<PAGE>
As filed with the Securities and Exchange Commission on October 7, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
INTEGRATED CIRCUIT SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 3674-100 23-2000174
(State or Incorporation) (Primary Standard (I.R.S. Employer
Industrial Identification Number)
Classification Code
Number)
2435 Boulevard of the Generals, Norristown, Pennsylvania 19403
(610) 630-5300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
SEE TABLE OF ADDITIONAL REGISTRANTS
Hock E. Tan
President & Chief Executive Officer
INTEGRATED CIRCUIT SYSTEMS, INC.
2435 Boulevard of the Generals
Norristown, Pennsylvania 19403
(610) 630-5300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
With a copy to:
Robert A. Friedel, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103
(215) 981-4000
---------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement becomes effective.
---------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
<CAPTION>
Proposed
Title of Each Class Maximum Proposed Maximum
of Securities Amount to Offering Aggregate Amount of
to be Registered be Registered Price Per Note Offering Price Registration Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/2% Senior Notes due
2009.................. $98,000,000 100%(1) $98,000,000(1) $27,244
- ----------------------------------------------------------------------------------------
Guarantees of the 11
1/2% Senior Notes due
2009.................. $98,000,000 --(2) -- --
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
(1)Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee.
(2)Pursuant to Rule 457(n), no separate consideration is payable for the
guarantees.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
---------------
ADDITIONAL REGISTRANTS
<TABLE>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<CAPTION>
Address, including Zip
Primary Code, and Telephone
Exact Name of State or Other Standard IRS Number, including
Registrant Jurisdiction of Industrial Employer Area Code, of Registrants'
as Specified in Corporation or Classification Identification Principal Executive
its Charter Organization Code Number Number Offices
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ICS Technologies, Delaware 6794 51-0341792 Suite 10A
Inc. ................. 2500 West Fourth Street
Wilmington, DE 19805
(302) 656-2928
- -------------------------------------------------------------------------------------------------
ICST, Inc. ............ Pennsylvania 3674 23-2704328 2435 Boulevard of the
Generals
Valley Forge, PA 19482
(610) 630-5300
- -------------------------------------------------------------------------------------------------
MicroClock, Inc. ...... Delaware 3674 77-0340495 Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
(302) 777-0200
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- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated October 7, 1999
PROSPECTUS
[LOGO OF ICS APPEARS HERE]
OFFER TO EXCHANGE
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
($98,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR ANY AND ALL OUTSTANDING
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009 OF
Integrated Circuit Systems, Inc.
GUARANTEED BY ICS TECHNOLOGIES, INC.,
ICST, INC. AND MICROCLOCK, INC. (COLLECTIVELY, THE "GUARANTORS")
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ,
1999] (AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION DATE").
Terms of the exchange offer:
. We are offering a total of $98,000,000 of new notes, which are registered
with the Securities and Exchange Commission, to all holders of old notes.
. We will exchange all old notes that are validly tendered and not validly
withdrawn.
. You may withdraw tenders of old notes at any time before the exchange offer
expires.
. We will not receive any proceeds from the exchange offer.
. The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
. The economic terms of the new notes are substantially identical to those of
the old notes.
You Should Consider carefully the Risk Factors beginning on page 14.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Each broker-dealer that receives new notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver this prospectus in
connection with any resale of those new notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of new notes received in exchange for old
notes where such old notes were acquired by such broker-dealer as a result of
market-making activites or other trading activities. We have agreed that, for
a period of 180 days after the Expiration Date, we will make this prospectus
available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
The date of this prospectus is , 1999
<PAGE>
FORWARD-LOOKING STATEMENTS
We make forward-looking statements throughout this prospectus. Whenever you
read a statement that is not simply a statement of historical fact, such as
when we describe what we believe, expect or anticipate will occur, and other
similar statements, you must remember that our expectations may not be correct.
While we believe these expectations and projections are reasonable, such
forward-looking statements are inherently subject to risks, uncertainties and
assumptions about us, including, among other things:
. our dependence on continuous introduction of new products based on the
latest technology
. the intensely competitive semiconductor and personal computer component
industries
. the importance of frequency timing generator products to total revenue
. our dependence on the personal computer industry and third-party silicon
wafer fabricators and assemblers of semiconductors
. risks associated with international business activities and acquisitions
and integration of acquired companies or product lines
. our dependence on proprietary information and technology and on key
personnel
. our product liability exposure and the potential unavailability of
insurance
. general economic conditions, including economic conditions related to
the semiconductor and personal computer industries
We do not guarantee that the transactions and events described in this
prospectus will happen as described, or that they will happen at all. You
should read this prospectus completely and with the understanding that actual
future results may be materially different from what we expect. We will not
update these forward-looking statements, even though our situation will change
in the future.
----------------
We were incorporated under the laws of the Commonwealth of Pennsylvania on
June 8, 1976. Our principal executive office is located at 2435 Boulevard of
the Generals, Norristown, Pennsylvania, 19403, and our telephone number is
(610) 630-5300. We maintain a website on the Internet at www.icst.com. Our
website and the information contained there shall not be deemed to be part of
this prospectus.
ii
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus. It does
not contain all of the information that is important to you in order to
understand this offering or the terms of the notes. You should read carefully
the entire document, including our consolidated financial statements and their
related notes. As used in this prospectus, unless the context otherwise
requires, (i) "we," "our," "ours" and "us" refer to Integrated Circuit Systems,
Inc. and its subsidiaries, (ii) "Bain Capital" refers to Bain Capital, Inc. and
its affiliates, (iii) "Bear Stearns" refers to The Bear Stearns Companies Inc.
and one of its affiliates and (iv) "Equity Investors" refers to both Bain
Capital and Bear Stearns. All references to a "fiscal" year refer to our fiscal
year ending on the Saturday closest to June 30 of such year.
In this prospectus, we rely on and refer to information regarding the
semiconductor market and its segments and competitors from several sources,
including Dataquest, an industry research firm, market research reports,
analyst reports and other publicly available information. Although we believe
this information is reliable, we cannot guarantee the accuracy and completeness
of the information and have not independently verified it.
ICS
Integrated Circuit Systems, Inc. is a worldwide leader in the design,
development and marketing of frequency timing generators. Frequency timing
generators, or FTGs, are integrated circuits on a single chip that emit timing
signals or pulses used to sequence and synchronize electronic operations in
order to ensure that information is interpreted at the right time and speed.
Every microprocessor and most electronic devices with any degree of complexity
require FTGs to time and synchronize their various operations. FTGs are an
indispensable part of the electronic world and are often referred to as the
heartbeat of electronic systems. FTGs are used in a wide variety and growing
number of applications including: computer systems (desktops, laptops, disk
drives, printers and peripheral cards), consumer electronics (digital video
disk players, video games, flat panel displays, high-definition TV and cable
and satellite TV set-top boxes) and communication devices (hubs and T1
framers).
We have developed a reputation for engineering excellence and innovative
technology in FTG design. We pioneered the FTG market in 1988, introducing FTGs
for video and graphics applications, and since then have consistently led the
industry with several technical designs, including delivering the first FTG for
the personal computer, or PC, motherboard in 1990 and the first FTG for the
Intel Pentium microprocessor in 1993. Our ongoing focus on product innovation
has led to the introduction of approximately 300 new products into the
marketplace over the past three fiscal years. We believe we currently hold the
leadership position in the largest FTG market segment, desktop PC motherboards,
with an estimated worldwide market share of 59% in the first quarter of fiscal
year 2000, and we believe we maintain leadership positions in other non-PC
motherboard applications, including set-top boxes and disk drives.
We have developed long-standing and valuable relationships with the majority
of leading original equipment manufacturers, or OEMs, of personal computers,
peripherals and communications equipment. We work closely with these OEMs to
develop unique timing, sequencing and synchronization solutions and are highly
integrated into their product design and development. Many OEMs, including
Intel and AMD, recommend our frequency timing components on their reference
boards and marketing materials. Our customers include such companies as Intel,
IBM, Dell, Compaq, Hewlett-Packard, Toshiba, Maxtek Technology, SCI, Gateway,
Sony, Panasonic, Zenith, Seagate, Silicon Graphics, Broadcom, Siemens, Acer,
MEC Technology, Asustek Computer, Giga-Byte Technology, Seagate, Amega, Hitachi
and Hughes Network. During the year ended July 3, 1999, no single OEM customer
accounted for more than 6% of our total revenue.
For the latest three fiscal years ended July 3, 1999, we have grown our
total revenue at a compound annual rate of 15% and EBITDA, as defined in this
document, at a compound annual rate of 39%. On a pro forma basis, for the year
ended July 3, 1999, we generated revenue of $139.1 million and EBITDA of $42.0
million.
1
<PAGE>
Product Overview
We currently operate through two product segments: Clocks and Non-Clocks.
Within our Clocks business group is our FTG group, which sells Clock products
for PC, non-PC applications and our imaging pixel clocks for PC video
applications that integrate certain of our proprietary mixed-signal cores with
frequency timing generators. The Non-Clocks product group sells integrated
circuits called transceivers used primarily to receive and transmit electronic
data between PCs in networking applications and custom mixed-signal integrated
circuits that combine analog and digital technology. The overview of each of
the product groups is described in the table below.
<TABLE>
<CAPTION>
Product Group Clocks Non-Clocks
<S> <C> <C>
------------------ ------------------------
Fiscal Year 1999 Revenue $107.7 million $31.4 million
% of Total Revenue 77.5% 22.5%
Fiscal Year 1999 Gross Margin 54.5% 50.5%
</TABLE>
. Tranceivers
Products . Frequency . Custom mixed-
timing signal integrated
generators circuits
Applications . Pixel clocks . Video signal
. PC converters
motherboards (digital-analog)
. PC memory
cards . Transceiver chips
for networking PCs
. PC video,
graphics, audio
cards
. Hard drives . ATM/SONET
transceivers
. Fast ethernet
. Laser transceivers
printers
. Custom mixed-
. Set-top boxes signal chips
- Glucose
. Digital video monitors
disk (DVD)players
- Hearing aids
. Communications
(T1 framers, - Security
hubs, switches) systems
. Flat panel - Caller ID boxes
displays
. Echo cancellers
(noise reducers
for communication
products)
Industry Overview
The Clocks segment has enjoyed favorable market trends that we expect will
continue. In particular, we expect the following key trends will provide
further growth in these core product groups.
. Industry sources estimate that the worldwide market for FTGs for PC
motherboards (including desktops, laptops and replacement motherboards)
was approximately $160 million in 1998. These sources expect this market
to grow more than 20% per year over the next four years, driven by the
growth in PC unit shipments and the increasing number of FTGs per
motherboard.
. Within the non-PC FTG market, we expect the need for faster processing
and increased functionality in electronic devices to accelerate the
shift from crystal oscillators (components manufactured from quartz that
resonate at a single set frequency) to silicon-based FTGs as the primary
timing and sequencing technology. Substitution is most likely where one
FTG replaces multiple crystals within a single electronic device. As
compared to the $2.5 billion crystal oscillator market (as estimated by
an industry research firm), we believe that non-PC FTGs represented only
approximately $130 million in 1998. By 2002, we expect the non-PC FTG
market to grow to approximately $400 million.
. Within our Clocks product group, the sale of pixel clocks to the flat
panel display market is a key area of new growth. The flat panel display
market is an emerging market, representing less than 4% of PC monitors
sold worldwide today. We estimate that the sales of semiconductors (of
which pixel clocks are a component) for flat panel applications could
grow from under $50 million today to over $450 million by 2004.
2
<PAGE>
Competitive Strengths
Worldwide Leadership Position. We pioneered the market for FTGs in 1988, and
we believe that we currently hold the leadership position in FTGs within
desktop PC motherboards, with an estimated worldwide market share of 59% in the
first quarter of fiscal year 2000. In addition, we believe we have leadership
positions in several non-PC motherboard applications, including set-top boxes
and disk drives.
Defensible Technology and Design Expertise. For over twenty years, we have
developed libraries of proprietary and patented mixed-signal integrated circuit
designs. We work closely with OEMs to develop unique timing, sequencing and
synchronization solutions and are highly integrated into their product design
and development. As device attributes and system speeds continue to increase,
FTG design continues to become more complex. As a result, our combination of
analog and digital expertise is an important core competency and a significant
barrier to entry.
Superior Product Performance and Attributes. Dataquest, a leading industry
research firm, measured the products of the major FTG competitors across five
performance criteria, including jitter (error in signal shape), skew (error in
signal repetition), number of frequencies, breadth of products and EMI
(electromagnetic interference). We ranked first in 4 of the 5 categories and
second in the fifth. The combination of these performance attributes allows our
FTGs to operate faster than those of our competitors and improves overall
system performance.
Low Cost Provider. We believe that we are one of the lowest cost producers
of FTGs because of our ability to leverage research and development costs over
a broad product line, our close relationship with suppliers and our position as
one of the largest providers to the FTG market. In addition, because we use
third-party manufacturers to supply silicon wafers and assemble our products,
we do not incur the significant fixed costs of building, operating and
upgrading a wafer foundry or assembly house.
Superior Time-to-Market Capabilities. Minimizing the time new products take
to reach the market is an important purchase criterion for our customers. We
believe that our close relationships with leading third-party manufacturers,
in-house testing capabilities, leading design expertise, large platform of
existing designs, and close involvement with customer design teams allow us to
anticipate customers' needs and provide faster product solutions than other
competitors. For example, we established our own testing and quality assurance
facility in Singapore near a major third-party manufacturer in order to shorten
delivery times to customer assembly facilities.
Broad and Diversified Product Line. We have a broad product line consisting
of unique, customized solutions for a wide variety of application and customer
segments, including consumer electronics, communications systems, medical
devices and computer systems. Our ability to provide OEM customers with FTG
technology and design expertise across their entire line (e.g., desktop PCs,
mobile PCs, servers and workstations) is a significant competitive advantage.
In addition, our wide breadth of products helps to diversify our revenue base
so that we are not dependent on the success of any single product. In fact, for
the year ended July 3, 1999, the average product represented less than $300,000
of revenue.
Blue Chip Customer Base. We have long-standing and valuable relationships
with most of the major OEMs of personal computers, peripherals and
communications equipment. We are closely integrated with the design teams of
our system manufacturer customers and often are afforded the opportunity to
solve their timing requirements early in their development cycle. The risk and
cost to OEMs of certifying new vendors, our worldwide leadership position and
continuing product innovation all provide significant competitive advantages
and switching barriers versus smaller competitors.
3
<PAGE>
Experienced Management Team with Significant Equity Ownership. We are led by
an exceptional team of eleven senior managers, who average nearly eight years
of experience with us and collectively possess over 200 years of experience in
the semiconductor industry. Over the last three fiscal years, our revenue has
increased at a compound annual rate of 15% and our EBITDA has increased at a
compound annual rate of 39%. As of July 3, 1999, the senior management team,
which includes a former chairman, and many other employees owns new common
stock and options, together representing up to approximately 33% of our common
stock on a fully-diluted basis. We intend for this investment to create
meaningful incentives for continuing strong financial performance.
Business Strategy
Our business strategy is to focus on our core FTG business and provide
customized and increasingly complex FTG products to our diversified customer
base. We have developed a set of strong design systems and business processes
that have enabled us to achieve a leading market position and a strong track
record of profitable growth. We intend to continue this business strategy and
strengthen our competitive position through the following initiatives:
Capitalize on Strong Industry Dynamics. We believe that our existing key FTG
markets will continue to experience strong growth. Industry sources expect the
PC motherboard market for FTGs to grow more than 20% per year over the next
four years, driven by strong PC unit shipment growth and the increasing number
of FTGs per motherboard. With the leading worldwide market share position
estimated at 59% in desktop PC motherboard FTGs, we are well positioned to
capitalize on the strong growth trends expected in this market. In addition, we
view certain segments of the $2.5 billion crystal oscillator market as future
growth opportunities. As electronic systems require higher processing speeds,
digital capabilities and multiple frequencies to operate efficiently, we expect
that demand for FTGs with faster speeds and multiple frequency timing
capabilities will accelerate and replace the use of crystal oscillators.
Remain Design Leader in Core FTG Technology. We believe that our strong
market share is a function of our ability to continually produce new designs
within short time-to-market requirements. Over the last three years, we have
introduced more than 300 new products, many of which provide timing solutions
for new generations of PCs, multimedia systems, digital set-top boxes and
numerous other electronic devices. We possess an extensive library of designs
as well as a number of key process patents that enable us to lead the industry
in product development. In order to maintain our position as a worldwide leader
in the FTG market, we plan to continue to make significant investments in
research and development.
