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT between Tracor, Inc., a Delaware corporation (the
"Corporation" or "Employer"), and ___________________ (the "Executive" or
"Employee"), dated this 22nd day of November, 1996.
W I T N E S S E T H :
WHEREAS, Employee is currently employed by this Corporation; and
WHEREAS, the Corporation wishes to continue to attract and retain
well-qualified executive key personnel who are an integral part
of the management of the Corporation, such as the Executive,
and to assure both itself of continuity of management and the
Executive of continued employment,
NOW, THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS.
(a) "DISABILITY" means Employee's inability, because of his/her
injury, illness, or other incapacity (physical or mental), to
perform the services for Employer contemplated hereby for 120
days out of any period of 150 days. Such disability shall be
deemed to have occurred on the 150th day of a given period.
(b) "TERMINATION DATE" means the date of receipt of a Notice of
Termination or any later date specified therein, as the case
may be.
(c) "AFFILIATED COMPANIES" means any company controlling,
controlled by, or under common control with the Corporation.
2. EMPLOYMENT PERIOD. The Corporation hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in
the employ of the Corporation, for the period commencing on the date
hereof and ending on the earlier to occur of (i) December 31, 1999, or
(ii) the first day of January following the year in which the Executive
reaches age 65. This Agreement shall automatically renew for
additional three-year periods effective December 31 of each year,
beginning December 31, 1997, unless otherwise determined by the Board
of Directors, such determination to be evidenced by the transmittal of
written notice to the Executive of the decision of the Board of
Directors to not allow automatic renewal as herein provided which must
notice
be received by the Executive no later than 60 days prior to such date.
In no event, however, shall this Agreement, as so renewed, extend
beyond the year in which the Executive attains age 65 (the "Employment
Period").
3. POSITION AND DUTIES.
(a) During the Employment Period, the Executive's duties and
responsibilities (outlined in Exhibit A to this Agreement),
shall be commensurate in all material respects with those held,
exercised, and assigned at any time during the 90-day period
immediately preceding the date hereof excluding, however, any
changes in the number of personnel reporting thereto or any
other changes in Executive's organization which are reasonably
mandated, in each case, by then current business conditions.
Such duties and responsibilities shall be regarded as not
commensurate unless (x) Section 11.(c) of this Agreement shall
have been complied with and (y) the Executive's duties and
responsibilities with any successor to the Corporation are at
least commensurate in all material respects with those held by
the Executive with the Corporation at any time during the
90-day period immediately preceding the date hereof, as
contemplated in the immediately preceding paragraph of this
Section 3.(a).
(b) Excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote
essentially all his/her business attention and time during
normal business hours to the business and affairs of the
Corporation and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
Employee's best efforts to perform faithfully and efficiently
such responsibilities.
4. COMPENSATION.
(a) BASE SALARY. As of the date hereof, the Executive is
receiving, and shall receive a base salary equal to
$_________________ per annum. During the Employment Period,
the base salary shall be reviewed at least annually and shall
be increased at any time, and from time to time (but may not be
decreased), as shall be merited by the Executive's performance
hereunder ("Base Salary"). The Base Salary shall not be
reduced after any such increase. Any increase in the Base
Salary shall not serve to limit or reduce any other obligation
to the Executive under this Agreement.
(b) INCENTIVE COMPENSATION. Provided that Executive shall not then
be in default hereunder, the Executive shall participate, in
each calendar year during the Employment Period, in the then
current incentive plan or program of the Corporation.
(c) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under each applicable welfare benefit plan of the
Corporation including, without limitation, all medical, dental,
disability, group life, accidental death, and travel accident
insurance plans and programs of the Corporation and its
affiliated companies.
(d) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the
policies and procedures of the Corporation, as in effect at any
time during the 90-day period immediately preceding the date
hereof or, if more favorable to the Executive, as in effect at
any time hereafter with respect to other key executives.
Employee will furnish Employer with evidence of having incurred
all such expenses.
(e) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the policies of
the Corporation as in effect at any time during the 90-day
period immediately preceding the date hereof or, if more
favorable to the Executive, as in effect at any time thereafter
with respect to other key executives.
5. TERMINATION.
(a) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Executive's death. The Corporation may
terminate this Agreement after having established the
Executive's Disability by giving the Executive written notice
of its intention to terminate the Executive's employment. In
such a case, the Executive's employment with the Corporation
shall terminate effective on the 30th day after receipt of such
notice (the "Disability Effective Date") provided that, within
30 days after such receipt, the Executive shall have failed to
return to full-time performance of the Executive's duties.
(b) CAUSE. The Corporation may terminate the Executive's
employment for cause. For purposes of this Agreement, "cause"
means (i) an act or acts of dishonesty or gross negligence
taken by the Executive in connection with the performance of
Executive's duties hereunder, or (ii) material violations by
the Executive of the Executive's obligations under Section 3.
of this Agreement, which violations have not either been
remedied within five days after receipt of notice in regard
thereto or, if not capable of being remedied in such period,
substantial efforts towards such end have not, in the
reasonable opinion of Employer, begun within such period.
(c) FAILURE TO PERFORM SATISFACTORILY. The Executive's employment
may be
terminated by the Corporation in the event that the Board
determines, in its sole discretion, that the Executive has
unreasonably and repeatedly failed to satisfactorily perform
his/her duties (as specified in Exhibit A to this Agreement) to
the detriment of the Corporation. Such failure shall be
defined in detail in a preliminary notice to the executive by
the Corporation, and the preliminary notice will give the
Executive 30 days in which to demonstrate improved performance
in the area(s) identified as deficient. A review of the
Executive's performance will occur at the end of 30 days and
the Executive shall receive a written evaluation of noted
improvements or continued deficiencies. After the 30-day
review, the Executive will have an additional 30 days in which
to improve his/her performance in the identified deficient
areas. If at the completion of such additional 30 days the
Corporation determines that the Executive's performance has not
improved to the level required hereby, the Executive may, at
the option of the company, be terminated.