Application of Core FTG Technology into Other Growth Markets. We believe
that our core FTG technology can be leveraged into new applications where our
FTG expertise provides differentiated technical capabilities. For example, we
have developed specialized FTG-related chips, called pixel clocks, for flat
panel displays that leverage our core FTG technology by combining the timing
function and video signal conversion function onto a single chip. We estimate
that sales of semiconductors to the flat panel display market will grow from
under $50 million today to over $450 million by 2004. We believe we are the
market leader in the design of FTG-related products for this market and intend
to aggressively pursue this high growth application segment.
Cash Deposit
We maintain a cash deposit with Chartered Semiconductor Manufacturing PTE
Ltd. ("CSM"), a wafer fabrication operation owned by the Singapore government.
We first made this deposit in November 1995 to procure increased wafer
fabrication from CSM. At the time, suppliers commonly used cash deposits when
establishing customer relationships. As of July 3, 1999, CSM held $15.3 million
of this deposit. By contractual agreement, CSM is required to return $11.3
million to us by December 31, 2000 and $4.0 million by June 30,
4
<PAGE>
2002, regardless of how many wafers we order. This schedule can be accelerated,
however, if we exceed certain minimum order levels. We believe that we are
likely to exceed these minimum order levels, and, therefore, accelerated
returns are likely. As of July 3, 1999, CSM has returned, in total,
approximately $6.7 million to us prior to scheduled returns.
The Equity Investors
Bain Capital. Bain Capital is one of the most experienced and successful
private equity investors in the United States. Since its founding in 1984, Bain
Capital has invested in more than 120 companies and currently manages more than
$4 billion of capital. Bain Capital's investment strategy is to acquire
businesses in partnership with exceptional management teams and improve the
long-term value of those businesses. The firm typically seeks to identify
companies with strong strategic positions and significant opportunities for
growth. The principals of Bain Capital have extensive experience in several
industry sectors, including the technology arena, and have made prior
investments in companies such as Details, Dynamic Circuits, Stream
International, Aspect Development, The Learning Company and DoubleClick.
Bear Stearns Merchant Banking. Bear Stearns Merchant Banking was formed in
April 1997 to capitalize on the extensive global franchise of Bear Stearns by
investing in private equity transactions. Bear Stearns Merchant Banking has
committed approximately $135 million of equity in eleven separate transactions,
with individual commitments of up to $60 million. Bear Stearns Merchant Banking
is a division of Bear, Stearns & Co. Inc.
5
<PAGE>
The Recapitalization
On May 11, 1999, we merged with ICS Merger Corp., a transitory merger
company formed and wholly owned by the Equity Investors. The following events,
which we collectively refer to as our recapitalization, provided the
consideration for the redemption and purchase of our outstanding shares of
common stock and vested options, together with the payment of fees and
expenses, totaling $294.4 million that took place on May 11, 1999:
. an equity investment of $30.6 million made by the Equity Investors and
certain other investors in ICS Merger Corp;
. direct purchases of our common stock by Bain Capital from certain
existing shareholders for $9.6 million;
. a rollover and new equity investment by certain members of our senior
management team of $9.8 million, consisting primarily of:
. the exchange of certain existing common stock ($6.6 million) into our
new common stock after the merger;
. the conversion of certain existing stock options into new stock
options after the merger ($2.2 million) and deferred compensation
agreements ($0.5 million); and
. purchases of new common stock ($0.5 million) in exchange for
promissory notes;
. our borrowing of $70.0 million in term loans and $3.9 million under a
$25.0 million revolving line of credit;
. the offering of the old notes described in this prospectus; and
. the use of cash on-hand of $70.5 million.
The merger was approved by our previous board of directors and the board of
directors of ICS Merger Corp., and was also approved by our previous
shareholders at a meeting held on May 10, 1999.
Since the recapitalization, our common stock is no longer traded on the
Nasdaq National Market or any exchange, price quotations are no longer
available and the registration of our common stock under the Securities
Exchange Act of 1934 has been terminated. Until our registration statement
filed in connection with this exchange offer (or a shelf registration, if
applicable) for the old notes has been declared effective, we will no longer
file periodic reports with the SEC.
Our corporate structure after the recapitalization is as follows:
[CHART ILLUSTRATING THE CORPORATE STRUCTURE OF ICS FOLLOWING THE
RECAPITALIZATION]
* Not a guarantor of the Notes
6
<PAGE>
Sources and Uses
The following table sets forth the sources and uses of funds at the closing
of the recapitalization.
<TABLE>
<CAPTION>
Sources of Funds
- ----------------
(in millions)
<S> <C>
Senior Credit Facility:
Revolving Credit Facility (1).................................. $ 3.9
Term Loans (2)................................................. 70.0
Notes............................................................ 100.0
Existing Cash.................................................... 70.5
New Equity Investment (3)........................................ 30.6
Purchases from Existing Shareholders (4)......................... 9.6
Rollover and New Equity of Management (5)........................ 9.8
------
Total........................................................ $294.4
======
<CAPTION>
Uses of Funds
- -------------
(in millions)
<S> <C>
Redemption and Purchase of Common Stock and Vested Options (6)... $256.0
Purchases from Existing Shareholders (4)......................... 9.6
Rollover and New Equity of Management (5)........................ 9.8
Fees and Expenses (7)............................................ 19.0
------
Total........................................................ $294.4
======
</TABLE>
- --------
(1) $3.9 million was borrowed at closing under the $25.0 million revolving
credit facility. See "Description of Senior Credit Facility."
(2) Includes a Term A loan facility of $30.0 million and a Term B loan facility
of $40.0 million. See "Description of Senior Credit Facility."
(3) Investment of funds by the Equity Investors and certain other investors in
ICS Merger Corp.
(4) Direct purchases of our new common stock by Bain Capital from certain
existing shareholders immediately following consummation of the merger.
(5) Rollover and new equity investment by certain members of our senior
management team, consisting primarily of the exchange of certain existing
common stock ($6.6 million) into our new common stock after the merger, the
conversion of certain existing stock options into new stock options after
the merger ($2.2 million) and deferred compensation agreements ($0.5
million,) and purchases of new common stock ($0.5 million) in exchange for
promissory notes.
(6) Cash redemption of our existing common stock and vested stock options,
excluding the rollover equity of certain members of our management, and
cash purchase of shares of our new common stock by Bain Capital from
certain existing shareholders immediately following consummation of the
merger.
(7) Includes commitment, placement, financial advisory, legal, accounting and
other professional fees. See "Certain Relationships and Related
Transactions."
7
<PAGE>
The Initial Offering
On May 11, 1999, we privately placed $100 million of our old 11 1/2% Senior
Subordinated Notes due 2009. On September 10, 1999, we repurchased $2 million
of the old notes in a privately negotiated transaction. We entered into a
registration rights agreement with the initial purchasers in that private
offering in which we agreed, among other things, to file a registration
statement with the SEC, use our best efforts to complete this exchange offer
within 240 days after issuing the old notes and, in some circumstances, file a
shelf registration statement. We must pay additional interest to the holders of
the old notes if we do not meet these deadlines or if certain registration
defaults occur.
The Exchange Offer
Securities Offered............ $98,000,000 principal amount of 11 1/2% Senior
Subordinated Notes due 2009.
The Exchange Offer............ We are offering to exchange $98,000,000
principal amount of our new notes which have
been registered under the Securities Act of
1933 for $98,000,000 of our outstanding 11 1/2%
Senior Subordinated Notes due 2009, which were
issued in May 1999.
We will accept the old notes in exchange for
the new notes in order to increase the
liquidity of both series of our outstanding
notes. The new notes are substantially
identical to the old notes, except that certain
transfer restrictions and registration rights
relating to the old notes do not apply to the
new notes. You may tender your old notes by
following the procedures described in this
prospectus under the heading "The Exchange
Offer."
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on . , 1999, unless we
extend it.
Withdrawal Rights............. You may withdraw your tender of your notes at
any time prior to 5:00 p.m., New York City
time, on . , the expiration date of the
exchange offer.
Conditions to the Exchange The exchange offer is subject to customary
Offer......................... conditions, which we may waive. Please read the
"Exchange Offer--Conditions" section of this
prospectus for more information regarding
conditions to the exchange offer.
Procedures for Tendering Your
Old Notes.....................
If you are a holder of old notes who wishes to
accept the exchange offer, you must either:
(a) complete, sign and date the accompanying
Letter of Transmittal, or a facsimile
thereof and mail or otherwise deliver such
documentation, together with your old
notes, to the exchange agent at the address
set forth under "Exchange Offer--Exchange
Agent;" or
(b) arrange for The Depository Trust Company to
transmit certain required information to
the exchange agent for this exchange offer
in connection with a book-entry transfer.
8
<PAGE>
By tendering your notes in this manner, you
will be representing, among other things, that:
. the new notes you acquire pursuant to the
exchange offer are being acquired in the
ordinary course of your business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate
in the distribution of the new notes issued
to you in the exchange offer; and
. you are not an "affiliate" of our company.
Federal Income Tax Your exchange of old notes for new notes
Consequences.................. pursuant to the exchange offer will not result
in any gain or loss to you for federal income
tax purposes.
Consequences of Failure to Old notes that are not tendered or that are
Exchange...................... tendered, but not accepted, will be subject to
the existing transfer restrictions on such
notes after the exchange offer. We will have no
further obligation to register the old notes.
If you do not participate in the exchange
offer, the liquidity of your notes could be
adversely affected.
Procedures for Beneficial If you are the beneficial owner of old notes
Owners........................ registered in the name of a broker, dealer or
other nominee and you wish to tender your
notes, you should contact such person in whose
name your notes are registered and promptly
instruct such person to tender on your behalf.
Guaranty Delivery If you wish to tender your old notes and time
Procedures.................... will not permit your required documents to
reach the Chase Manhattan Trust Company by the
expiration date, or the procedure for book-
entry transfer cannot be completed on time, or
the certificate for your notes cannot be
delivered on time, you may tender your notes
pursuant to the guaranteed delivery procedures.
Acceptance of Old Notes;
Delivery of New Notes.........
Subject to certain conditions, we will accept
old notes which are properly tendered in the
exchange offer and not withdrawn, prior to 5:00
p.m., New York City time, on the expiration
date of the exchange offer. The new notes will
be delivered as promptly as practicable
following the expiration date.
Use of Proceeds............... We will receive no proceeds from the exchange
offer.
Exchange Agent................ Chase Manhattan Trust Company is the exchange
agent for the exchange offer.
9
<PAGE>
Summary of the New Notes
Issuer........................ Integrated Circuit Systems, Inc.
Securities Offered............ $98,000,000 principal amount of 11 1/2% Senior
Subordinated Notes Due 2009.
Maturity...................... May 15, 2009.
Interest Payment Dates........ We will pay interest on the notes semi-annually
on May 15 and November 15 of each year,
beginning November 15, 1999.
Optional Redemption........... Except in the case of certain equity offerings
by us and certain kinds of changes of control,
we cannot choose to redeem the notes until May
15, 2004. At any time after that date (which
may be more than once), we can choose to redeem
some or all of the notes at certain specified
prices plus accrued interest.
At any time (which may be more than once)
before May 15, 2002, we can choose to redeem up
to 35% of the outstanding notes with money that
we raise in one or more equity offerings, as
long as we pay 111.50% of the principal amount
of the notes plus accrued interest and at least
$65 million of the notes originally issued
remain outstanding afterwards.
In addition, before May 15, 2004, if we
experience specific kinds of changes of
control, we may also redeem all, but not part,
of the notes at the redemption prices listed in
"Description of Notes" under the heading
"Optional Redemption."
Mandatory Offer to If we sell certain assets or experience
Repurchase.................... specific kinds of changes of control, we must
offer to repurchase the notes at the prices
listed in "Description of Notes" under the
heading "Repurchase at the Option of Holders."
Guarantees.................... All of our domestic subsidiaries will guarantee
the notes with unconditional guarantees of
payment that will rank below their senior
indebtedness, but will rank equal to their
other senior subordinated indebtedness in right
of payment.
Ranking....................... The notes will be our senior subordinated
unsecured obligations. They will rank senior in
right of payment to any of our future
subordinated indebtedness, equal in right of
payment with any of our future senior
subordinated indebtedness, and subordinated in
right of payment to any of our existing and
future senior indebtedness. The notes will be
effectively subordinated to indebtedness and
other liabilities of our subsidiaries which are
not guarantors. As of July 3, 1999, we had
approximately $70.0 million of senior
indebtedness, our subsidiaries which are
guarantors had $70.0 million of senior
indebtedness, and our subsidiary, which is not
a guarantor, had approximately $1.9 million of
indebtedness (excluding intercompany
indebtedness).
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<PAGE>
Covenants..................... The indenture contains covenants that limit
what we (and most or all of our subsidiaries)
may do. The indenture will limit our ability
to:
. incur additional indebtedness;
. pay dividends and make distributions;
. make certain investments;
. permit payment or dividend restrictions on
certain of our subsidiaries;
. transfer and sell assets;
. create certain liens;
. engage in certain transactions with
affiliates;
. issue stock of subsidiaries; and
. consolidate or merge or sell all or
substantially all of our assets and the
assets of our Restricted Subsidiaries.
These restrictions and prohibitions are subject
to a number of important qualifications and
exceptions.
Use of Proceeds............... The notes are new securities, and there is
currently no established market for them. We do
not intend to list the notes on any securities
exchange.
Transfer Restrictions......... We will not receive cash proceeds from the
issuance of the notes.
For more information about the notes, see the "Description of Notes" section
of this prospectus.
Risk Factors
You should carefully consider the information set forth under "Risk Factors"
as well as other information and data included in this prospectus before
tendering your old notes in exchange for new notes.
11
<PAGE>
Summary Historical and Unaudited Pro Forma Consolidated Financial Data
The following table sets forth our summary historical and unaudited pro
forma consolidated financial data as of the dates and for the periods
indicated, as derived from the Selected Historical Consolidated Financial Data
and Unaudited Pro Forma Consolidated Statement of Operations included elsewhere
in this prospectus. The summary historical consolidated financial data set
forth below should be read in conjunction with "Unaudited Pro Forma
Consolidated Statement of Operations," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of the Financial
Condition and Results of Operations," and the Consolidated Financial Statements
and the notes accompanying them included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended(a)
----------------------------------------
Pro Forma
July 3, July 3, June 27, June 28,
1999 1999 1998 1997
--------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue............................. $139,063 $ 139,063 $160,634 $104,359
Cost and expenses:
Cost of sales..................... 64,496 64,496 88,859 59,137
Research and development.......... 16,808 21,316 19,797 13,521
Selling, general and
administrative................... 20,188 19,794 19,678 15,654
Special charges (b)............... -- 15,051 -- 11,196
-------- --------- -------- --------
Income from operations.............. 37,571 18,406 32,300 4,851
Interest expense.................... 18,852 2,955 64 63
Interest income and other expense
(income), net...................... 275 (12,912) (1,984) 5,984
-------- --------- -------- --------
Income (loss) from continuing
operations before income taxes..... 18,444 28,363 34,220 (1,196)
Income tax expense.................. 5,646 5,320 12,845 6,314
-------- --------- -------- --------
Income from continuing operations... 12,798 23,043 21,375 (7,510)
Loss from discontinued operations
(c)................................ -- -- -- (909)
-------- --------- -------- --------
Net income (loss)................... $ 12,798 $ 23,043 $ 21,375 $ (8,419)
======== ========= ======== ========
Other Financial Data:
EBITDA (d).......................... $ 41,989 $ 38,422 $ 36,879 $ 19,791
Gross profit........................ 74,567 74,567 71,775 45,222
Gross margin........................ 53.6% 53.6% 44.7% 43.3%
Depreciation and amortization....... $ 4,418 $ 4,965 $ 4,579 $ 3,744
Capital expenditures................ 7,694 7,694 8,139 3,358
Ratio of earnings to fixed charges
(e)................................ 1.9x 9.0x 105.7x --
Balance Sheet Data (at end of
period):
Cash and cash equivalents........... $ 9,285 $ 25,340 $ 18,425
Total assets........................ 87,795 108,009 90,622
Total debt.......................... 170,030 1,523 1,709
Total shareholders' equity
(deficit).......................... (106,912) 89,768 70,147
</TABLE>
See Notes to Summary Historical Consolidated Financial Data
12
<PAGE>
Notes to Summary Historical Consolidated Financial Data
(Dollars in thousands)
(a) Our fiscal year is based upon a 52/53 week operating cycle that ends on the
Saturday nearest June 30. Fiscal year 1999 represents a 53-week operating
cycle; all other periods presented represent a 52-week operating cycle.
(b) Non-recurring special charges consist of: (i) for fiscal year 1999, $15,051
related to the accelerated vesting, cash-out and conversion of employee
stock options that occurred upon the consummation of the recapitalization
and (ii) for fiscal year 1997, $11,196 for the write-off of in-process
research and development costs associated with our acquisition of
MicroClock, Inc., a designer and marketer of FTGs for non-PC applications.
(c) In fiscal year 1995, we acquired a 51% majority interest in ARK Logic,
Inc., a developer of complex graphic accelerator chips. Subsequently, in
fiscal 1997, we disposed of our majority interest in ARK Logic, Inc. The
disposition of ARK Logic, Inc. was accounted for as a discontinued
operation, and all periods prior to the disposition have been restated to
reflect this presentation.
(d) EBITDA represents earnings from continuing operations before interest,
taxes, depreciation, amortization, other income and expense and special
charges. EBITDA is presented because we believe that it is frequently used
by security analysts in the evaluation of companies. However, EBITDA should
not be considered as an alternative to cash flow from operating activities
as a measure of liquidity, as an alternative to net income as an indicator
of our operating performance, or as an alternative to any other measure of
performance in accordance with generally accepted accounting principles.
The following table sets forth a reconciliation of historical EBITDA to Pro
Forma to EBITDA (see notes to "Unaudited Pro Forma Consolidated Statements
of Operations" for additional details):
<TABLE>
<CAPTION>
Fiscal Year Ended
July 3,
1999
-----------------
<S> <C>
Historical EBITDA........................................ $38,422
Sale of Data Communications product group................ 4,124
Sale and leaseback of headquarters....................... (576)
Board of directors compensation.......................... 116
Costs directly related to the recapitalization and proxy
contest................................................. 903
Shareholder advisory fee................................. (1,000)
-------
Pro Forma EBITDA......................................... $41,989
=======
</TABLE>
(e) For purposes of calculating the ratio of earnings to fixed charges,
earnings represents income (loss) from continuing operations before income
taxes, plus fixed charges. Fixed charges consists of interest expense
including amortization of financing costs and the portion of operating
rental expense which we believe is representative of the interest component
of rent expense. Earnings were insufficient to cover fixed charges by
$1,350 fiscal year ended June 28, 1997.
13
<PAGE>
RISK FACTORS
You should carefully consider the information below in addition to all other
information provided to you in this prospectus in deciding whether to exchange
your old notes for the new notes. There may be additional risks and
uncertainties not presently known to us or that we currently do not believe are
material that may also impair our business operations. Except for the first
risk factor described below, the risk factors generally apply to the old notes
as well as to the new notes.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of the notes could decline and you may lose all or
part of your investment.
Substantial Leverage--Our substantial indebtedness could adversely affect
our financial health and prevent us from fulfilling our obligations under these
notes.
After this offering, we will continue to have a significant amount of
indebtedness. On July 3, 1999, our total debt was $170.0 million, and our total
shareholders' deficit was $106.9 million.
Our substantial indebtedness could have important consequences to you. For
example, it could:
. make it more difficult for us to satisfy our obligations with respect to
the notes;
. increase our vulnerability to general adverse economic and industry
conditions;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
. place us at a competitive disadvantage compared to our competitors that
have less debt; and
. limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional
funds. Furthermore, failing to comply with those covenants could result
in an event of default which, if not cured or waived, could have a
material adverse effect on us.
Possible Additional Borrowings--Despite current indebtedness levels, we may
still be able to incur more debt under the senior credit facility and the
indenture governing the notes. This could further exacerbate the risks
described above.
We may be able to incur additional indebtedness in the future. The terms of
the senior credit facility and the indenture governing the notes do not fully
prohibit us from doing so. Since we have no borrowings outstanding under our
$25.0 million revolving credit facility as of July 3, 1999, our senior credit
facility will permit additional borrowings of up to $25.0 million to fund
operations and to finance the cost of future expansion. All of the borrowings
under our senior credit facility are secured by substantially all of the assets
of our domestic subsidiaries. The addition of new debt to our current debt
levels could intensify the leverage-related risks that we now face.
Effective Subordination--Although your notes are referred to as "Senior
Subordinated Notes," they will be effectively subordinated to our senior debt,
secured debt and the debt of any future non-guarantor subsidiaries.
The notes and the subsidiary guarantees are unsecured and therefore are
effectively subordinated to any of our or the subsidiary guarantors' senior
debt (including debt under the senior credit facility but not trade payables)
and any secured debt we or the subsidiary guarantors may incur to the extent of
the value of the assets securing
14
<PAGE>
such debt. As a result of the subordination provisions of the notes and the
subsidiary guarantees, in the event of a liquidation or insolvency, our and the
subsidiary guarantors' assets will be available to pay obligations on the notes
only after all of our and the subsidiary guarantors' senior debt has been paid
in full, and there may be insufficient assets remaining to pay amounts due on
any or all of the notes then outstanding. Claims in respect of the notes will
be effectively subordinated to all liabilities, including trade payables of any
of our subsidiaries that are not subsidiary guarantors. At July 3, 1999, the
aggregate outstanding principal amount of all of our senior indebtedness was
approximately $70.0 million. Our subsidiaries which are guarantors had
approximately $185.4 million of indebtedness, including $70.0 million of
outstanding liabilities as guarantors under the senior credit facility. Our
subsidiaries which are not guarantors had approximately $1.9 million of
indebtedness and other liabilities (excluding intercompany indebtedness).
Certain events of default under our senior indebtedness would prohibit us from
making any payments on the notes.
Ability to Service Debt--We will require a significant amount of cash to
service our indebtedness. Our ability to generate cash depends on many factors
beyond our control.
Our ability to make payments on and to refinance our indebtedness, including
the notes, and to fund planned capital expenditures and research and
development efforts will depend on our ability to generate cash in the future.
This, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
Our cash flow, and consequently our ability to service our debt, including
our obligations under the indenture governing the notes, is dependent upon the
cash flows of our subsidiaries and the payment of funds by our subsidiaries to
us in the form of loans, distributions or otherwise. Our subsidiaries are
separate legal entities that have no obligation to pay any amounts due pursuant
to the notes other than through the subsidiary guarantees or to make any funds
available for that purpose, whether by dividends, interest, loans, advances or
other payments. In addition, their ability to pay dividends and make loans,
advances and other payments to us depends on any statutory or contractual
restrictions, which may include requirements to maintain minimum levels of
working capital and other assets. Accordingly, repayment of the notes may
depend upon our ability to effect an equity offering or to refinance the notes.
We cannot assure you that our business will generate sufficient cash flow
from operations, that our currently anticipated growth in revenue and cash flow
will be realized on schedule or that future borrowings will be available to us
under our senior credit facility in an amount sufficient to enable us to pay
our indebtedness, including the notes, on or before maturity. We cannot assure
you that we will be able to refinance any of our indebtedness, including our
senior credit facility and the notes, on commercially reasonable terms or at
all.
Restrictive Covenants--The senior credit facility and the indenture
governing the notes will contain various covenants which limit our management's
discretion in the operations of our business.
The senior credit facility and the indenture governing the notes contain
various provisions that limit our management's discretion by restricting our
ability to:
. incur additional debt;
. pay dividends and make other distributions;
. prepay subordinated debt;
. make investments and other restricted payments;
. enter into sale and leaseback transactions;
. create liens;
. sell assets; and
15
<PAGE>
. enter into certain transactions with affiliates.
In addition, the senior credit facility requires us to meet certain
financial ratios.
If we fail to comply with the restrictions of the senior credit facility or
the indenture governing the notes or any other subsequent financing agreements,
a default may occur. This default may allow the creditors, if the agreements so
provide, to accelerate the related indebtedness as well as any other
indebtedness to which a cross-acceleration or cross-default provision applies.
In addition, the lenders may be able to terminate any commitments they had made
to supply us with further funds.
Change of Control--We may not have the ability to raise the funds necessary
to finance the Change of Control offer required by the indenture.
If we undergo a Change of Control (as defined), we may need to refinance
large amounts of our debt, including the debt under the notes and under the
senior credit facility. If a Change of Control occurs, we must offer to
repurchase the notes for a price equal to 101% of the notes' principal amount,
plus any interest which has accrued and remains unpaid as of the repurchase
date. We would fund any repurchase obligation with our available cash, cash
generated from other sources such as borrowings, sales of equity, or funds
provided by a new controlling person. However, we cannot assure you that there
will be sufficient funds available for any required repurchases of the notes
when a Change of Control occurs. In addition, the senior credit facility will
prohibit us from repurchasing the notes after a Change of Control until we
first repay our indebtedness under the senior credit facility in full. If we
fail to repurchase the notes in that circumstance, we will be in default under
both the notes and the senior credit facility. Any future indebtedness which we
incur may also contain restrictions on repayment which come into effect upon a
Change of Control. If a Change of Control occurs, we cannot assure you that we
will have sufficient funds to satisfy all of our indebtedness. These repurchase
requirements may also delay or make it harder for others to obtain control of
us. In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a Change of Control under the indenture.
Fraudulent Conveyance Matters--Federal and state laws allow courts, under
specific circumstances, to void debts and require creditors to return payments
received from debtors.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, the notes and the subsidiary guarantees could be
voided, or claims in respect of the notes or the subsidiary guarantees could be
subordinated to all of our other debts or the debts of any subsidiary guarantor
if, among other things, we or any subsidiary guarantor, at the time it incurred
the indebtedness evidenced by the notes or its guarantee:
. received less than reasonably equivalent value or fair consideration for
the incurrence of such indebtedness;
. was insolvent or rendered insolvent by reason of such incurrence;
. was engaged in a business or transaction for which we or any guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by us or such subsidiary guarantor pursuant to the
notes or any subsidiary guarantee could be voided and required to be returned
to us or such subsidiary guarantor, or to a fund for the benefit of our
creditors or the creditors of any subsidiary guarantor.
16
<PAGE>
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine
whether a fraudulent transfer has occurred. Generally, however, we or a
subsidiary guarantor would be considered insolvent if:
. the sum of our or such subsidiary guarantor's debts, including
contingent liabilities, were greater than the fair saleable value of all
of our or such subsidiary's assets;
. the present fair saleable value of our or any subsidiary guarantor's
assets were less than the amount that would be required to pay our or
any subsidiary guarantor's [probable] liability on existing debts,
including contingent liabilities, as they become absolute and mature; or
. we or any subsidiary guarantor could not pay debts as they become due.
Based on historical financial information, recent operating history and
other factors, neither ICS nor any of its subsidiary guarantors believes that,
after giving effect to the indebtedness incurred in connection with the
recapitalization, it will be insolvent, will have unreasonably small capital
for the business in which it is engaged or will have incurred debts beyond its
ability to pay such debts as they mature. There can be no assurance, however,
as to what standard a court would apply in making such determinations or that
a court would agree with our or our subsidiary guarantors' conclusion in this
regard. In addition, we will receive a solvency opinion from an independent
third party that the redemption of our common stock and vested options upon
consummation of this offering will not render us insolvent, leave us with
inadequate or unreasonably small capital or result in the incurrence of debt
beyond our ability to repay such debt as it matures. There can be no
assurance, however, that a court considering such issues would agree with such
conclusions or opinions.
We Depend on Continuous Introduction of New Products Based on the Latest
Technology--Our inability to create new products could adversely affect our
business.
The markets for our products are characterized by rapidly changing
technology, evolving industry standards and frequent new product
introductions. Product life cycles are continually becoming shorter, which may
cause the gross margins of semiconductor products to decline as the next
generation of competitive products are introduced. Therefore, our future
success is highly dependent upon our ability to continually develop new
products using the latest and most cost-effective technologies, introduce them
in commercial quantities to the marketplace ahead of the competition and have
them selected for inclusion in products of leading systems manufacturers. We
cannot assure you that we will be able to regularly develop and introduce such
new products on a timely basis or that our products, including recently
introduced products, will be selected by systems manufacturers for
incorporation into their products. Our failure to develop such new products,
to have our products available in commercial quantities ahead of competitive
products or to have them selected for inclusion in products of systems
manufacturers would have a material adverse effect on our results of
operations and financial condition.
Competition--Our business is very competitive and increased competition
could adversely affect us.
The semiconductor and PC component industries are intensely competitive.
Our ability to compete depends heavily upon elements outside our control, such
as general economic conditions affecting the semiconductor and PC industries
and the introduction of new products and technologies by competitors. Many of
our competitors and potential competitors have significant financial,
technical, manufacturing and marketing resources. These competitors include
major multinational corporations possessing worldwide wafer fabrication and
integrated circuit production facilities and diverse, established product
lines. Competitors also include emerging companies attempting to obtain a
share of the existing market for our current and proposed products. To the
extent that our products achieve market acceptance, competitors typically seek
to offer competitive products or embark on pricing strategies which, if
successful, could have a material adverse effect on our results of operation
and financial condition.
17
<PAGE>
We Depend on the PC Industry--Our business could be adversely affected by
decline in the PC market.
A substantial portion of the sales of our products depends largely on sales
of PCs and peripherals for PCs. The PC industry is subject to price
competition, rapid technological change, evolving standards, short product life
cycles and continuous erosion of average selling prices. Should the PC market
decline or experience slower growth, then a decline in the order rate for our
products could occur. A downturn in the PC market could also affect the
financial health of some of our customers, which could affect our ability to
collect outstanding accounts receivable from such customers.
We Depend on Outside Wafer Foundries and Assemblers--Our inability to obtain
wafers and assemblers could seriously affect our operations.
We currently depend entirely upon third-party suppliers for the manufacture
of the silicon wafers from which our finished integrated circuits are
manufactured and for the assembly of finished integrated circuits from silicon
wafers.
We cannot assure you that we will be able to obtain adequate quantities of
processed silicon wafers within a reasonable period of time or at commercially
reasonable rates. In the past, the semiconductor industry has experienced
disruptions from time to time in the supply of processed silicon wafers due to
quality or yield problems or capacity limitations. Virtually all of our wafers
are manufactured by three outside foundries. If one or more of these foundries
is unable or unwilling to produce adequate supplies of processed wafers on a
timely basis, it could cause significant delays and expense in locating a new
foundry and redesigning circuits to be compatible with the new manufacturer's
processes and, consequently, could have a material adverse effect on our
results of operations and financial condition.
We also rely entirely upon third parties for the assembly of our finished
integrated circuits from processed silicon wafers. We currently rely on four
assemblers, two of which produce most of our finished integrated circuits.
While we believe that there is typically a greater availability of assemblers
than silicon wafer foundries, we could nonetheless incur significant delays and
expense if one or more of the assemblers upon which we currently rely are
unable or unwilling to assemble finished integrated circuits from silicon
wafers.
Two of the foundries that manufacture the silicon wafers from which our
integrated circuits are manufactured and all of the third parties used by us to
assemble our finished integrated circuits are located in the Pacific Rim. We
have typically relied upon production and assembly in this geographic area
because of the abundance of third parties performing these services as well as
the geographic proximity to manufacturers of PCs and other equipment in that
region that use our products. The impact of the recent financial crisis in the
Pacific Rim countries on our operations in this area has been minimal. Several
countries in this region have experienced currency devaluation and/or
difficulties in financing short-term obligations. It is possible, among other
things, that one or more of our key suppliers could face insolvency or other
financial risks due to the economic crisis in that region which would require
them to cease operations. This could cause a delay in the production and
delivery of commercial quantities of our products, which in turn could
materially adversely affect our revenue and financial condition.
One of the foundries we use is located in Taiwan, which recently suffered a
devastating earthquake. While this foundry's manufacturing facility was not
damaged in the earthquake, damage incurred in the earthquake by other
fabricators may result in an increased demand for wafers upon our suppliers
inside and outside Taiwan, including our Taiwan foundry. This increased demand
could affect our ability to obtain an adequate supply of processed wafers and,
consequently, could have a material adverse effect on our results of operations
and financial condition. An added concern with respect to our suppliers'
ability to meet our demand lies in the potential inability of our fabricators
to obtain products from their Taiwan suppliers, who may have experienced damage
as a result of the earthquake or whose businesses may be interrupted as a
result of the earthquake, such as through power outages. In addition, the
inability of our customers to obtain other components for their
18
<PAGE>
products from suppliers located in Taiwan which were damaged by the earthquake
or suffer business interruption may result in a decrease in production of our
customers' products. Such a decrease in production may, in turn, result in a
decreased demand for our products.