(d) GOOD REASON. The Executive's employment may be terminated by
the Executive anytime during the Employment Period for good
reason. For purposes of this Agreement, "good reason" means:
(i) (A. the assignment to the Executive of any duties
inconsistent in any material respect with the
Executive's duties or responsibilities as
contemplated by Section 3. of this Agreement;
or
(B. any other action by the Corporation which
results in a material diminishment in such
duties or responsibilities, other than an
inadvertent action which is remedied by the
Corporation promptly after receipt of notice
thereof given by the Executive, provided that
the Company shall not be deemed to have
breached this Section due to any reductions of
the number of personnel reporting to
Executive, nor due to any other changes in
Executive's organization, in each case
reasonably mandated by then current business
conditions;
(ii) any failure by the Corporation to comply with any of
the provisions of this Agreement, other than an
insubstantial and inadvertent failure which is
remedied by such entity promptly after receipt of
notice thereof given by the Executive;
(iii) any purported termination of the Executive's
employment other than as permitted by this Agreement,
it being understood that any such purported
termination shall not be effective for any purpose of
this Agreement; or
(iv) any failure by the Corporation or a Successor to
comply with and satisfy Section 11.(c) of this
Agreement.
(e) NOTICE OF TERMINATION. Any termination by the Corporation for
cause or by the Executive for good reason or by the Corporation
for failure to perform satisfactorily shall be communicated by
Notice of Termination to the other party in writing. For
purposes of this Agreement, a "Notice of Termination" is a
written notice which (i) indicates the specific termination
provision of this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to
provide a basis for such termination, and (iii) specifies the
Termination Date (which date shall be not less than 15 days
after the giving of such notice).
6. OBLIGATIONS OF THE CORPORATION UPON TERMINATION.
(a) DEATH. If the Executive's employment is terminated by reason
of the Executive's death, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement other than those
obligations accrued hereunder at the date of the Executive's
death. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to those provided by the
Corporation to surviving families of executives of the
Corporation under such plans, programs, and policies relating
to family death benefits, if any, as in effect at any time
during the 90-day period immediately preceding the date hereof
or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter with respect to
other key executives and their families.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall be
entitled after the Disability Effective Date to receive
disability and other benefits at least equal to those provided
by the Corporation to disabled employees and/or their families
in accordance with such plans, programs, and policies relating
to disability, if any, as in effect during the 90-day period
immediately preceding the date hereof or, if more favorable to
the Executive and/or the Executive's family, as in effect at
any time thereafter with respect to other key executives and
their families.
(c) UNSATISFACTORY PERFORMANCE OR FOR CAUSE. If the Executive's
employment shall be terminated for unsatisfactory performance
or for cause, the Corporation shall pay the executive his/her
Base Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, and shall
also reimburse Executive for any amounts due and owing thereto
pursuant to Section 4.(d) above, plus any accrued and unpaid
vacation days, at the rate in effect on the Date of
Termination, and thereafter shall have no further obligations
to the Executive under this Agreement.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Corporation shall terminate the
Executive's employment for other than cause or disability, or
the employment of the Executive shall be Terminated by the
Executive for good reason,
(i) the Corporation shall pay to the Executive, in a lump
sum in cash within 30 days after the Date of
Termination Date, the following amounts:
(A. if not theretofore paid, the Executive's Base
Salary through the Date of Termination, and
any accrued and unpaid vacation days, at the
rate in effect on the Date of Termination or,
if higher, at the highest rate in effect at
any time preceding the Termination Date; and
(B. the Executive's pro rata portion of any Bonus
(as defined below) payable to him/her for the
fiscal year in which such termination occurs;
and
(ii) the Corporation shall pay to the Executive an amount
equal to two times the Base Salary of the executive in
effect at the time Notice of Termination was given or,
if higher, at the highest rate in effect at any time
within the 90-day period preceding the Effective Date,
plus an amount equal to two times any Bonus payable to
him/her, such amount being payable to the Executive in
24 equal installments, beginning on the first day of
the month following such Termination; and
(iii) in respect of any then outstanding awards to the
Executive under the Stock Plan for Employees of
Tracor, Inc. and Subsidiaries (the "Plan") or any
successor or supplement thereto, to the extent
permitted by law (any contrary provisions of the plan
or any then outstanding options, rights, or grants
thereunder notwithstanding), effective upon the date
of the Notice of Termination, all stock options or
rights of Executive shall become immediately
exercisable in full, and for 90 days thereafter; and
all restrictions shall lapse or terminate with respect
to restricted shares or units and the employee shall
be deemed vested therein; and
(iv) the Corporation shall, promptly upon submission by the
Executive of supporting documentation, pay or
reimburse to the Executive any costs and expenses
(including moving and relocation expenses) paid or
incurred by the Executive which would have been
payable under Section 4.(d) if the Executive's
employment had not terminated; and
(v) the Executive shall be eligible to continue as a
participant in the Company's medical benefit plan for
24 months thereafter, under the same terms and
conditions as existed prior to such Termination.
If such termination should occur prior to December 1 of any year, the
amount of bonus payable pursuant to the provisions of subsections
(d)(i)B. and (d)(ii) shall be calculated based upon the average bonus
actually earned by the executive during the two calendar years
immediately preceding the year of Executive's Termination or, if such
termination should occur thereafter, such bonus shall be based upon the
average bonus actually earned by the Executive for the year in which
such Termination occurs, and the bonus earned in the immediately
preceding year ("Bonus").