International Business Activities--Our business could be adversely affected
by changes in political and economic conditions abroad.
For the fiscal years 1999, 1998 and 1997, we generated approximately 68.8%,
58.8% and 60.3% of our net revenue, respectively, from international markets.
These sales were generated primarily from customers in the Pacific Rim region
and included sales to foreign corporations, as well as to foreign subsidiaries
of U.S. corporations. We estimate that in fiscal year 1999, approximately one-
half of our sales in international markets were to foreign subsidiaries of U.S.
corporations, with the bulk of them being in Taiwan. In addition, certain of
our international sales are to customers in the Pacific Rim who in turn sell
some of their products to North America, Europe and other non-Asian markets.
In addition, two of our wafer suppliers and all of our assemblers are
located in the Pacific Rim. There can be no assurance that the effect of an
economic crisis on our suppliers will not impact our wafer supply or assembly
operations, or that the effect on our customers in that region will not
adversely affect both the demand for our products and the collectivity of
receivables.
Our international business activities in general are subject to a variety of
potential risks resulting from certain political, economic and other
uncertainties including, without limitation, political risks relating to a
substantial number of our customers being in Taiwan. Certain aspects of our
operations are subject to governmental regulations in the countries in which we
do business, including those relating to currency conversion and repatriation,
taxation of our earnings and earnings of our personnel, and our use of local
employees and suppliers. Our operations are also subject to the risk of changes
in laws and policies in the various jurisdictions in which we do business,
which may impose restrictions on us. We cannot determine to what extent our
future operations and earnings may be affected by new laws, new regulations,
changes in or new interpretations of existing laws or regulations or other
consequences of doing business outside the U.S.
Our activities outside the U.S. are subject to additional risks associated
with fluctuating currency values and exchange rates, hard currency shortages
and controls on currency exchange. Additionally, worldwide semiconductor
pricing is influenced by currency fluctuations and the devaluation of foreign
currencies could have a significant impact on the prices of our products if our
competitors offer products at significantly lower prices in an effort to
maximize cash flows to finance short-term, dollar denominated obligations; such
devaluation could also impact the competitive position of our customers in
Taiwan and elsewhere, which could impact our sales. Currently, we do not engage
in hedging activities as all transactions are denominated in U.S. dollars.
Risks Related to Future Acquisitions--We may make acquisitions which could
subject us to a number of operational risks.
In order to grow our business and maintain our competitive position, we may
acquire other businesses in the future. We cannot predict whether or when any
acquisitions will occur. Acquisitions commonly involve certain risks, and we
cannot assure you that we will make any acquisitions or that any acquired
business will be successfully integrated into our operations or will perform as
expected. Our ability to finance such acquisitions may be constrained by our
high leverage. We may also enter into joint venture transactions. Joint
ventures have the added risk that the other joint venture partners may have
economic, business or legal interests or objectives that are inconsistent with
our interests and objectives. We may also have to fulfill our joint venture
partners' economic or other obligations if they fail to do so.
19
<PAGE>
We Depend on Patents, Trade Secrets and Proprietary Technology--Our
inability to secure our intellectual property could adversely affect our
business.
We hold several patents as well as copyrights, mask works and trademarks
with respect to various products and expect to continue to file applications
for them in the future as a means of protecting our technology and market
position. In addition, we seek to protect our proprietary information and know-
how through the use of trade secrets, confidentiality agreements and other
security measures. With respect to patents, there can be no assurance that any
applications for patent protection will be granted, or, if granted, will offer
meaningful protection. Additionally, there can be no assurance that competitors
will not develop, patent or gain access to similar know-how and technology, or
reverse engineer our products, or that any confidentiality agreements upon
which we rely to protect our trade secrets and other proprietary information
will be adequate to protect our proprietary technology. The occurrence of any
such events could have a material adverse effect on our results of operations
and financial condition.
Patents covering a variety of semiconductor designs and processes are held
by various companies. We have from time to time received, and may in the future
receive, communications from third parties claiming that we may be infringing
certain of such parties' patents and other intellectual property rights. Any
infringement claim or other litigation against or by us could have a material
adverse effect on our results of operations and financial condition.
Virtually all of our key engineers worked at other companies or at
universities and research institutions before joining us. Disputes may arise as
to whether technology developed by such engineers while employed by or
associated with us was first discovered when they were employed by or
associated with others in a manner that would give third parties rights to such
technology superior to our rights, if any. Disputes of this nature have
occurred in the past, and are expected to continue to arise in the future, and
there can be no assurance that we will prevail in these disputes. To the extent
that consultants, vendors or other third parties apply technological
information independently developed by them or by others to our proposed
products, disputes may also arise as to the proprietary rights to such
information, which may not be resolved in our favor.
We Depend upon Key Management--Our loss of certain key members of management
could negatively impact our business prospects.
We are dependent upon our ability to attract and retain highly-skilled
technical, managerial and marketing personnel. We believe that our future
success in developing marketable products and achieving a competitive position
will depend in large part upon whether we can attract and retain skilled
personnel. Competition for such personnel is intense, and there can be no
assurance that we will be successful in attracting and retaining the personnel
we require to successfully develop new and enhanced products and to continue to
grow and operate profitably. Furthermore, retention of scientific and
engineering personnel in our industry typically requires us to present
attractive compensation packages.
Product Liability Exposure and Potential Unavailability of Insurance--Some
of our products may be subject to product liability claims.
Certain of our custom integrated circuits products are sold into medical
markets for applications which include blood glucose measurement devices and
hearing aids. In certain cases, we have provided or received indemnities with
respect to possible third party claims arising from these products. Although we
believe that exposure to third-party claims has been minimized, there can be no
assurance that we will not be subject to third party claims in these or other
applications or that any indemnification or insurance available to us will be
adequate to protect us from liability. A product liability claim, product
recall or other claim, as well as any claims for uninsured liabilities or in
excess of insured liabilities, could have a material adverse effect on our
results of operations and financial condition.
20
<PAGE>
Y2K--We could be adversely affected if year 2000 problems are significant.
As the end of the century nears, there is a widespread concern that many
existing computer programs that use only the last two digits to refer to a year
will not properly recognize a year that begins with the digits "20" instead of
"19." If not corrected, many computer applications could fail, create erroneous
results, or cause unanticipated systems failures, among other problems. Our
failure, or the failure of one or more of our key suppliers, customers or
distributors, to address successfully year 2000 issues could have a material
adverse effect on our results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," for a discussion of the actions we have taken and expenses we have
incurred in connection with the Year 2000 issues.
Adverse Effect on Sale or Trading of Old Notes--If You Do Not Exchange Your
Notes Pursuant to This Exchange, It Will Be More Difficult for You to Sell Your
Notes.
It may be difficult for you to sell old notes that are not exchanged in the
exchange offer. Those notes may not be offered or sold unless they are
registered or there are exemptions from the registration requirements under the
Securities Act and applicable state securities laws.
If you do not tender your old notes or if we do not accept some of your old
notes, those notes will continue to be subject to the transfer and exchange
restrictions in:
--the indenture;
--the legend on the old notes; and
--the offering circular relating to the old notes.
The restrictions on transfer of your old notes arise because we issued the
old notes pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the old notes if they are registered under the Securities Act and
applicable state securities laws, or offered and sold pursuant to an exemption
from such requirements. We do not intend to register the old notes under the
Securities Act. To the extent old notes are tendered and accepted in the
exchange offer, the trading market, if any, for the old notes would be
adversely affected.
No Active Trading Market for the Notes--You Cannot Be Sure That an Active
Trading Market Will Develop For The Notes.
The new notes are being offered to the holders of the old notes only. There
is no public market for the new notes. The initial purchasers have informed us
that they currently intend to make a market in the new notes. However, the
initial purchasers may cease their market making at any time. The new notes
could trade at prices that may be higher or lower than the initial offering
price of the old notes. The liquidity of the trading market in these notes, and
the market price quoted for these notes, may be adversely affected by changes
in the overall market for similar securities, existing interest rates, and by
our operating results.
No State Registration--The Notes Have Not Been Registered under State
Securities Laws
The new notes have not been registered or qualified under any state
securities laws. This offer to exchange old notes for new notes is being made
both to U.S. institutional investors, pursuant to exemptions from such laws for
sales to such investors, and to non-U.S. persons, as state securities laws do
not apply to sales to persons who are not residents of any state. In order to
acquire the old notes, each holder was required to represent to us that it was
either a "qualified institutional buyer" or a non-U.S. person. Holders who wish
to exchange their old notes for new notes will be required to represent to us
that they remain institutional investors or non-U.S. persons. Any holder who no
longer qualifies as an institutional investor or who is no longer a non-U.S.
person, will not be entitled to exchange its old notes for new notes, unless
another state securities law exemption is available. If no such exemption is
available, the holder will continue to hold the old notes, which will continue
to be subject to the restrictions on transfer as set forth in the legend
thereon.
21
<PAGE>
THE TRANSACTIONS
On May 11, 1999, we completed our recapitalization. Our shareholders and
option holders immediately prior to the recapitalization who chose to receive
cash in exchange for their common stock and options received aggregate cash
consideration of approximately $256.0 million.
To finance the recapitalization,
(1) we issued the notes,
(2) we entered into and borrowed $73.9 million under the senior credit
facility,
(3) we used existing cash on-hand at the closing of $70.5 million,
(4) the Equity Investors and certain other investors invested $30.6
million in ICS Merger Corp., a transitory merger corporation organized by
the Equity Investors,
(5) Bain Capital made direct purchases of our common stock from certain
existing shareholders for $9.6 million; and
(6) certain members of management, including a former chairman, made a
rollover and new investment of $9.8 million.
Immediately following the merger, the senior management team and many other
employees owned new common stock and options, together representing
approximately 31% of our common stock on a fully-diluted basis.
22
<PAGE>
USE OF PROCEEDS
We will not receive cash proceeds from the issuance of the new notes. We
used proceeds from the sale of the old notes plus borrowings under our senior
credit facility, existing cash on-hand at the closing and proceeds from the
equity investment by the equity investors, certain members of management and
other investors to complete the recapitalization and pay related costs, fees
and expenses.
The following table sets forth the sources and uses of funds in connection
with the Transactions, which were consummated on May 11, 1999.
<TABLE>
<CAPTION>
Sources of Funds
----------------
(in millions)
<S> <C>
Senior Credit Facility:
Revolving Credit Facility (1).............................. $ 3.9
Term Loans (2)............................................. 70.0
Notes........................................................ 100.0
Existing Cash................................................ 70.5
New Equity Investment (3).................................... 30.6
Purchases from Existing Shareholders (4)..................... 9.6
Rollover and New Equity of Management (5).................... 9.8
------
Total.................................................... $294.4
======
<CAPTION>
Uses of Funds
-------------
(in millions)
<S> <C>
Redemption and Purchase of Common Stock and Vested Options
(6)......................................................... $256.0
Purchases from Existing Shareholders (4)..................... 9.6
Rollover and New Equity of Management (5).................... 9.8
Fees and Expenses (7)........................................ 19.0
------
Total.................................................... $294.4
======
</TABLE>
- --------
(1) $3.9 million was borrowed at closing under the $25.0 million revolving
credit facility. See "Description of Senior Credit Facility."
(2) Includes a Term A loan facility of $30.0 million and a Term B loan facility
of $40.0 million. See "Description of Senior Credit Facility."
(3) Investment of funds by the Equity Investors and certain other investors in
ICS Merger Corp.
(4) Direct purchases of our new common stock by Bain Capital from certain
existing shareholders immediately following consummation of the merger.
(5) Rollover and new equity investment by certain members of our senior
management team, consisting primarily of the exchange of certain existing
common stock ($6.6 million) into our new common stock after the merger, the
conversion of certain existing stock options into new stock options after
the merger ($2.2 million) and deferred compensation agreements ($0.5
million), and purchases of new common stock ($0.5 million) in exchange for
promissory notes.
(6) Cash redemption of our existing common stock and vested stock options,
excluding the rollover equity of certain members of our management, and
cash purchase of shares of our new common stock by Bain Capital from
certain existing shareholders immediately following consummation of the
merger.
(7) Includes commitment, placement, financial advisory, legal, accounting and
other professional fees. See "Certain Relationships and Related
Transactions."
23
<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents and our
consolidated capitalization as of July 3, 1999. The information in the
following table should be read in conjunction with the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the notes accompanying them appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of
July 3, 1999
Actual
-------------
(in millions)
<S> <C>
Cash and cash equivalents......................................... $ 9.3
=======
Long-term debt, including current portion:
Senior credit facility:
Revolving credit facility..................................... -- (a)
Term A loan facility.......................................... 30.0
Term B loan facility.......................................... 40.0
Notes........................................................... 100.0
-------
Total debt.................................................... 170.0
Shareholders' deficit............................................. (106.9)
-------
Total capitalization.......................................... $ 63.1
=======
</TABLE>
- --------
(a) The revolving credit facility has total availability of $25.0 million, with
no amounts drawn as of July 3, 1999 and no letters of credit issued.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The tables below set forth our unaudited pro forma consolidated financial
data for the fiscal year ended July 3, 1999. The unaudited pro forma data gives
effect to the adjustments described in the accompanying notes. The information
in the column titled "Historical" is summarized from our historical
consolidated financial statements included in this prospectus. Our fiscal year
is based upon a 52/53 week operating cycle that ends on the Saturday nearest
June 30. Fiscal year 1999 represents a 53-week operating cycle.
Our recapitalization has been accounted for as a leveraged recapitalization
because it did not constitute a change in control under generally accepted
accounting principles. Under the recapitalization method of accounting, the
historical cost basis of our assets and liabilities will be carried forward
with the aggregate cost of repurchasing our common stock and certain vested
options to purchase common stock accounted for as a charge to shareholders'
equity.
The following unaudited pro forma consolidated statement of operations for
the fiscal year ended July 3, 1999 reflects the effect of (A) the
recapitalization, and (B) the sale of certain assets of the Data Communications
product group to 3Com Corporation and the sale and leaseback of our Norristown,
Pennsylvania facility, which we call the fiscal year 1999 divestitures, as if
they had each occurred on June 28, 1998. The unaudited pro forma consolidated
statement of operations is presented for informational purposes only and does
not (i) purport to represent what our results of operations would have been if
the recapitalization had occurred as of the date indicated or what such results
will be for any future periods, (ii) reflect the non-recurring charge of
approximately $15.1 million related to the accelerated vesting, cash-out and
conversion of employee stock options that occurred upon the consummation of the
recapitalization or (iii) reflect the non-recurring gain of approximately $10.7
million that was realized upon the consummation of the fiscal year 1999
divestitures. The unaudited pro forma consolidated financial data are based on
assumptions that we believe are reasonable and should be read in conjunction
with the Consolidated Financial Statements and notes accompanying them included
elsewhere in this prospectus. A pro forma balance sheet as of July 3, 1999 has
not been presented as all of the transactions described above had occurred and
are reflected in our July 3, 1999 historical balance sheet.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended July 3, 1999
(In thousands)
<TABLE>
<CAPTION>
Divestiture Recapitalization Pro
Historical Adjustments Adjustments Forma
---------- ----------- ---------------- --------
<S> <C> <C> <C> <C>
Revenue.................... $139,063 $ -- $ -- $139,063
Cost and expenses:
Cost of sales............ 64,496 -- -- 64,496
Research and
development............. 21,316 (4,508)(a) -- 16,808
Selling, general and
administrative.......... 19,794 413 (b) (116)(c) 20,188
(903)(d)
1,000 (e)
Special charge........... 15,051 -- (15,051)(f) --
-------- ------- ------- --------
Income from operations..... 18,406 4,095 15,070 37,571
Interest expense (income),
net....................... 502 -- 18,350 (g) 18,852
Other expense (income),
net....................... (10,459) 10,734 (a) -- 275
-------- ------- ------- --------
Income before provision for
income taxes.............. 28,363 (6,639) (3,280) 18,444
Income tax expense......... 5,320 1,638 (h) (1,312)(h) 5,646
-------- ------- ------- --------
Net income................. $ 23,043 $(8,277) $(1,968) $ 12,798
======== ======= ======= ========
Other Data:
EBITDA (i)................. $ 41,989
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Operations
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended July 3, 1999
(In thousands)
(a) On February 18, 1999, we sold certain intellectual property and equipment
of our Data Communications product group to 3Com Corporation for
approximately $16.0 million in cash, resulting in a $10.7 million gain.
Because we retain the right to sell certain of our existing and next
generation transceiver products, no adjustments have been made to eliminate
the historical revenue of the Data Communications product group, which
approximated $15.2 million in fiscal 1999.
The adjustment reflects the impact on income from operations resulting from
the sale of the assets of the Data Communications product group, as
summarized in the table below:
<TABLE>
<CAPTION>
Fiscal Year
Ended July 3,
1999
-------------
<S> <C>
Research and development costs, net/1/ ........................ $4,244
Sublease income/2/ ............................................ 264
------
Impact on income from operations............................... 4,508
Depreciation impact included in the above adjustments.......... (384)
------
EBITDA impact.................................................. $4,124
======
</TABLE>
--------
/1 /Research and development costs--Represents certain of the actual
historical costs incurred by the Data Communications product group
incurred through February 18, 1999, the most significant of which are
the salary, stock compensation and related costs associated with the
employees that became employees of 3Com Corporation upon closing of the
sale, which are not being incurred post-sale. This adjustment is
presented net of the estimated engineering and support costs that we
will be charged under the terms of the license agreement with 3Com
Corporation that was entered into as part of the transaction.
/2 /Sublease income--Represents incremental rental income that would have
been earned from subletting space to 3Com Corporation in which the
transferred employees continue to work. Under the terms of the lease
arrangement, 3Com Corporation is required to make lease payments of
approximately $100 per quarter.
(b) On April 13, 1999, we sold our corporate headquarters located in
Norristown, PA. Concurrent with the sale, we entered into an operating
lease arrangement for the property with the buyer.
The adjustment reflects the impact on income from operations resulting from
the sale and leaseback of the facility, as summarized in the table below:
<TABLE>
<CAPTION>
Fiscal Year
Ended July 3,
1999
-------------
<S> <C>
Operating lease payments....................................... $(576)
Building depreciation.......................................... 163
-----
Impact on income from operations............................... (413)
Depreciation impact included in above adjustments.............. (163)
-----
EBITDA impact.................................................. $(576)
=====
</TABLE>
(c) The pro forma adjustment reflects the elimination of actual compensation
paid to our outside directors ($166), net of the estimated nominal
compensation to be paid to outside directors prospectively ($50).
(d) The pro forma adjustment represents non-recurring investment banking, legal
and other fees incurred in connection with the recapitalization and the
proxy contest relating to our February 1, 1999 shareholder meeting.
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended July 3, 1999 (In thousands)
(e) The pro forma adjustment represents the $1 million annual shareholder
advisory fee for consulting and financial services to be provided by the
equity investors. See "Certain Relationships and Related Transactions."
(f) In fiscal 1999, we recorded a $15.1 million charge related to the
accelerated vesting, cash-out and conversion of employee stock options that
occurred upon the consummation of the recapitalization. This charge has
been added back due to its non-recurring nature.
(g) The increase in the pro forma interest expense as a result of the
recapitalization is summarized in the table below:
<TABLE>
<CAPTION>
Fiscal Year
Ended July 3,
1999
-------------
<S> <C>
Elimination of historical net interest expense............... $ (502)
-------
Interest on new borrowings:
Interest expense at a weighted average interest rate of
10.13%/1/ .................................................. 17,232
Amortization of deferred financing costs .................... 1,620
-------
Interest from the requirements of the recapitalization....... 18,852
-------
Net increase in interest expense............................. $18,350
=======
</TABLE>
/1 /A 0.125% increase or decrease in the assumed weighted average interest
rate for the senior credit facility would change pro forma interest
expense by $200 million for the fiscal year ended July 3, 1999.
(h) Represents the income tax adjustment required to result in a pro forma
income tax provision based on:(i) our historical tax provision using
historical tax amounts and (ii) the direct tax effects of the pro forma
adjustments described above at an estimated 40% effective tax rate.
(i) EBITDA represents earnings before interest, taxes, depreciation,
amortization, other income and expense (consisting primarily of the
gain/loss on sales of assets and marketable securities) and special
charges. EBITDA and Pro Forma EBITDA are presented because we believe they
are frequently used by security analysts in the evaluation of companies.
However, EBITDA and Pro Forma EBITDA should not be considered as an
alternative to cash flow from operating activities as a measure of
liquidity, as alternatives to net income as an indicator of our operating
performance, or as an alternative to any other measures of performance in
accordance with generally accepted accounting principles.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended July 3, 1999 (In thousands)
The following table sets forth a reconciliation of Historical EBITDA to Pro
Forma EBITDA:
<TABLE>
<CAPTION>
Fiscal Year
Ended July 3,
1999
-------------
<S> <C>
Historical EBITDA............................................ $38,422
Sale of Data Communications product group.................... 4,124
Sale and leaseback of headquarters........................... (576)
Board of directors compensation.............................. 116
Costs directly related to the recapitalization and proxy
contest..................................................... 903
Shareholder advisory fee..................................... (1,000)
-------
Pro Forma EBITDA............................................. $41,989
=======
</TABLE>
29
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected historical consolidated
financial data as of the dates and for the periods indicated. Our selected
historical consolidated statements of operations data for the fiscal years
ended July 3, 1999, June 27, 1998, June 28, 1997 and the selected historical
consolidated balance sheet data as of July 3, 1999 and June 27, 1998 were
derived from our historical consolidated financial statements that were audited
by KPMG LLP, whose report appears elsewhere in this prospectus. Our selected
historical statements of operations data for the fiscal years ended June 29,
1996 and June 30, 1995 and the selected historical balance sheet data as of
June 28, 1997, June 29, 1996 and June 30, 1995 were derived from our audited
financial statements that are not included in this prospectus. The selected
historical consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of the Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and the notes accompanying them included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended (a)
-------------------------------------------------
July 3, June 27, June 28, June 29, June 30,
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue..................... $ 139,063 $160,634 $104,359 $91,330 $97,745
Cost and expenses
Cost of sales.............. 64,496 88,859 59,137 54,848 45,649
Research and development... 21,316 19,797 13,521 10,547 10,995
Selling, general and
administrative............ 19,794 19,678 15,654 18,653 20,450
Special charges (b)........ 15,051 -- 11,196 3,257 7,428
--------- -------- -------- ------- -------
Income from operations...... 18,406 32,300 4,851 4,025 13,223
Interest expense net........ 2,955 64 63 403 715
Gain on sale of assets...... (10,734) -- -- -- --
Interest income and other
expense (income), net...... (2,178) (1,984) 5,984 (2,390) (1,126)
--------- -------- -------- ------- -------
Income (loss) from
continuing operations
before income taxes........ 28,363 34,220 (1,196) 6,012 13,634
Income tax expense.......... 5,320 12,845 6,314 1,376 5,151
--------- -------- -------- ------- -------
Income (loss) from
continuing operations...... 23,043 21,375 (7,510) 4,636 8,483
Loss from discontinued
operations (c)............. -- -- (909) (721) (3,560)
--------- -------- -------- ------- -------
Net income (loss)........... $ 23,043 $ 21,375 $ (8,419) $ 3,915 $ 4,923
========= ======== ======== ======= =======
Other Financial Data:
EBITDA (d).................. $ 38,422 $ 36,879 $ 19,791 $10,411 $23,690
Depreciation and
amortization............... 4,965 4,579 3,744 3,129 3,039
Capital expenditures........ 7,694 8,139 3,358 4,390 3,834
Ratio of earnings to fixed
charges (e)................ 9.0x 105.7x -- 9.5x 16.4x
Balance Sheet Data (at end
of period):
Cash and cash equivalents .. $ 9,285 $ 25,340 $ 18,425 $27,376 $ 9,960
Total assets................ 87,795 108,009 90,622 87,571 77,691
Total debt.................. 170,030 1,523 1,709 4,063 3,774
Total shareholders' equity
(deficit).................. (106,912) 89,768 70,147 69,165 62,484
</TABLE>
See Notes to Selected Historical Consolidated Financial Data
30
<PAGE>
Notes to Selected Historical Consolidated Financial Data
(In thousands)
(a) Our fiscal year is based upon a 52/53 week operating cycle that ends on the
Saturday nearest June 30. All of the periods presented represent a 52-week
operating cycle, except for fiscal year 1999 which represents 53 weeks.
(b) Special charges consist of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------
June
July 3, June 27, 28, June 29, June 30,
1999 1998 1997 1996 1995
------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Compensation cost/1........../.. $15,051 $ -- $ -- $ -- $ --
Change in business strategy..... -- -- -- -- 3,822
Facility closings............... -- -- -- 1,757 --
Discontinued product lines...... -- -- -- -- 3,606
Write-off of in-process research
and development costs.......... -- -- 11,196 1,500 --
------- ----- ------- ------ ------
$15,051 $ -- $11,196 $3,257 $7,428
======= ===== ======= ====== ======
</TABLE>
--------
/1/In connection with the recapitalization, the Company recorded a
compensation charge of $15.1 million related to the accelerated vesting,
cash-out and conversion of employee stock options.
(c) In fiscal 1995, we acquired a 51% majority interest in ARK Logic, Inc., a
developer of complex graphic accelerator chips. Subsequently, in fiscal
year 1997, we disposed of our majority interest in ARK Logic, Inc. The
disposition of ARK Logic, Inc. was accounted for as a discontinued
operation and all periods prior to the disposition have been restated to
reflect this presentation.
(d) EBITDA represents earnings from continuing operations before interest,
taxes, depreciation, amortization, other income and expense and special
charges. EBITDA is presented because we believe that it is frequently used
by security analysts in the evaluation of companies. However, EBITDA should
not be considered as an alternative to cash flow from operating activities
as a measure of liquidity, as an alternative to net income as an indicator
of our operating performance, or as an alternative to any other measures of
performance in accordance with generally accepted accounting principles.
The following table sets forth a reconciliation of income (loss) from
continuing operations before income taxes to EBITDA (See notes to
"Unaudited Pro Forma Consolidated Statements of Operations" for additional
details):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
July 3, June 27, June 28, June 29, June 30,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations,
before income taxes..... $ 28,363 $34,220 $(1,196) $ 6,012 $13,634
Depreciation and
amortization............ 4,965 4,579 3,744 3,129 3,039
Interest expense......... 2,955 64 63 403 715
Interest income and other
expense (income), net... (2,178) (1,984) 5,984 (2,390) (1,126)
Gain on sale of assets... (10,734) -- -- -- --
Special charges.......... 15,051 -- 11,196 3,257 7,428
-------- ------- ------- ------- -------
EBITDA................... $ 38,422 $36,879 $19,791 $10,411 $23,690
======== ======= ======= ======= =======
</TABLE>
31
<PAGE>
Notes to Selected Historical Consolidated Financial Data
(In thousands)
(e) For purposes of calculating the ratio of earnings to fixed charges,
earnings represents income (loss) from continuing operations before income
taxes plus fixed charges. Fixed charges consists of interest expense,
including amortization of financing costs, and the portion of operating
rental expense which we believe is representative of the interest component
of rent expense. Earnings were insufficient to cover fixed charges by
$1,350 for the fiscal year ended June 28, 1997.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We currently operate through two segments: Clocks and Non-Clocks. Within our
Clocks business group is our FTG group, which sells Clock products for PC, non-
PC applications and pixel clocks for PC video applications that integrate
certain of our proprietary mixed-signal cores with frequency timing generators.
The Non-Clock product group sells integrated circuits called transceivers used
primarily to receive and transmit electronic data between PCs in networking
applications and custom mixed-signal integrated circuits that combine analog
and digital technology.
The following table sets forth statement of operations line items as a
percentage of total revenue for the periods indicated and should be read in
conjunction with the Consolidated Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------
July 3, 1999 June 27, 1998 June 28, 1997
-------------- --------------- ---------------
(Expressed as a percentage of total revenue)
<S> <C> <C> <C>
Revenues.................. 100.0% 100.0% 100.0%
Cost and expenses:
Cost of sales............. 46.4 55.3 56.7
Research and development
expense.................. 15.3 12.3 13.0
Selling, general and
administrative expense... 14.1 12.1 14.5
Amortization of goodwill.. 0.2 0.2 0.5
Special charges:
Compensation costs...... 10.8 -- --
Write-off of in-process
research and
development costs...... -- -- 10.6
-------------- -------------- --------------
Operating income.......... 13.2 20.1 4.7
Gain on sale of assets.... (7.8) -- --
Interest and other
income................... (1.5) (1.2) (1.7)
Interest expense.......... 2.1 -- 0.1
Impairment in equity
investment............... -- -- 6.8
Minority interest......... -- -- (0.1)
Equity loss of investee... -- -- 0.8
-------------- -------------- --------------
Income (loss) before
income taxes from
continuing operations.... 20.4 21.3 (1.2)
Income tax expense........ 3.8 8.0 6.0
-------------- -------------- --------------
Income (loss) from
continuing operations.... 16.6 13.3 (7.2)
Loss from discontinued
operations............... -- -- (0.9)
-------------- -------------- --------------
Net income (loss)......... 16.6% 13.3% (8.1%)
============== ============== ==============
</TABLE>
Fiscal Year 1999 as compared to Fiscal Year 1998
Revenue
We achieved revenue of $139.1 million in fiscal year 1999, as compared to
$160.6 million in fiscal year 1998. This decrease in fiscal year 1999 revenue
was attributable to a decrease in revenue from the Non-Clock product lines.
Clocks
Our Clock component revenue increased $17.1 million to $107.7 million for
fiscal year 1999 as compared to the prior year. The increase is attributable to
strong demand from PC motherboard OEM customers. The
33
<PAGE>
average selling price for clocks declined 6.0% from fiscal year 1998 to fiscal
year 1999 while volume increased 27.5%.
Clock components contributed approximately 77.5% and 56.4% of total revenue
in fiscal years 1999 and 1998, respectively. We are currently involved in the
design of FTGs for the next generation of PC motherboards. In particular, FTGs
are being used for the Pentium III (high-end motherboard), Whitney (sub-$1,000
PC motherboard) and Mobile BX (new notebook motherboard) platforms, all of
which are being released in calendar 1999. We are planning to expand into high
performance clocking solutions supporting networking, telecommunication,
workstation and server applications.
The sale of pixel clocks to the flat panel display market is an area of
growth. The flat panel display market is an emerging market, representing less
than 4% of PC monitors sold worldwide today.
Major customers in fiscal year 1999 were: Maxtek Technology, SCI, Asustek
Computer, Giga-Byte Technology, Acer, Intel, MEC Technology, Seagate, Amega,
Hitachi and Hughes Network.
Non-Clocks
Non-Clocks' component revenue represented approximately 22.5% of total
revenue in fiscal year 1999, as compared to 43.6% in fiscal year 1998. This is
due to the decreased market share from network system suppliers of the single
chip 10/100-Mb transceivers. In fiscal year 1998, we shifted our focus away
from the transceiver market to our other product groups. We sold certain
intellectual property and equipment of our Data Communications product group to
3Com Corporation on February 18, 1999, but will still continue to sell and
support existing and the next generation fast ethernet transceiver products.
Foreign Revenue
Foreign revenue, which resulted primarily from sales to offshore customers
was 68.8% and 58.8% of total revenue in fiscal years 1999 and 1998,
respectively. While the percentage increase reflected growing sales to the
Pacific Rim markets, certain of our international sales were to customers in
the Pacific Rim who in turn sold some of their products to North America,
Europe and other non-Asian markets. Our sales are denominated in U.S. dollars.
Cost of Sales
Cost of sales consists of costs related to the purchase of processed wafers,
assembly and testing services provided by third-party suppliers, as well as
costs arising from in-house product testing, shipping, quality control and
manufacturing support operations. Cost of sales as a percentage of total
revenue was 46.4% in fiscal year 1999, as compared to 55.3% in fiscal year
1998. We have continued to realize material cost savings in the manufacturing
processes. We have received price reductions from their subcontractors and are
also realizing savings from their internal testing site in Singapore. These
cost savings have helped to improve our gross margin.
Research & Development
Research and development expense expressed as a percentage of revenue was
15.3% in fiscal year 1999, as compared to 12.3% in fiscal year 1998. In dollar
terms, research and development spending increased 7.7% from fiscal year 1998
to 1999. The increase is attributable to a compensation charge of $1.3 million
arising from the modifications of stock options owned by certain employees
affected by the sale of assets to 3Com. As a result of the sale of assets to
3Com, we expect that there will be savings in research and development
expenses, which will be offset by additional expenses incurred to support our
expansion into high performance clocking solutions supporting networking,
telecommunication, workstation and server applications.