Any provisions in such Sections to the contrary notwithstanding, the
monthly payments provided for in Section 6.(d)(ii) and the Executive's
participation in the Company's medical benefit plan provided for in
Section 6.(d)(v) shall cease on January 1 of the year following the
year in which the Executive attains age 65, or on the date of his/her
death, whichever first occurs.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any
benefit, bonus, incentive, or other plan or program provided by the
Corporation or any of its affiliated companies and for which the
Executive may qualify nor, except to the extent specifically provided
herein, shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with
the Corporation or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Corporation or any of its affiliated
companies at or subsequent to the Date of Termination shall be payable
in accordance with such plan or program.
8. FULL SETTLEMENT. The Corporation's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances including, without
limitation, any unliquidated set off, counterclaim, or recoupment, or
any defense or other right which the Corporation may have against
Executive or others. The payment by the Corporation of the amount set
forth in Section 6. above shall constitute payment in full of all of
Corporation's liabilities to Executive resulting from the Termination
of Executive's employment with the Corporation. In no event shall the
Executive be obligated to seek other employment by way of mitigation of
the amounts payable to the Executive under any of the provisions of
this Agreement.
9. NON-COMPETITION. During the Employment Period and for a period of six
months thereafter, Employee agrees not to, directly or indirectly,
engage in any business, whether as an owner, officer, agent,
contractor, or employee, which would unfairly benefit from the
confidential information or trade secrets which Employee learned during
the course of his/her employment with Employer (which Employee
acknowledges are the sole property of Employer), and Employee agrees
not to use or disclose such information or trade secrets to third
parties except as contemplated hereby.
Employee also agrees that he/she will not now or in the future disrupt,
damage, interfere with, or otherwise impair Employer's business whether
by way of interfering with or raiding its employees, or disrupting its
relationship with customers, agents, representatives, or vendors.
10. CONFIDENTIALITY. Employer and Employee agree not to divulge the terms
of this Agreement to anyone except that (i) Employer may divulge the
terms of this Agreement to officers and personnel of Employer, may
disclose the existence and contents of this Agreement, to the extent
required by state and federal law, including, but not limited to, the
federal securities laws, and may disclose the existence and contents of
this Agreement to Employer's parent corporations, government auditors,
or contractors of Employer who have a need to know in order to perform
their duties or obtain appropriate approvals, and (ii) Employee may
divulge the terms of this Agreement to his/her attorney or his/her
immediate family (spouse, children, brothers, sisters, parents). To
the extent that Employer or Employee is permitted to disclose the terms
of this Agreement, they will each advise anyone to whom disclosure is
permitted that such persons must not divulge the terms of this
Agreement to any other person or persons.
11. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation, shall not be
assignable by the Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors.
(c) In the event of the assignment or transfer by the Corporation
of substantially all of its business and assets to another
corporation, the Corporation shall cause such other
corporation, by an agreement in form and substance satisfactory
to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent as the
Corporation would be required to perform if no such assignment
or transfer had taken place.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas without reference to
principles of conflict of laws.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise than
by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
(d) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party
or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Corporation: If to Executive:
Legal Department
Tracor, Inc. ----------------
6500 Tracor Lane ----------------
Austin, Texas 78725 ----------------
or to such other address as such party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(e) The invalidity or enforceability or any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) The Corporation may withhold from any amounts payable under
this Agreement such federal, state, or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(g) This Agreement contains the entire understanding of the
Corporation and the Executive with respect to the subject
matter hereof, and supersedes any prior or contemporaneous
agreements between the parties regarding Executive's employment
with the Corporation.
IN WITNESS WHEREOF, the Executive has hereunder set his/her hand and,
pursuant to authorization from its Board of Directors, the Corporation has
caused these presents to be executed in its name on its behalf, all as of the
date and year first above written.
EXECUTIVE TRACOR, INC.
By:
- ---------------------------------- ----------------------------------
James B. Skaggs, President
EXHIBIT 10.2
November 20, 1995
Dr. Terry A. Straeter
18383 Lincolnshire Street
San Diego, California 92128
RE: Employment and Executive Stock Agreement
Dear Dr. Straeter:
This Employment and Executive Stock Agreement (the "Agreement") is made and
entered into as of the date hereof by and between GDE Systems, Inc., a Delaware
corporation (the "Company"), and Dr. Terry A. Straeter (the "Executive"). The
Company hereby agrees to employ Executive, and Executive hereby agrees to be
employed by the Company, in accordance with the terms, covenants, and
conditions hereinafter set forth.
1. Term of Employment.
(a) This Agreement and Executive's employment hereunder shall
commence on November 20, 1995, and shall terminate on November
20, 1997, unless sooner terminated in accordance with
Paragraph 9. The period during which Executive is employed
under this Agreement shall be referred to herein as the "Term
of Employment."
(b) The date on which Executive's employment hereunder shall
terminate, determined without regard to Paragraph 9, shall be
referred to herein as the Expiration Date."
2. Duties During Employment. Executive shall serve as the Chief
Executive Officer and President of the Company and, subject to
appointment and annual re-election as provided in Paragraph 7,
as a member of the Board of Directors (the "Board"), and shall
do and perform all services, acts, or things customary,
necessary, or advisable to fulfill the duties associated with
his position, subject to policies established by the Board,
and shall perform such other duties of an executive character
as the Board may assign to him from time to time.