34
<PAGE>
Selling, General and Administration
Selling, general and administration expense was 14.1% and 12.1% of total
revenues in fiscal years 1999 and 1998, respectively. In monetary terms,
expenses have increased 0.6% from fiscal year 1998 to fiscal year 1999. The
increase from 1998 to 1999 represents increased charges for the proxy contest
relating to our annual shareholders' meeting. We were faced with a proxy
contest that was waged by our former Chief Executive Officer. As a result of
the proxy contest, we have incurred mailing, legal and printing costs of
approximately $0.8 million for our annual meeting, in excess of those
historically incurred for routine and annual shareholders' meetings, during
both the second and third quarters of fiscal year 1999. This was offset by the
decrease in variable selling expenses as a result of decreased revenues.
Special Charge
In connection with the recapitalization, we recorded a compensation charge
of $15.1 million related to the accelerated vesting, cash-out and conversion of
employee stock options.
Operating Income
Expressed as a percentage of revenue, operating income was 13.2% and 20.1%
in fiscal years 1999 and 1998, respectively. In dollar terms, operating income
was $18.4 million in fiscal year 1999 compared to $32.3 million in fiscal year
1998. Fiscal year 1999 includes a special charge relating to the vesting period
for outstanding options arising from the management-led buyout of $15.1
million. Accordingly, operating income before special charges was 24.0% of
revenue in fiscal year 1999 as compared to 20.1% in fiscal year 1998.
Gain on Sale of Assets
In the third quarter of fiscal year 1999, we sold intellectual property and
engineering hardware and software from our data communications product line to
3Com Corporation for $16.0 million in cash. We recognized $10.7 million as the
gain on the sale.
Interest and other Income
Interest and other income was $2.2 million in fiscal year 1999 and $2.0
million in fiscal year 1998. Interest income increased as a result of higher
cash balances available for investing.
Interest Expense
Interest expense was $3.0 million in fiscal year 1999 and $64,000 in fiscal
year 1998. The increase in interest expense is attributable to the financing
obtained in connection with the recapitalization.
Income Taxes
After adjusting for minority interest and equity investment, our effective
tax rate related to income from continuing operations was 18.8% and 37.5% for
fiscal years 1999 and 1998, respectively. The effective tax rate for fiscal
years 1999 and 1998 reflects the tax-exempt status of our Singapore operation,
which has been given pioneer status, or exemption of taxes on non-passive
income for five years. The significant decrease from fiscal years 1998 to 1999
is the result of the profitability of the Singapore operations being larger
than the domestic operations. We do not currently calculate deferred taxes on
our investment in our Singapore operations, as all undistributed earnings are
permanently reinvested back into the Singapore facility. If we were to record
deferred taxes on our investment, the amount would be a $4.3 million liability.
35
<PAGE>
Net Income (Loss)
Fiscal year 1999 reflects a net income of $23.0 million as compared to a
net income of $21.4 million for fiscal year 1998. Excluding special charges,
however, net income for fiscal year 1999 would have been $32.8 million. The
changes in income are disclosed in the previous paragraphs.
Fiscal Year 1998 as compared to Fiscal Year 1997
Revenue
We achieved revenue of $160.6 million and $104.4 million in fiscal years
1998 and 1997, respectively.
Clocks
Our Clock component revenue increased $27.3 million to $90.6 million for
fiscal year 1998 as compared to the prior year. The acquisition of MicroClock,
Inc. in the third quarter of fiscal year 1997 accounted for $14.1 million of
the increase with the remaining amount attributable to strong demand from PC
motherboard Original Equipment Manufacturer ("OEM") customers. The average
selling price for frequency timing generators ("FTGs") remained approximately
the same year-to-year, while volume increased 45.0%.
Clock components contributed approximately 56.4% and 60.6% of total revenue
in fiscal years 1998 and 1997, respectively. Although the FTG markets for
motherboard and PC peripheral applications are expected to continue to be
major sources of revenue, we intend to increase our FTG presence in non-PC
applications which comprised less than 10% of total FTG component revenue in
fiscal year 1998. Fiscal year 1998 also reflected the emerging shipments of
pixel clocks for flat panel display.
Major customers in fiscal year 1998 include: Maxtek, SCI, Asustek, Giga-
Byte, Acer, Intel, MEC, Compaq, DELL, Seagate, Amega and Hitachi.
Non-Clocks
Non-Clocks component revenue represented approximately 43.6% in fiscal year
1998 and 32.9% of total revenue in fiscal year 1997. Increases in fiscal year
1998 revenue were due to increased penetration of our transceiver products
within network system suppliers and revived demand for PC video graphics
products. In fiscal year 1999, we shifted our focus away from the transceiver
market to our other product groups. We sold certain intellectual property and
equipment of our Data Communications product group to 3Com Corporation on
February 18, 1999, but still continue to sell and support existing and next
generation fast ethernet transceiver products.
Turtle Beach
As a result of the merger of Turtle Beach and Voyetra, Turtle Beach was de-
consolidated commencing November 30, 1996. Our 35% share of net losses at
Voyetra was recorded under the equity method of accounting during the
remainder of fiscal year 1997. Revenues were 6.5% of total revenue in fiscal
year 1997.
During the fourth quarter of fiscal year 1997, we determined that, due to
significant events and changes in circumstances, it was probable that our
investment in Voyetra would not be recoverable. Accordingly, we recorded an
impairment loss of approximately $7.1 million on our investment in Voyetra in
the fourth quarter of 1997.
36
<PAGE>
Foreign Revenue
Foreign revenue, which resulted primarily from sales to offshore customers,
was 58.8% and 60.3% of total revenue in fiscal years 1998 and 1997,
respectively. The decrease in fiscal year 1998 reflected a substantial increase
of Data Communications shipments in North America. Certain of our international
sales were to customers in the Pacific Rim who in turn sold some of their
products to North America, Europe and other non-Asian markets. Our sales are
denominated in U.S. dollars.
Cost of Sales
Cost of sales consists of costs related to the purchase of processed wafers,
assembly and testing services provided by third-party suppliers, as well as
costs arising from in-house product testing, shipping, quality control and
manufacturing support operations. Cost of sales as a percentage of total
revenue was 55.3% in fiscal year 1998 and 56.7% in fiscal year 1997. The
decrease in cost of sales in fiscal year 1998 reflected reduced material costs,
conversion to in-house testing in Singapore and favorable product mix trends.
These cost savings have helped to improve our gross margin.
Research & Development
Research and development expense expressed as a percentage of revenue was
12.3% in fiscal year 1998, as compared to 13.0% in fiscal year 1997. In dollar
terms, research and development spending increased 46.4% from fiscal year 1997
to 1998, primarily as a result of the hiring of additional engineering
personnel, investment in new design tools and increased activity related to new
product development and enhancement programs for existing standards products.
Selling, General and Administration
Selling, general and administration expense was 12.1% and 14.5% of total
revenues in fiscal years 1998 and 1997, respectively. In monetary terms,
expenses increased 28.6% from fiscal year 1997 to fiscal year 1998. The
increase from fiscal year 1997 to fiscal year 1998 primarily represents
increases in variable costs associated with revenue growth, including $0.5
million for bad debt reserves.
Special Charge
Fiscal year 1997 included a special charge of $11.2 million as a result of
the write-off of in-process research and development costs arising from the
acquisition of MicroClock.
Operating Income
Expressed as a percentage of revenue, operating income was 20.1% and 4.7% in
fiscal years 1998 and 1997, respectively. In dollar terms, operating income was
$32.3 million in fiscal year 1998 as compared $4.9 million in fiscal year 1997.
Fiscal year 1997 includes a special charge of $11.2 million as a result of the
write-off of in-process research and development costs arising from the
acquisition of MicroClock. Accordingly, operating income before special charges
was 20.1% of revenue in fiscal year 1998, as compared to 15.3% in fiscal year
1997.
Interest and Other Income
Interest and other income was $2.0 million in fiscal year 1998 as compared
to $1.8 million in fiscal year 1997. Interest income increased as yields on our
investments improved.
Interest Expense
Interest expense was $64,000 in fiscal year 1998 and $63,000 in fiscal year
1997. Interest related to the PIDA loan on the Valley Forge building.
37
<PAGE>
Equity Investment and Minority Interest
On November 29, 1996, we signed a Merger Agreement to merge Turtle Beach
Systems ("Turtle Beach") with Voyetra Technologies Inc. in exchange for
approximately 35% equity interest in the combined business. Prior to the
merger, we recorded income of $0.2 million relating to the minority interest in
Turtle Beach. The minority interest represents the ownership interest in Turtle
Beach Systems that we did not own prior to the merger. In connection with the
merger, we also entered into a Revolving Credit Agreement and Note ("Revolving
Credit Agreement") with Voyetra, pursuant to which we agreed to make loans to
Voyetra up to an aggregate of $3.5 million, subject to certain covenants. We
accounted for our investment in Voyetra under the equity method of accounting,
and recorded an impairment loss of $0.9 million on this investment in the
fourth quarter of fiscal year 1997.
During the fourth quarter of fiscal year 1997, we determined that
significant events and changes in circumstances had occurred subsequent to the
merger that indicated it was probable that our investment in Voyetra would not
be recoverable. In the opinion of our management, Voyetra experienced an
adverse shift in the fundamentals of our business, which resulted in
deteriorating gross profit margins and a substantial increase in operating
losses. In addition, during the fourth quarter of fiscal year 1997, we notified
Voyetra that they had violated certain covenants and were in default under the
Revolving Credit Agreement. As such, we were under no obligation to provide
financing under the Revolving Credit Agreement. As a result of these
developments, our management estimated that the undiscounted cash flows
anticipated for Voyetra would not be sufficient to recover the carrying value
of our investment and a write-down to fair value was required. Consequently, in
the fourth quarter of fiscal year 1997, we recorded an impairment loss of $7.1
million on our investment in Voyetra, which is included in the Statement of
Operations as Impairment in equity investment.
In the second quarter of fiscal year 1998, Voyetra filed a complaint in the
Supreme Court of the State of New York against us. At the end of the second
quarter, we reached a settlement with Voyetra. Voyetra released us from all
claims and all obligations with respect to the Voyetra/Turtle Beach merger
agreement in exchange for assumption of certain liabilities of Turtle Beach by
us, a $200,000 cash payment, and return of Voyetra stock held by the Company.
As of June 27, 1998, we have settled these obligations and returned the Voyetra
stock.
Income Taxes
After adjusting for minority interest and equity investment, our effective
tax rate related to income from continuing operations was 37.5% and 95.8% for
fiscal years 1998 and 1997, respectively. The effective tax rate for fiscal
year 1998 reflects the tax-exempt status of our Singapore operation, which has
been given pioneer status, or exemption of taxes on non-passive income for five
years. The effective tax rate for fiscal year 1997 includes a $11.2 million
non-deductible intangible write-off related to the acquisition of MicroClock,
Inc. and a $7.1 million capital loss for the impairment of the Voyetra
investment.
Discontinued Operations
During the third quarter of fiscal year 1997, we implemented a plan, with
approval of the Board of Directors, to dispose of our majority interest in our
subsidiary, ARK Logic, within a 12-month period. Unlike our core business of
developing mixed signal components, ARK Logic uses different design tools and
technology to engineer complex digital circuits. Accordingly, we have presented
ARK Logic as discontinued operations and all prior periods have been restated
to reflect this presentation. We recorded a charge of $1.5 million in the third
quarter of fiscal year 1997, including severance and other exit costs.
Subsequently, on June 17, 1997, we sold approximately 80% of our holdings in
ARK Logic to Vision 2000 Ventures, Ltd. for which a gain of $2.4 million,
including the reversal of severance and facility termination accruals, was
recorded. Our remaining ownership interest in ARK Logic (approximately 11%) was
written off in the fourth quarter of fiscal year 1997.
Net Income (Loss)
Fiscal year 1998 reflects a net income of $21.4 million as compared to a
loss of $8.4 million for fiscal year 1997. Excluding special charges, equity
investment related charges and minority interest, however, net income for
fiscal year 1997 was $10.6 million. The changes in income are disclosed in the
previous paragraphs.
38
<PAGE>
Liquidity, Capital Resources and Inflation
As a result of the recapitilization, we are in a heavily leveraged financial
position as of July 3, 1999. As a result of the borrowings incurred to finance
the recapitalization transaction, our total liabilities exceed our total assets
by approximately $106.9 million as of July 3, 1999.
As of July 3, 1999, our principal sources of liquidity included
approximately $9.6 million in cash and investments, as compared to $41.8
million at June 27, 1998. The investments primarily consist of commercial paper
and money markets with various maturities up to three months. During fiscal
year 1999, we generated $24.5 million in cash from our operating activities, as
compared to $22.3 million during fiscal year 1998 and $10.4 million in fiscal
year 1997. The increase in fiscal year 1999 was primarily due to improved
operating results, decreased accounts receivable as a result of improved
collection efforts, and reduced inventory. Our days sales outstanding decreased
slightly from 52 days in fiscal year 1998 to 49 days in fiscal year 1999, while
inventory turns increased from 5.6 times in fiscal year 1998 to 7.3 times in
fiscal year 1999. We have recorded a provision for doubtful accounts for $0.5
million, and also increased our inventory obsolescence reserve by $1.8 million.
Expenditures for property and equipment were $7.7 million in 1999 as
compared to $8.1 million in fiscal year 1998. The decreased expenditures are
primarily attributable to the start up of the Singapore facility and the
investment in design and testing tools and software in fiscal year 1998, offset
by expenditures for the San Jose facility in fiscal year 1999.
We expect to incur $6.0 to $7.0 million in start-up costs for our expansion
into high performance clocking solutions supporting networking,
telecommunication, workstation and server applications during fiscal year 2000.
During fiscal year 1998, under our existing wafer supply contract with CSM,
we advanced the final $2.0 million installment of our deposit with CSM whereby
CSM would supply an agreed minimum quantity of wafers from April 1996 through
June 2002. On October 7, 1998, we assumed a third party's wafer purchase
contract with CSM. The agreement required us to advance $12.0 million as part
of a mutual commitment for CSM to supply and to purchase an agreed upon minimum
quarterly quantity of wafers over a twenty-seven month period from October 1,
1998 to December 31, 2000. The contracts require CSM to refund our deposit by
progressive installments based upon the volume of purchases made by the
Company. CSM has refunded $2.1 million and $4.5 million to us in fiscal years
1998 and 1999, respectively. As of July 3, 1999 and June 27, 1998, amounts due
from CSM were $15.3 million and $7.9 million, respectively. We had previously
entered into a similar agreement with one of our other wafer suppliers,
American Microsystems, Inc., by which deposits totaling $5.5 million were
placed in fiscal year 1995 and we received $2.6 million from AMI in fiscal year
1998 extinguishing the balance of any outstanding deposit at AMI.
In the third quarter of fiscal year 1999, we sold intellectual property and
engineering hardware and software related to our data communications product
line to 3Com Corporation for approximately $16.0 million in cash, resulting in
a $10.7 million gain.
On June 17, 1997, we sold approximately 80% of our share holdings in ARK
Logic to Vision 2000 Ventures, Ltd. for cash of approximately $2.4 million, of
which 20% was held in escrow. The escrow plus interest of $0.5 million was
returned to us in June 1999. As part of such divestiture, a shareholders'
agreement, which required us to buy the remaining 49% minority interest in ARK
Logic at a future period, was terminated.
On February 28, 1997, we acquired all the capital stock of MicroClock, Inc.,
a producer of clock synthesizer integrated circuits for various applications,
for approximately $16.4 million, consisting of $6.4 million in cash and 608,504
shares of ICS common stock. Our shares exchanged in the transaction were
restricted from sale for one year, and therefore the shares were valued at a
20% discount from the closing price on the date of issuance based on an
independent valuation.
39
<PAGE>
The acquisition was accounted for under the purchase method of accounting
and resulted in a charge of $11.2 million related to the write-off of in-
process research and development costs and the recording of goodwill of $1.7
million, which is being amortized over 7 years. In determining the write-off of
in-process research and development expenses, MicroClock was valued as a whole,
and then the portion of the value attributable to technology, which had not
reached technical and/or commercial feasibility, was identified. This was
determined to be in-process research and development, and the residual portion
of the purchase consideration after assigning values to the net tangible assets
and in-process research and development was recorded as goodwill. The method
used in making the determination was the discounted probable future cash flows
on a product by product basis. The assumptions used in the appraisal were a
projected three-year net cash flow on a product with no material changes from
historical pricing, margins and expense levels. The amount attributable to
goodwill was included as an amortizable item on our balance sheet, and the
amount attributable to in-process research and development was written off as
not being sufficiently evolved to be commercialized or to readily ascertain the
future commercial value of the same as of the date of acquisition. Revenues and
results of operations of MicroClock were not significant to our consolidated
statement of operations for the year ended June 28, 1997, and accordingly, pro
forma information as if the transaction had occurred on June 29, 1996, has not
been presented.