3. Extent of Services During Employment. Executive shall devote
substantially all of his energies, interest, abilities, and productive
time to the business of the Company and shall not be engaged in any
other business activity other than that
required of him in connection with his positions with the Company
described in Paragraph 2. The foregoing shall not prevent Executive
from investing his personal assets in other businesses or ventures to
the extent that such other businesses or ventures do not require
substantial services on his part or otherwise materially interfere
with the performance of his duties hereunder. Executive shall not,
without the Company's prior written consent, render to others services
of any kind that would materially interfere with the performance of
his duties hereunder.
4. Place of Employment. Executive's principal place of employment shall
be at the principal offices of the Company in the San Diego,
California area. Notwithstanding the foregoing, Executive shall
undertake normal business travel on behalf of the Company, the
expenses of which shall be paid by the Company.
5. Compensation.
(a) Subject to subparagraph (b) hereof, for Executive's services
hereunder, the Company shall pay to Executive in cash base
salary at an annual rate of $212,000 through December 31,
1995. Such base salary shall be payable not less frequently
than semi-monthly in accordance with the Company's executive
compensation practices.
(b) The annual rate of Executive's base salary set forth in
subparagraph (a) shall be adjusted upward, but not downward,
on the first day of each calendar year beginning January 1,
1996 (the "Adjustment Date") as determined by the Board of
Directors of the Company (without participation of the
Executive).
(c) In addition, the Company shall pay to Executive in cash a
bonus with respect to each calendar year during the Term of
Employment. The amount of each such bonus shall be determined
in the discretion of the Board (acting without participation
by Executive); provided, however, that each such bonus shall
be not less than $100,000. The bonus with respect to any
calendar year shall be paid within 75 days after such calendar
year.
(d) Tracor, at its sole discretion, may grant options, restricted
stock, and/or performance awards to the Executive pursuant to
such programs at any time during the Term of Employment.
6. Benefits and Expense Reimbursements; Office Support. During the Term
of Employment, the Company shall provide Executive with the following
benefits, expense reimbursements, and office support:
(a) The Company shall provide that Executive shall participate in,
and receive benefits under, pension and welfare benefit plans,
programs, and
Dr. Terry A. Straeter
November 20, 1995
Page 3 of 12
arrangements of the Company that are substantially similar to
the plans, programs, and arrangements in which Executive
participated immediately prior to the date hereof, subject to
applicable tenure and vesting requirements. Executive shall
be entitled to participate in all such plans, programs, and
arrangements without satisfying any eligibility or
pre-existing condition exclusion period. Executive shall be
provided eligibility, vesting, and benefit service credit
under such plans, programs, and arrangements for Executive's
service with General Dynamics Corporation.
(b) The Company shall provide that Executive shall:
(i) participate in, and receive reimbursements under, the
expense reimbursement plans, programs, and arrangements
of the Company in which executive officers of the
Company participate;
(ii) receive four weeks of vacation leave per calendar year,
such leave to be taken at such times as are reasonably
agreeable to the Company and Executive; and
(iii) receive sick, holiday, and other leave provided to
executive officers of the Company in accordance with
the Company's executive compensation practices.
Each of the benefits, expense reimbursements, and leave
allowances described in this subparagraph (b) shall be
subject to and provided on a basis consistent with the
terms, conditions, and general administration of such
plans, programs, and arrangements. Notwithstanding this
subparagraph (b), the Company shall have the right to
amend, discontinue, or terminate any of such plan, program,
or arrangement in accordance with the terms thereof.
(c) The Company shall provide Executive with the additional
expense reimbursements described in Exhibit A hereto.
(d) The Company shall provide Executive with reimbursement for all
reasonable expenses incurred by him in performing services
hereunder to the extent that Executive properly accounts
therefor in accordance with the Company's expense
reimbursement practices.
Dr. Terry A. Straeter
November 20, 1995
Page 4 of 12
(e) The Company shall reimburse Executive for the initiation fee
and annual membership dues incurred by Executive as a member
in a country club or other similar private club selected by
Executive. The Company shall further reimburse Executive for
the initiation fee and annual membership dues incurred by
Executive as a member of a luncheon club or other similar
private club selected by Executive. The Company shall
reimburse Executive for reasonable entertainment expenses
incurred by Executive as a member of such clubs. Such
reimbursements shall be made to the extent that Executive
properly accounts therefor in accordance with the Company's
executive compensation practices. As soon as reasonably
practical following the expiration or termination of the Term
of Employment, Executive shall transfer all rights of
membership in such clubs (including any right to sell such
membership or receive reimbursement of annual membership dues)
to the Company.
(f) The Company shall reimburse Executive for the premiums for
term life insurance in the amount of $2,000,000. Such
insurance shall be maintained under a policy selected by the
Executive (and approved by the Board, such approval not to be
unreasonably withheld). Executive shall be entitled to
designate beneficiaries under the policy.
(g) The Company shall reimburse Executive for the premiums for
special travel term life insurance in the amount of
$1,000,000. Such insurance shall be maintained under a policy
selected by the Executive (and approved by the Board, such
approval not to be unreasonably withheld). Executive shall be
entitled to designate beneficiaries under the policy.
(h) The Company shall provide Executive with a private office,
secretarial, and clerical help, office equipment, supplies,
and other facilities and services suitable to Executive's
position and adequate for the performance of his duties
hereunder.
7. Directorship. During the Term, Executive shall serve as a director of
the Company. Upon the termination of this Agreement and Executive's
employment hereunder, Executive shall resign as a director.
8. Deductions and Withholdings. All amounts payable or which become
payable hereunder shall be subject to any deductions and withholdings
required by law.
Dr. Terry A. Straeter
November 20, 1995
Page 5 of 12
9. Termination. Notwithstanding the provisions of Paragraph 1,
Executive's employment hereunder may be terminated by the Company or
Executive prior to the Expiration Date upon, and only upon, the
following terms and conditions:
(a) By the Company for Cause upon 15 days' notice to Executive.
For purposes of this subparagraph (a), "Cause" shall mean
(i) Executive's embezzlement or misappropriation of funds
of the Company;
(ii) Executive's commission of an act of dishonesty
detrimental to the best interests of the Company; or
(iii) Executive's participation in any fraud against the
Company or gross negligence in the performance of his
duties hereunder.
During the period of notice set forth above, Executive shall
be afforded reasonable opportunity to establish, to the
reasonable satisfaction of the Board that no act or failure to
act on his part constitutes "Cause" as described above.
(b) By the Company in the event of Executive's Disability. For
purposes of this subparagraph (b), Executive's "Disability"
shall mean a good faith determination by the Board (acting
without participation by Executive), based on competent and
independent medical evidence, that Executive, as a result of a
mental or physical disease or condition expected to continue
indefinitely, is incapable of performing a substantial portion
of the services contemplated in this Agreement. In the event
that the Company terminates Executive's employment under this
subparagraph (b), the Company shall pay to Executive in cash
his base salary plus bonus as reflected in Paragraph 5(c)
until the later of nine months after the date of Executive's
termination hereunder and the date on which Executive begins
to receive benefits under the Company long-term disability
plan in which Executive participates; provided, however, that
in no event shall such base salary and bonus be provided after
the earlier of 12 months after the date of Executive's
termination hereunder and the Expiration Date. Such base
salary shall be paid at the annual rate of his base salary in
effect on the date of Executive's termination hereunder and
shall be payable not less frequently than semi-monthly in
accordance with the Company's executive compensation
practices.
Dr. Terry A. Straeter
November 20, 1995
Page 6 of 12
(c) In the event of Executive's death. In the event that
Executive's employment terminates under this subparagraph (c),
the Company shall pay to Executive's estate his base salary
and bonus until 12 months after the date of Executive's death.
Such bonus under this subparagraph (c) shall be established as
Executive's bonus for the immediately preceding calendar year.
Such base salary shall be paid at the annual rate of his base
salary in effect on the date of Executive's death. Such bonus
amount shall be payable in cash in a lump sum not later than
90 days after the date of Executive's death.
(d) By the Company in the event that the Board determines, in its
sole discretion, that Executive's performance of his duties
hereunder has been unsatisfactory upon 60 days' notice to
Executive. In the event the Company terminates Executive's
employment under this subparagraph (d), the Company shall pay
to Executive in cash the greater of (i) his base salary plus
bonus as reflected in Paragraph 5(c) for a period of 12
months, or (ii) his base salary plus bonus as reflected in
Paragraph 5(c) from the date of termination to the Expiration
Date. Such base salary shall be paid at the annual rate of
Executive's base salary in effect on the date of the
Executive's termination hereunder and shall be payable not
less frequently than semi-monthly in accordance with the
Company's executive compensation practices.
(e) If the Executive is terminated pursuant to Paragraph 9(d) of
this Agreement and prior to the date on which Executive
attains age fifty-five (55), the Company shall provide to
Executive and his eligible dependents, until the date on which
Executive attains age fifty-five (55), such medical benefits
as are equivalent to those which may be provided from time to
time to similarly situated active employees of the Company.
Upon his attainment of age fifty-five (55), Executive and his
eligible dependents shall be entitled to such retiree medical
benefits, if any, as may be provided from time to time to
retirees whose active employment with the Company is
terminated at age fifty-five (55); provided, however, that (i)
the Executive may elect that such retiree medical coverage
shall be coverage substantially similar to the coverage
provided by the Company on the day before the date hereof;
(ii) such retiree medical coverage shall terminate when
Executive attains age sixty-five (65); and (iii) such retiree
medical benefits shall at all times be reduced by the amount
of any medical benefits provided to the Executive by another
employer, any governmental program, or otherwise.
Dr. Terry A. Straeter
November 20, 1995
Page 7 of 12
Additionally, the Company shall, to the extent permitted by
law, cause the GDE Systems, Inc. Retirement Plan, and any
successor plan, to:
(1) calculate the early retirement benefits payable to
the Executive according to the factors which are
applied to determine early retirement benefits for
employees who are eligible to commence benefit
payments immediately upon termination of employment;
provided, however, that the Executive is not eligible
to accrue additional benefits after termination of
employment. Thus, if the employment of Executive is
terminated pursuant to Paragraph 9(d) prior to
attaining age 55, the Executive may commence payment
of an early retirement benefit at age 55, based upon
the benefit accrued while the Executive was an
employee, and the benefit shall be calculated
according to the factors which would have applied had
the Executive been an employee immediately prior to
commencement of the benefit; and
(2) consider the payments under Paragraph 9(d), to the
extent not previously considered, as compensation,
and deemed to be paid over the two-year term of this
Agreement, for purposes of determining the amount of
the benefit payable to the Executive.
To the extent the Company is not permitted by law to provide
the benefits set forth in subsection 30(b) through the GDE
Systems, Inc. Retirement Plan or a successor plan which is
qualified under Section 401(a) of the Internal Revenue Code,
then the Company shall pay such benefits from its general
assets.
10. Confidential Information. In the course of his employment hereunder,
Executive may have access to confidential records, data, formulae,
customer lists, trade secrets, specifications, inventions, and
processes owned by the Company. During the Term of Employment and
thereafter, Executive shall not, directly or indirectly, disclose such
information to any person or use any such information, except as
required in the performance of Executive's duties hereunder. All
records, files, keys, drawings, documents, models, equipment, and the
like relating to the Company's business, which Executive shall
prepare, copy, or use, or with which Executive comes into contact,
shall be and remain the Company's sole property, shall not be removed
from the Company's premises (except as necessary for the performance
of the Executive's duties) and shall be returned to the Company upon
the expiration or termination of the Term of Employment.