The in-process research and development projects included applications such
as communications, desktop, notebook, set top boxes and oscillators. These
projects enabled us to reach a customer base in which it had not been able to
reach, break into a new market with the consumer electronics applications and
offered additional future returns. The risks associated with their timely
completion included technical issues relating to the projects, ability to
retain our employee base after the merger and ability to obtain project
materials from third party vendors. Management assigned approximately 87% of
MicroClock's total product value to the in-process research and development
projects at the time of acquisition. We have spent an additional $885,000 on
these projects and had taken six months to complete these projects. We used our
working capital to fund the completion of these projects.
On November 29, 1996, we signed a Merger Agreement to sell our approximate
87% interest in Turtle Beach to Voyetra in exchange for an approximate 35%
equity interest in Voyetra. Voyetra was a supplier of music and audio software.
In connection with the merger, we also entered into a Revolving Credit
Agreement with Voyetra, pursuant to which we agreed to make loans to Voyetra up
to an aggregate of $3.5 million, subject to certain restrictions and covenants.
As of June 28, 1997, Voyetra was not in compliance with certain covenants. As
such, we decided to cease funding under the Revolving Credit Agreement.
On November 5, 1997, Voyetra filed a complaint in the Supreme Court of the
State of New York against us. On December 31, 1997, we reached a settlement
with Voyetra in which Voyetra agreed to release us from all claims and relieve
us of all obligations with respect to the Voyetra/Turtle Beach merger agreement
in exchange for assumption of certain liabilities of Turtle Beach, a $200,000
cash payment, and the return of Voyetra stock held by the Company. As of June
27, 1998, we have settled these obligations and returned the Voyetra stock held
by the Company to Voyetra.
On May 11, 1999, we merged with ICS Merger Corp., a transitory merger
company formed and wholly owned by the Equity Investors. The following events,
referred to as our recapitalization, provided the consideration for the
redemption and purchase of our outstanding shares of common stock and vested
options, together with the redemption and purchase of our outstanding shares of
common stock and vested options, together with the payment of fees and
expenses, totaling $294.4 million that took place on May 11, 1999:
. an investment made by the Equity Investors and certain other investors
totaling $40.2 million in cash, consisting of an equity investment in
ICS Merger Corp. ($30.6 million), and direct purchases of our common
stock from certain existing shareholders ($9.6 million);
40
<PAGE>
. a rollover and new equity investment by certain members of our senior
management team of $9.8 million, consisting primarily of:
. Certain existing common stock ($6.6 million) that was converted into
our new common stock after the merger; and
. Certain existing stock options that were converted into new stock
options after the merger ($2.2 million) and deferred compensation
agreements ($0.5 million);
. purchases of new common stock ($0.5 million) in exchange for
promissory notes;
. borrowing of $70.0 million in term loans and $3.9 million under a $25.0
million revolving line of credit;
. the offering of $100.0 million in Senior Subordinated Notes; and
. the use of cash on-hand of $70.5 million.
The merger was approved by our previous board of directors and the board of
directors of ICS Merger Corp., and was also approved by the previous
shareholders at a meeting held on May 10, 1999.
Since the recapitalization, our common stock is no longer traded on the
Nasdaq National Market or any exchange, price quotations are no longer
available and the registration of our common stock under the Securities
Exchange Act of 1934 has been terminated. Until our registration statement
filed in connection with the exchange offer for the notes has been declared
effective, we will no longer file periodic reports with the Securities and
Exchange Commission.
The term A loan is payable over varying quarterly installments beginning
September 30, 1999 through May 11, 2004. The term B loan is payable over
varying quarterly installments beginning September 30, 1999 through May 11,
2006. The revolving loans can be borrowed and repaid without paying a premium
or penalty, other than payment of breakage costs and reimbursement of the
lenders' actual re-employment costs under certain circumstances through May 30,
2004. The revolving credit facility permits total availability of $25.0
million. At our option, the interest rates under the senior credit facility
will be either (1) the base rate, which is the higher of the prime lending rate
or 0.5% in excess of the federal funds effective rate, plus a margin or
(2) adjusted LIBOR plus a margin. The margins of the different loans under the
senior credit facility will initially be set and then will vary according to a
pricing grid based upon the consolidated leverage ratio as follows: the initial
margin on the term A loan and revolving loans will be 2.0% over the base rate
or 3.0% over adjusted LIBOR, and then on each of the term A and revolving loans
the margins will range from 1.75%-0.75% for base rate or from 2.75%-1.75% for
adjusted LIBOR; and the initial margin on the term B loan will be 2.5% over the
base rate or 3.5% over adjusted LIBOR, and then on the term B loans the margins
will range from 2.25%-2.00% for base rate or from 3.25%-3.00% for adjusted
LIBOR.
The $100.0 million of Senior Subordinated Notes are due May 15, 2009.
Interest on the notes will accrue at the rate of 11.5% per annum and will be
payable semi-annually on May 15 and November 15 of each year, commencing on
November 15, 1999, to holders of record on the immediately preceding May 1 and
November 1. Except in the case of certain equity offerings by us and certain
kinds of changes of control, we can not choose to redeem the notes until May
15, 2004. At anytime before May 15, 2002, we can choose to redeem up to 35% of
the outstanding notes with money that we raise in one or more equity offerings,
as long as we pay 11.5% of the principal amount of the notes plus accrued
interest and at least $65.0 million of the notes originally issued remain
outstanding afterwards. All of our domestic subsidiaries guarantee the notes
with unconditional guarantees of payment that will rank below their senior
indebtedness, but will rank equal to their other senior subordinated
indebtedness in right of payment. The notes contain covenants that limit what
we may do, such as paying dividends, incurring additional indebtedness,
transfer or selling assets and consolidate or merge or sell all or
substantially all of our assets of subsidiaries.
Certain of our loan agreements require the maintenance of specified
financial ratios and impose financial limitations. At July 3, 1999, we were in
compliance of our credit facility.
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During fiscal year 1999, we repurchased $3.0 million of our common stock
versus $13.0 million in the prior year. Proceeds and the tax benefit for stock
option exercises were $1.3 million in fiscal year 1999 versus $11.2 million in
the prior year. As a result of the recapitalization, we no longer hold shares
in treasury.
Management believes that the existing sources of liquidity and funds
expected to be generated from operations will adequately fund our anticipated
working capital needs. We have acquired technology companies in the past, and
may continue to make strategic acquisitions in the future. Such potential
transactions may require substantial resources which, to the extent not
provided by internally generated sources, would require us to draw from our
revolving credit facility.
Inflation
Inflation has not had a significant impact on our results of operations.
Year 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, a temporary inability to
process transactions, send invoices, or engage in normal business activities.
Our formal Year 2000 readiness program includes analysis of potentially
affected business and process systems and replacement or correction of all non-
compliant critical business and process systems that we will need in the new
millennium. As of July 3, 1999, our internal application systems,
infrastructure and procedures, and manufacturing and control processes were
Year 2000 compliant. In connection with our Year 2000 readiness program, we
were required to modify or replace certain portions of our internal systems. We
used internal resources to reprogram or replace then test the software for Year
2000 changes.
We rely on subcontractors for wafer manufacture, assembly and testing of
products. We have sent questionnaires to these critical suppliers to determine
the extent to which our operations are exposed to failure of Year 2000 issues.
We have received positive responses from all of our vendors, promising to be
Year 2000 compliant by the fall of 1999. There can be no assurance that they
will be successful in resolving any Year 2000 issues, enabling the Company to
continue receiving products from these suppliers. The failure of our vendors to
resolve these issues could result in a shutdown of some or all our operations,
which would have a material adverse effect on us.
We utilize third-party network equipment and software products, which may or
may not be Year 2000 compliant. We have begun formal communications, through
questionnaires, with critical suppliers of products and services to determine
that the suppliers' operations and the products and services they provide are
Year 2000 capable. We have received positive responses from all of these
suppliers, promising to be Year 2000 compliant by the fall of 1999. We do not
currently have any information concerning the Year 2000-compliance status of
our customers. If any of our significant customers and suppliers do not
successfully, and in a timely manner, achieve Year 2000 compliance, our
business or operations could be adversely affected. There can be no assurance
that another company's failure to ensure Year 2000 capability would not have an
adverse effect on us. The products that we sell are not date-sensitive, and
therefore product related exposures are low.
The total expense of the Year 2000 project to date is approximately
$100,000, which is not material to our business operations or financial
condition. Although we believe that resolution of the Year 2000 issue will not
require material additional costs and will not have a material adverse effect
on our results of operations, there can be no assurance that additional
material compliance costs will not be incurred or that we will be able to
resolve in a timely manner any Year 2000 issues that arise. The expenses of the
Year 2000 project are being funded through operating cash flows.
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Our contingency plan, in case of failure due to Year 2000, consists of
stocking volume parts by December 31, 1999, so that stock is still available in
the event of a production shut down. We have qualified secondary sources for
wafer fabrication, assembly and testing, but identified third and fourth backup
sources as well. We put backup generators for power at all of our critical
sites. There can be no assurance that our contingency plan will adequately
address issues that may arise in the year 2000. Our failure to successfully
resolve such issues could result in shutdown of some or all of our operations,
which would have a material adverse effect on us.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities," which
defers the effective date of SFAS No. 133 to fiscal years beginning after June
15, 2000. We will adopt the requirements of this statement in fiscal year 2001.
Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exposures. Our sales are denominated in U.S. dollars,
accordingly, we do not currently engage in foreign currency hedging or other
derivative trading activities.
Interest Rate Risk. Because our obligations under the bank credit facility
bear interest at variable rates, our results of operations are sensitive to
changes in prevailing interest rates. We currently do not engage in interest
rate hedging activities. We manage our interest rate risk by keeping variable
rate instruments at less than 50% of total debt instruments.
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INDUSTRY OVERVIEW
Overview
Semiconductors, also referred to as integrated circuits, are the basic
building blocks used to create an increasing variety of electronic products and
systems. Since the invention of the transistor in 1948, continuous improvements
in semiconductor process and design technologies have led to smaller, more
complex and more reliable devices at a lower cost per function. The two basic
functional technologies for semiconductor products are analog and digital.
Analog (or linear) devices monitor, amplify or transform analog signals.
Analog signals vary continuously over a wide range of values. Analog circuits
provide a critical interface between electronic systems and a variety of real-
world phenomena such as sound, light, temperature, pressure, weight and speed.
Digital devices perform binary arithmetic functions on data represented by a
series of on/off states mathematically represented by "1s" and "0s".
Historically, the digital integrated circuit market has been primarily focused
on the fast growing markets for computing and information technology systems.
Increasing demands for high-throughput computing and networking in recent years
have led to drastic improvements in digital device performance. An example of
these improvements is subsequent generations of ever-faster microprocessors
that power personal computers.
Electronic systems continuously translate analog signals into digital data
and digital data into analog signals. Mixed-signal integrated circuits combine
analog and digital circuitry on the same chip to process both analog signals
and digital data. Historically, analog and digital circuitry has been developed
separately given the technical difficulties associated with combining analog
and digital circuitry onto a single integrated circuit. As a result, system
manufacturers have generally addressed mixed-signal requirements using printed
circuit boards containing many separate analog and digital circuits acquired
from multiple suppliers. However, in an effort to improve performance, decrease
system size and reduce costs, system designers are increasingly requiring the
integration of both analog and digital functions onto a single chip.
Clocks
Every microprocessor and, in fact, most electronic devices with any degree
of complexity must incorporate a means to time and synchronize their various
operations. Frequency timing generators, or FTGs, are mixed-signal integrated
circuits on a single chip that, like miniature "clocks," emit timing signals or
pulses used to sequence and synchronize electronic operations.
FTGs are an indispensable part of the electronic world as they ensure the
smooth flow of data along crowded electronic pathways by integrating and
sequencing multiple functions within complex systems. As each new generation of
electronic devices becomes faster, adds more functions and accommodates more
peripheral equipment, the task of designing "clocks" to control, sequence and
synchronize their operations grows more complex and critical. FTGs perform
critical timing control, sequence and synchronization functions for a wide
variety of applications including computer systems, consumer electronics and
communications devices.
The trend towards more compact systems, coupled with higher system
performance requirements, is creating more challenges for system designers. As
this trend continues, new opportunities for FTG suppliers are created to both
increase their penetration in PC-related markets and enter a wider array of
non-PC application segments.
The worldwide PC motherboard FTG market in 1998 was estimated to total
approximately $160 million. Dataquest estimates the market to grow
approximately 22% per annum to $350 million by 2002. This growth is
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being driven by two primary factors: (i) growth in the global PC market
resulting largely from the advent of the inexpensive (sub $1,000) PC and the
increasing popularity of the Internet, and (ii) the increasing number of FTGs
per PC motherboard.
According to Dataquest, the number of FTGs per motherboard is expected to
continue increasing from current levels. The causes of increasing clock density
include: (i) higher microprocessor speeds requiring the separation of
frequencies onto multiple clocks to function efficiently; (ii) increasing CPU
power and functions requiring more frequencies; and (iii) the ongoing growth of
peripheral applications.
Historically, the FTG market for PC motherboards has provided stable average
prices and consistent margins. This market is less susceptible to downward
pricing pressures and commoditization as FTGs are specifically tailored to
certain architectures and are highly sophisticated and differentiated products.
Given their customized and specialized nature, individual FTG products tend to
be produced in small volume. Dataquest estimates that the combination of these
factors and the increasing density of clocks per motherboard will actually
cause the FTG content per PC motherboard to increase as a percentage of total
motherboard content from 1.9% in 1998 to 2.8% in 2002. Based on our
observations, we believe that average prices of FTGs for PC motherboards have
declined somewhat commencing in the second half of fiscal year 1999, in large
part due to delays in the release of new chip set designs for the PC
motherboard market by the major microprocessor manufacturers.
The FTG market will continue to expand beyond PC motherboard applications.
Growth tends to be driven by the continued conversion of analog devices to
digital systems, which accelerates the replacement of segments of the $2.5
billion crystal-based oscillator market with FTGs. We believe that the
continuing "digitization" trend and the increasing complexity of electronic
devices in non-PC motherboard applications will drive significant growth
opportunities for FTG suppliers. Our belief is based on the precedent set by
the PC motherboard market where FTGs started to replace crystal oscillators in
the late 1980s and today represent the dominant timing and sequencing
technology in virtually every PC motherboard. Examples of product conversions
from analog to digital include analog TVs to high-definition TVs, video
cassette recorders to digital video disk players, and cathode ray tube monitors
to flat panel displays. We estimate the market for the substitution of FTGs for
existing crystal solutions will grow from its current level of approximately
$130 million to approximately $400 million by 2002.
We believe that frequency timing generators are not only the beneficiary of
the crystal oscillator replacement trend but also have limited technological
substitution risk. We believe there are numerous technological, cost and design
barriers that limit the integration of FTG functionality into other chips such
as:
. Yield issues: The defect rate of the FTG would adversely impact the
production yield of more expensive chips;
. Performance issues: Noise from the microprocessor would materially
degrade the tight performance requirements of an FTG;
. Customized nature of FTGs: FTGs are specifically tailored for memory
type, microprocessor speed, and core logic architecture. Supporting all
configurations significantly increases cost and complexity;
. Unique design issues: The complexity of FTG designs could negatively
affect the product time-to-market;
. Technological barriers: The analog component of a mixed-signal
integrated circuit does not operate efficiently at the low voltage
levels of high speed digital cores; and
. Pin count restraint: Additional timing signal functions would add
several "input/output" pins to a chip adding significant packaging and
die costs as well as exacerbating severe space constraints.
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Pixel clocks are highly specialized FTG-related integrated circuits that
transfer digital data to flat panel display screens. The flat panel display
market is an emerging market, representing less than 4% of PC monitors sold
worldwide today. We estimate that the sales of semiconductors (of which pixel
clocks are a component) for flat panel applications could grow from under $50
million today to over $450 million by 2004.
Non-Clocks
Custom mixed-signal integrated circuits are used primarily in medical,
industrial, consumer and imaging applications such as glucose measurement
machines, hearing aids, burglar alarm systems, caller ID boxes and others. The
custom niche of the mixed-signal integrated market has historically
demonstrated strong and stable growth due to the specialization of design and
the wide variety of applications in the marketplace.