Dr. Terry A. Straeter
November 20, 1995
Page 8 of 12
11. Executive's Obligations During Term of Employment. Executive agrees
that during the Term of Employment Executive shall not:
(a) without the written consent of the Company, directly or
indirectly, as a director, officer, agent, employee,
consultant, or independent contractor, or in any other
individual or representative capacity (i) invest (other than
investments in publicly-owned companies which constitute not
more than one percent (1%) of the outstanding securities of
any such company) or engage in any business or activity that
is competitive with the business of the Company or any of its
Affiliates (as hereinafter defined) (as that business is
conducted during the Term of Employment); (ii) accept
employment with or render services to a competitor of the
Company or any of its subsidiaries; or (iii) take any action
inconsistent with the fiduciary relationship of an employee to
the Executive's employer. As used herein, the term
"Affiliate" will be deemed to mean any entity which controls,
is controlled by, or is under common control with the Company
including, without limitation, Tracor, Inc., a Delaware
corporation ("Tracor") and its subsidiaries;
(b) solicit, divert, or take away or attempt to solicit, divert,
or take away any of the customers, business, or patrons of the
Company;
(c) without prior written consent by the Company, directly or
indirectly engage in the business of developing products
competitive with the business of the Company within the
geographical area served by the Company during the 12-month
period immediately preceding termination of employment nor
will the Executive engage, within the said geographical area,
in the design, development, distribution, manufacture,
assembly, or sale of a product in competition with any product
planned by the Company, the plans, designs, or specifications
of which have been revealed to the Executive; or
(d) communicate with customers or former customers of the Company
for the purpose of engaging in any transaction competing with
the business of the Company or involving products which
compete with the business of the Company nor will the
Executive actively solicit the employ of any of the Company's
employees.
In the event of a Change in Control (as hereinafter defined) of the
Company or the acquisition of the Company by another corporation and
the subsequent
Dr. Terry A. Straeter
November 20, 1995
Page 9 of 12
termination by the Company of the Executive or a material decrease in
the responsibilities or compensation of the Employee, the provisions
of clauses (c) and (d) of this Paragraph 11 with respect to the period
until the last day of the Term of Employment shall be waived. For
purposes of this Agreement, "Change in Control" shall mean the
acquisition of 50% or more of the outstanding common stock of the
Company or Tracor by any entity other than an Affiliate.
The Company and Executive agree that the restrictions of this
Paragraph 11 shall be subject to exclusions for work for non-profit
organizations or the United States or any foreign government.
12. Executive's Obligations Subsequent to Termination. Executive agrees
that subsequent to the Term of Employment, Executive shall:
(a) not use, disclose, reproduce, distribute, or otherwise
disseminate the trade secrets of the Company;
(b) not solicit, divert, or take away or attempt to solicit,
divert, or take away any of the employees, customers,
business, or patrons of the Company for the period of the
payments made pursuant to Paragraph 9(d); and
(c) be available for the period of the payments made pursuant to
Paragraph 9(d) to provide consulting services of up to 200
hours per year to the Company. During this period, Executive
shall not render services of any nature to any Competing
Business. As a result of the unique nature of the consulting
services that Executive may provide, Executive and the Company
agree that a breach of this clause will cause irreparable
injury to the Company. The Company agrees to pay Executive,
in addition to the payments made pursuant to Paragraph 9(d),
$1,000 per month during the term of the consulting period and
to pay Executive, at a rate negotiated in good faith by the
parties, for each hour of consulting services. Executive's
compensation under this paragraph shall not diminish the
Company's obligations to Executive under other provisions of
this Agreement.
13. Notices. Any notice, request, demand, or other communication required
or permitted hereunder shall be deemed to be properly given when
personally delivered in writing to the person being served or the
designated officer of the corporate party being served; deposited in
the United States mail, in the State of California, first class,
registered or certified with return receipt requested,
Dr. Terry A. Straeter
November 20, 1995
Page 10 of 12
postage prepaid, and addressed as specified below to the person
otherwise designated, on the date of receipt, refusal or non-delivery
indicated on the return receipt; communicated to a public telegraph
company for transmittal; or sent by telecopier; and addressed to the
Company or the Executive at the following addresses:
To the Company: Chairman of the Board of Directors
GDE Systems, Inc.
16550 West Bernardo Drive
San Diego, California 92127-1806
To the Executive: Dr. Terry A. Straeter
18383 Lincolnshire Street
San Diego, California 92128
Each party may change its address by written notice in
accordance with this paragraph.
14. Benefit of Agreement. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective
executors, administrators, successors, and assigns (including, without
limitation, any firm, corporation, or business entity which shall,
whether by merger, purchase, or otherwise, acquire all or
substantially all of the assets or business of the Company); provided,
however, that Executive may not assign, pledge, or encumber any of his
rights or duties hereunder except upon the prior written consent of
the Company.
15. Applicable Law. This Agreement is made and is to be governed by and
construed under the laws of the State of California.
16. Waiver of Breach. A waiver by either party of any breach of the
provisions of this Agreement by the other party, or, in any particular
instance or series of instances, of any term or condition of this
Agreement, shall not constitute or be deemed a waiver of such breach
or of any such term or condition in any other instance nor shall any
waiver constitute a continuing waiver hereunder. No waiver shall be
binding unless executed in writing by the party making the waiver.
17. Warranty. As an inducement to the Company to enter into this
Agreement, Executive represents and warrants that he is not a party to
any other agreement or obligation for personal services, and that
there exists no impediment or
Dr. Terry A. Straeter
November 20, 1995
Page 11 of 12
restraint, contractual or otherwise, on his power, right, or ability
to enter into this Agreement and to perform his duties and obligations
hereunder.
18. Amendment; Termination. The provisions of this Agreement may be
amended, modified, supplemented, or otherwise altered only by an
agreement, in writing, executed by the Company and Executive. This
Agreement may not be terminated other than by an agreement, in
writing, executed by the Company and Executive.
19. Surviving Obligations. Not with standing the termination of this
Agreement as provided in Paragraph 9, the Company shall be liable to
Executive for all compensation due to Executive under Paragraph 9
until full payment thereof
20. Inadequacy of Remedy at Law. The Executive acknowledges and agrees
that the Company's remedy at law for any breach of the Executive's
obligations under this Agreement may be inadequate, and agrees and
consents that temporary and/or permanent or injunctive relief may be
entered enjoining the Executive from breaching this Agreement and
further agrees that any proceeding may be brought to enforce any
provision of this Agreement by the Company without it being requested
to prove actual damages as a result of the premature breach of this
Agreement.
21. Arbitration of Disputes. In the event of a dispute between the
parties hereto, with respect to any promise, term, condition, or
covenant of this Agreement, including any claim of fraud or fraud in
the inducement, or a claim for rescission, reformation, or any
equitable relief, the same shall be submitted to binding arbitration
before a sole retired judge of the Superior Court of California, who
shall be appointed by agreement of the parties or by designation by
any court of competent jurisdiction, and said arbitration shall
proceed in accordance with the then applicable rules of the Code of
Civil Procedure, Sections 1282, et seq., as may be amended from time
to time, and the then California Rules of Court. Venue for any such
arbitration shall be in San Diego County, California and the
arbitrator shall render his decision within 15 days of submission.
22. Attorneys' Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default, or misrepresentation
in connection with any of the provisions of this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding,
in addition to any other relief that may be granted.
Dr. Terry A. Straeter
November 20, 1995
Page 12 of 12
23. Captions and Paragraph Headings. Captions and paragraph headings used
herein are for convenience only and are not a part of this Agreement
and shall not be used in construing it.
24. Severability. The provisions of this Agreement are severable. If any
provision of this Agreement shall be held to be invalid or otherwise
unenforceable, in whole or in part, the remaining provisions or
enforceable parts thereof shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
25. Entire Agreement. This Agreement contains the entire agreement of the
Company and Executive and supersedes any and all other agreements,
either oral or in writing, with respect to the employment of Executive
by the Company. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, oral or
otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement,
statement, or promise not contained in this Agreement shall be valid
or binding.
26. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which
together shall constitute one and the same instrument.
Please indicate your acceptance of the terms of this Agreement by execution
below.
Very truly yours,
GDE SYSTEMS, INC.
/s/ Russell E. Painton
- ----------------------
Russell E. Painton
Vice President
ACCEPTED AND AGREED TO:
/s/ Terry A. Straeter
- --------------------------
Terry A. Straeter
EMPLOYMENT AND EXECUTIVE STOCK AGREEMENT
OF
DR. TERRY A. STRAETER
ADDITIONAL EXPENSE REIMBURSEMENTS
The following expense reimbursements shall be provided to Executive in
accordance with Paragraph 6(c) of the Agreement.
1. Reimbursement of fees for financial planning and counseling, such fees
not to exceed $5,000 for each calendar year.
2. Reimbursement of fees for tax preparation, such fees not to exceed
$5,000 for each calendar year.
3. Reimbursement of premiums for personal liability insurance in the
amount of $4,000,000.
4. Reimbursement of expenses for home security for Executive's principal
residence.
5. Reimbursement of expenses for communications equipment suitable to
Executive's position and adequate for the performance of his duties
under the Agreement.
6. Reimbursement of expenses for airline VIP memberships for Executive
and his wife.
7. Reimbursement of expenses for Platinum car rental club membership for
Executive.
8. Reimbursement of expenses for a physical examination at least once
during each 12-month period during the Term of Employment.
9. Reimbursement for personal automobile expenses in the amount of up to
$956.92 per month.
- EXHIBIT A -
Dr. Terry A. Straeter
November 20, 1995
Page 8 of 12
11. Executive's Obligations During Term of Employment. Executive agrees
that during the Term of Employment Executive shall not:
(a) without the written consent of the Company, directly or
indirectly, as a director, officer, agent, employee,
consultant, or independent contractor, or in any other
individual or representative capacity (i) invest (other than
investments in publicly-owned companies which constitute not
more than one percent (1%) of the outstanding securities of
any such company) or engage in any business or activity that
is competitive with the business of the Company or any of its
Affiliates (as hereinafter defined) (as that business is
conducted during the Term of Employment); (ii) accept
employment with or render services to a competitor of the
Company or any of its subsidiaries; or (iii) take any action
inconsistent with the fiduciary relationship of an employee to
the Executive's employer. As used herein, the term
"Affiliate" will be deemed to mean any entity which controls,
is controlled by, or is under common control with the Company
including, without limitation, Tracor, Inc., a Delaware
corporation ("Tracor") and its subsidiaries;
(b) solicit, divert, or take away or attempt to solicit, divert,
or take away any of the customers, business, or patrons of the
Company;
(c) without prior written consent by the Company, directly or
indirectly engage in the business of developing products
competitive with the business of the Company within the
geographical area served by the Company during the 12-month
period immediately preceding termination of employment nor
will the Executive engage, within the said geographical area,
in the design, development, distribution, manufacture,
assembly, or sale of a product in competition with any product
planned by the Company, the plans, designs, or specifications
of which have been revealed to the Executive; or
(d) communicate with customers or former customers of the Company
for the purpose of engaging in any transaction competing with
the business of the Company or involving products which
compete with the business of the Company nor will the
Executive actively solicit the employ of any of the Company's
employees.
In the event of a Change in Control (as hereinafter defined) of the
Company or the acquisition of the Company by another corporation and
the subsequent
Dr. Terry A. Straeter
November 20, 1995
Page 12 of 12
23. Captions and Paragraph Headings. Captions and paragraph headings used
herein are for convenience only and are not a part of this Agreement
and shall not be used in construing it.
24. Severability. The provisions of this Agreement are severable. If any
provision of this Agreement shall be held to be invalid or otherwise
unenforceable, in whole or in part, the remaining provisions or
enforceable parts thereof shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
25. Entire Agreement. This Agreement contains the entire agreement of the
Company and Executive and supersedes any and all other agreements,
either oral or in writing, with respect to the employment of Executive
by the Company. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, oral or
otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement,
statement, or promise not contained in this Agreement shall be valid
or binding.
26. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which
together shall constitute one and the same instrument.
Please indicate your acceptance of the terms of this Agreement by execution
below.
Very truly yours,
GDE SYSTEMS, INC.
Russell E. Painton
Vice President
ACCEPTED AND AGREED TO:
- --------------------------
Terry A. Straeter
Dr. Terry A. Straeter
November 20, 1995
Page 13 of 12
EMPLOYMENT AND EXECUTIVE STOCK AGREEMENT
OF
DR. TERRY A. STRAETER
ADDITIONAL EXPENSE REIMBURSEMENTS
The following expense reimbursements shall be provided to Executive in
accordance with Paragraph 6(c) of the Agreement.
1. Reimbursement of fees for financial planning and counseling, such fees
not to exceed $5,000 for each calendar year.
2. Reimbursement of fees for tax preparation, such fees not to exceed
$5,000 for each calendar year.
3. Reimbursement of premiums for personal liability insurance in the
amount of $4,000,000.
4. Reimbursement of expenses for home security for Executive's principal
residence.
5. Reimbursement of expenses for communications equipment suitable to
Executive's position and adequate for the performance of his duties
under the Agreement.
6. Reimbursement of expenses for airline VIP memberships for Executive
and his wife.
7. Reimbursement of expenses for Platinum car rental club membership for
Executive.
8. Reimbursement of expenses for a physical examination at least once
during each 12-month period during the Term of Employment.
9. Reimbursement for personal automobile expenses in the amount of up to
$956.92 per month.
- EXHIBIT A -
Exhibit 11.1
Tracor, Inc.
Computation of Income per Common and Common Equivalent Share
Years Ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C>
Primary:
Net Income $36,614 $27,863 $18,547
Adjustments, net of income taxes:
Interest expense 424 1,865 2,575
Investment income - - -
------- ------- -------
Adjusted net income $37,038 $29,728 $21,122
======= ======= =======
Weighted average common shares outstanding 19,720 13,188 10,387
Weighted average common share equivalents:
Assumed exercise of warrants 6,099 12,450 12,925
Assumed exercise of options 1,566 1,214 899
Assumed purchase of common shares for treasury (2,055) (2,684) (2,098)
------- ------- -------
Net weighted average additional shares issuable 5,610 10,980 11,726
------- ------- -------
Common and common equivalent shares 25,330 24,168 22,113
======= ======= =======
Net income per common and common equivalent share $1.46 $1.23 $ .96
===== ===== =====
Fully diluted:
Net Income $36,614 $27,863 $18,547
Adjustments, net of income taxes:
Interest expense 360 1,802 2,076
Investment income - - -
------- ------- -------
Adjusted net income $36,974 $29,665 $20,623
======= ======= =======
Weighted average common shares outstanding 19,720 13,188 10,387
Weighted average common share equivalents:
Assumed exercise of warrants 6,099 12,450 12,925
Assumed exercise of options 1,566 1,214 899
Assumed purchase of common shares for treasury (2,032) (2,684) (2,098)
------- ------- -------
Net weighted average additional shares issuable 5,633 10,980 11,726
------- ------- -------
Common and common equivalent shares 25,353 24,168 22,113
======= ======= =======
Net income per common and common equivalent share $1.46 $1.23 $ .93
===== ===== =====
</TABLE>
Exhibit 21.0
Subsidiaries of the Registrant
Tracor, Inc.
Cordant, Inc.
Cordant Federal Services Corporation
GDE Holdings, Inc.
ADR Associates, Inc.
GDE Systems, Inc.
GDE Systems Imaging, Inc.
GDESI, Inc.
HealthCom, Inc.
Helava Associates, Inc.
Rokar International, Ltd.
Tracor Aerospace, Inc.
Tracor Aerospace Electronic Systems, Inc.
Tracor Applied Sciences, Inc.
Tracor Australia PTY Limited
Tracor Flight Systems, Inc.
Tracor FSC, Inc.
Tracor Holdings, Inc.
Tracor Information Systems Company
Tracor Marine, Inc.
Vitro Corporation
Quality Systems, Inc.
Vitro Systems International Corporation
Vitro Sciences International
Vitro Services Corporation
Vitro Technical Services, Inc.
Westmark Services Company, Inc.
Exhibit 23.0
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8's No. 33-55624, 33-93186, 33-96474, and 333-17409) pertaining to
the Stock Plans for Employees of Tracor, Inc. and Subsidiaries, Tracor,
Inc. 401(k) Savings Plan and Tracor Deferred Compensation Plan of our
report dated January 27, 1997, except for Note N, as to which the date is
February 17, 1997, with respect to the consolidated financial statements
of Tracor, Inc. included in this Annual Report on Form 10-K for the year
ended December 31, 1996.
/s/ Ernst & Young LLP
Austin, Texas
March 28, 1997