Customized products are typically sold pursuant to development and product
contracts which generally provide for partial reimbursement of development
costs and a minimum purchase commitment by the customer. This arrangement
produces profitability on a per product basis. Therefore, overall margins
within this custom niche segment tend to be higher and more stable given the
high-value and sole-sourced nature of custom integrated circuits.
Transceivers are integrated circuits that receive and transmit signals
between PC systems in networking applications. We believe the transceiver
market to be approximately $160 million. This market has experienced rapid
growth over the last three years, driven by the rapid proliferation of the Fast
Ethernet networking protocol among PC systems worldwide. Industry sources
estimate that demand for Fast Ethernet products will increase from
approximately 10 million ports in calendar year 1996 to approximately 60
million ports in calendar year 1999.
A growing trend among networking equipment vendors has been to integrate
transceivers into the digital logic of network interface cards in PCs and
telecommunications hubs or switches in order to reduce the cost per port
supplied to their customers. However, certain niche applications such as mobile
computing, printer servers, cable modems, and set-top boxes will continue to
demand "stand-alone" transceivers.
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BUSINESS
ICS
We are a worldwide leader in the design, development and marketing of FTGs.
FTGs are integrated circuits on a single chip that emit timing signals or
pulses used to sequence and synchronize electronic operations in order to
ensure that information is interpreted at the right time and speed. Every
microprocessor and most electronic devices with any degree of complexity
require FTGs to time and synchronize their various operations. FTGs are an
indispensable part of the electronic world and are often referred to as the
heartbeat of electronic systems. FTGs are used in a wide variety and growing
number of applications including: computer systems (desktops, laptops, disk
drives, printers and peripheral cards), consumer electronics (digital video
disk players, video games, flat panel displays, high-definition TV and cable
and satellite TV set-top boxes) and communication devices (hubs and T1
framers).
We have developed a reputation for engineering excellence and innovative
technology in FTG design. We pioneered the FTG market in 1988, introducing FTGs
for video and graphics applications, and since then have consistently led the
industry with several technical designs, including delivering the first FTG for
the PC motherboard in 1990 and the first FTG for the Intel Pentium
microprocessor in 1993. Our ongoing focus on product innovation has led to the
introduction of approximately 300 new products into the marketplace over the
past three fiscal years. We believe we currently hold the leadership position
in the largest FTG market segment, desktop PC motherboards, with an estimated
worldwide market share of 59% in the first quarter of fiscal year 2000, and we
believe we maintain leadership positions in other non-PC motherboard
applications, including set-top boxes, disk drives and flat panel displays.
We have developed long-standing and valuable relationships with the majority
of leading OEMs of personal computers, peripherals and communications
equipment. We work closely with these OEMs to develop unique timing, sequencing
and synchronization solutions and are highly integrated into their product
design and development. Many OEMs, including Intel and AMD, recommend our
frequency timing components on their reference boards and marketing materials.
Our customers include such companies as Intel, IBM, Dell, Compaq, Hewlett-
Packard, Toshiba, Maxtek Technology, SCI, Gateway, Sony, Panasonic, Zenith,
Seagate, Silicon Graphics, Broadcom, Siemens, Acer, MEC Technology, Asustek
Computer, Giga-Byte Technology, Seagate, Amega, Hitachi and Hughes Network.
For the latest three fiscal years ended July 3, 1999, we have grown our
total revenue at a compound annual rate of 15% and EBITDA at a compound annual
rate of 39%. On a pro forma basis, for the year ended July 3, 1999, we
generated revenue of $139.1 million and EBITDA of $42.0 million.
History
1976--Founded as mixed-signal (analog/digital) circuit design house
1988--Pioneered FTG industry
1991--Completed initial public stock offering
1992--Acquired Avasem Inc. (a designer of PC FTGs)
1997--Acquired MicroClock, Inc. (a designer of non-PC FTGs)
1999--Entered into merger agreement
1999--3Com Corporation purchased certain intellectual property and equipment
from our Data Communications product group
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Product Overview
Clocks. Within our Clocks product group is our group which supplies a broad
line of FTG products for use in PC motherboard and peripheral applications.
These FTGs control multiple processes by providing and synchronizing the timing
of the computer system, including signals from the video screen, graphics
controller, memory, keyboard, microprocessor, disk drives and communication
ports.
This product group also designs, develops and markets FTGs for non-PC
motherboard applications such as digital video disk players, set-top boxes,
digital cameras, laser printers and digital TVs, as well as cordless and
wireless communications applications. The timing requirements of these products
have traditionally been served by crystal oscillators. Crystal oscillators are
components manufactured from quartz that resonate at a single set frequency. In
situations where a single FTG can replace multiple crystal oscillators, FTGs
have emerged as both more cost-effective and technologically superior solutions
than the crystal-based standard. We view the $2.5 billion crystal-based
oscillator market as a future growth opportunity, as our FTG products provide
viable alternatives to the present crystal-based standard. Several application
segments are leading the conversion from crystal oscillators to FTGs, including
set-top boxes, telecom networking equipment and mass storage systems.
A significant area of growth in this product group is highly specialized
FTGs, called pixel clocks, for flat panel displays. We currently have design
specifications with 48 different flat panel display OEMs and continue to
innovate our FTG design technology to provide more functionality and
performance to our flat panel OEM customers. The flat panel display market is
an emerging and rapidly growing application. We shipped approximately 300,000
units to this sector in fiscal year 1999.
Non-Clocks. Our Non-Clocks segment sells leading edge mixed-signal (analog
and digital) integrated circuits customized to the specific requirements of a
broad range of customers and applications. Custom mixed-signal products are
used in medical, consumer and industrial applications such as glucose
measurement devices, hearing aids, burglar alarm systems and caller ID boxes.
Custom mixed-signal integrated circuits are typically sold through development
and product contracts of five years or more, which generally provide a minimum
purchase commitment by the customer.
Our Non-Clocks segment includes a portfolio of transceiver integrated
circuits that transmit and receive electronic data between various PC systems.
Our transceivers are utilized in a wide variety of networking protocols
including Fast Ethernet, Asynchronous Transfer Mode and SONET applications. Our
flagship product, the ICS1890, was the industry's first single-chip integrated
circuit transceiver for the Fast Ethernet protocol.
On February 18, 1999, we sold certain intellectual property and equipment of
our Non-Clocks product group to 3Com Corporation for $16.0 million in cash. We
decided to reduce our ongoing investment in this product group in order to
focus on our core FTG and Systems Technology product groups.
We believe these core product groups will continue to experience stronger
growth, higher margins, and a more favorable risk profile than our Non-Clocks
product group. Most importantly, we believe we have several competitive
advantages in our core product groups which will enable us to sustain our
leadership positions in these relevant markets.
The sale of certain assets of our Non-Clocks product group benefits us by
permanently eliminating certain fixed costs associated with research and
development while at the same time allowing us to retain the right to sell
certain of our existing and next generation transceiver products over their
remaining product life cycles. While revenue from this product group will
eventually decline over the next few years, the sale allows us to optimize this
product group's cost structure and contribution to EBITDA while these products
continue to be sold.
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Competitive Strengths
Worldwide Leadership Position. We pioneered the market for FTGs in 1988,
shipped the first standard FTG for desktop PC motherboards in 1990, and were
the first to meet Intel's FTG specifications for its Pentium microprocessor
series in 1993. We believe that we currently hold the leadership position in
FTGs within desktop PC motherboards, with an estimated worldwide market share
of 59% in the first quarter of fiscal year 2000. In addition, we believe we
have leadership positions in several non-PC motherboard applications, including
set-top boxes and disk drives.
Defensible Technology and Design Expertise. For over twenty years, we have
developed libraries of proprietary and patented mixed-signal integrated circuit
designs and have invested in extensive computer-aided design and engineering
resources specifically designed to support the increasing complexity and
customized nature of FTGs. Our focus on product innovation and leading
technology has resulted in the introduction of approximately 300 new products
into the marketplace over the past three fiscal years. We work closely with
OEMs to develop unique timing, sequencing and synchronization solutions and are
highly integrated into their product design and development. As device
attributes and system speeds continue to increase, FTG design continues to
become more complex. As a result, our combination of analog and digital
expertise is an important core competency and a significant barrier to entry.
Industry First Designs
. First to develop frequency timing generator--1988
. First to develop standard FTG for desktop PC motherboards--1990
. First to develop FTG for Pentium motherboard--1993
. First to develop FTG for Digital Alpha motherboard--1994
. First to develop Fast Ethernet transceiver--1996
. First to incorporate EMI reduction into motherboard clocks--1997
. First to develop 1 gigahertz fiber channel transceiver--1998
. First to develop pixel clock for flat panel displays at 135Mhz--1998
Superior Product Performance and Attributes. We believe that we have the
leading position in the key FTG performance measures. Dataquest research
suggests that the technical capabilities of our products are, on average,
superior to those of our major competitors. The combination of these
performance attributes allows our FTGs to operate faster than those of our
competitors and improves overall system performance. Dataquest measured the
products of the major competitors across five performance criteria including
jitter (error in signal shape), skew (error in signal repetition), number of
frequencies, breadth of products and EMI (electromagnetic interference). We
ranked first in 4 of the 5 categories and second in the fifth.
<TABLE>
<CAPTION>
No. of
Company Jitter Skew Frequencies Breadth EMI
------- ------ ------ ----------- ------- ---
<S> <C> <C> <C> <C> <C>
Integrated Circuit Systems............. 1 1 1 1 2
IC Works............................... 2 2 3 2 1
IMI.................................... 3 3 2 3 3
Cypress................................ 3 2 4 4 3
</TABLE>
Low Cost Provider. We believe that we are one of the lowest cost producers
of FTGs because of our ability to leverage research and development costs over
a broad product line, our close relationship with suppliers and our position as
one of the largest providers to the FTG market. In addition, we use third-party
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manufacturers to supply silicon wafers and assemble our products. Therefore, we
do not incur the significant fixed costs of building, operating and upgrading a
wafer foundry or assembly house. As a result of our leadership position,
extensive product application and highly variable cost structure, we are able
to offer a compelling value proposition to customers of high performance,
quality products at competitive prices.
Superior Time-to-Market Capabilities. Minimizing the time new products take
to reach the market is an important purchase criterion for our customers who
are increasingly trying to improve inventory and supply chain management to
meet rapidly growing demand forecasts. We believe that our close relationships
with leading third-party manufacturers, in-house testing capabilities, leading
design expertise, large platform of existing designs, and close involvement
with customer design teams allow us to anticipate customers' needs and provide
faster product solutions than other competitors. Several examples illustrate
our competitive advantage in this area. First, we developed the first chip in
the industry whose timing signals can be pre-set from 1 to 160 MHz by the user
without additional external devices, software or programmers, thereby
eliminating the high cost and long lead times associated with certain
customized FTGs. Second, we established our own testing and quality assurance
facility in Singapore near a major third-party manufacturer in order to shorten
delivery times to customer assembly facilities. Third, we have developed unique
relationships with certain third-party manufacturers to store work-in-process
chips (i.e., wafer banks) that are ready to be finished in half the normal
production time upon order. Finally, we have a substantial portfolio of designs
or building blocks from which we can draw upon to develop customized solutions
quickly. We believe that the resulting time-to-market is substantially less
than those of our competitors, thereby creating a significant competitive
advantage with OEM customers.
Broad and Diversified Product Line. We have a broad product line consisting
of unique, customized solutions for a wide variety of application and customer
segments, including consumer electronics, communications systems, medical
devices and computer systems. Our ability to provide OEM customers with FTG
technology and design expertise across their entire line (e.g., desktop PCs,
mobile PCs, servers and workstations) is a significant competitive advantage.
For example, we have the ability to produce an unusually wide range of
frequencies for our customers, from 66.6 megahertz FTGs for older generation
motherboard systems to 133 megahertz FTGs for new generation Pentium III
systems to 460 megahertz FTGs for very high performance workstations. In
addition, our wide breadth of products helps to diversify our revenue base so
that we are not dependent on the success of any single product. In fact, for
the twelve months ended July 3, 1999, the average product represented less than
$300,000 of revenue. We believe that our broad and diversified product line
will continue to provide significant value for our customers and enable us to
expand our leadership position.
Blue Chip Customer Base. We have long-standing and valuable relationships
with most of the major OEMs of personal computers, peripherals and
communications equipment. Certain manufacturers, including Intel, reference our
frequency timing components on their data sheets and marketing materials. We
are closely integrated with the design teams of our system manufacturer
customers and often are afforded the opportunity to solve their timing
requirements early in their development cycle. Many OEMs, including Intel and
AMD, recommend our frequency timing components on their reference boards and
marketing materials. The risk and cost to OEMs of certifying new vendors, our
worldwide leadership position and continuing product innovation all provide
significant competitive advantages and switching barriers versus smaller
competitors. Our list of leading-edge manufacturers continues to expand and
includes Intel, IBM, Dell, Compaq, Hewlett-Packard, Toshiba, Gateway, Sony,
Panasonic, Zenith, Seagate, Silicon Graphics, Broadcom, Siemens, and Acer.
Experienced Management Team with Significant Equity Ownership. We are led by
an exceptional team of eleven senior managers who average nearly eight years of
experience with us and collectively possess over 200 years of experience in the
semiconductor industry. Our management has demonstrated its ability to develop
leading market share positions in several application segments, develop
innovative core technology and achieve strong financial performance. Over the
last three fiscal years, our revenue has increased at a compound annual rate of
15% and our EBITDA has increased at a compound annual rate of 39%. As of July
3, 1999, the senior
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management team and many other employees own new common stock and options,
together representing up to approximately 33% of our common stock on a fully-
diluted basis.
Business Strategy
Our business strategy is to focus on our core FTG business and provide
customized and increasingly complex FTG products to our diversified customer
base. We have developed a set of strong design systems and business processes
that have enabled us to achieve a leading market position and a strong track
record of profitable growth. We intend to continue this business strategy and
strengthen our competitive position through the following initiatives:
Capitalize on Strong Industry Dynamics. We believe that our existing key FTG
markets will continue to experience strong growth. Industry sources expect the
PC motherboard market for FTGs to grow more than 20% per year over the next
four years driven by strong PC unit shipment growth and the increasing number
of FTGs per motherboard. With the leading worldwide market share position
estimated at approximately 59% in desktop PC motherboard FTGs, we are well
positioned to capitalize on the strong growth trends expected in this market.
In addition, we view certain segments of the $2.5 billion crystal oscillator
market as future growth opportunities. As electronic systems require higher
processing speeds, digital capabilities and multiple frequencies to operate
efficiently, we expect that demand for FTGs with faster speeds and multiple
frequency timing capabilities will accelerate and replace the use of crystal
oscillators. Examples of the "digitization" trend include: the substitution of
video cassette recorders by digital video disk players, analog set-top boxes by
digital set-top boxes, traditional cathode ray tube monitors by flat panel
displays and analog television by high-definition television. We estimate these
applications and others, where a single FTG could replace multiple crystals,
representing a market of approximately $130 million today, could reach $400
million by 2002.
Remain Design Leader in Core FTG Technology. We believe that our strong
market share is a function of our ability to continue to produce new designs
within short time-to-market requirements. We have led the industry with many
technical designs, including delivering the first FTG for the Intel Pentium
microprocessor in 1993 and the first FTG for the Digital Alpha microprocessor
in 1994. We possess an extensive library of designs as well as a number of key
process patents that enable us to lead the industry in product development. In
order to maintain our position as a worldwide leader in the FTG market, we plan
to continue to make significant investments in research and development. Over
the last three years, we have introduced more than 300 new products, many of
which provide timing solutions for new generations of PCs, multimedia systems,
digital set-top boxes and numerous other electronic devices. We are currently
involved in the design of FTGs for the next generation of PC motherboards. In
particular, our FTGs are being used for the Pentium III (high-end motherboard),
Whitney (sub-$1,000 PC motherboard) and Mobile BX (new notebook motherboard)
platforms, all of which are being released in calendar year 1999.
Application of Core FTG Technology into Other Growth Markets. We believe
that our core FTG technology can be leveraged into new applications where our
FTG expertise provides differentiated technical capabilities. For example, we
are working on several product solutions for consumer electronics and
communications systems that are shifting from the analog to the digital realm.
One particular area of focus involves flat panel displays. Our Clocks product
group has developed specialized FTG-related chips, called pixel clocks, for
flat panel displays that leverage our core FTG technology by combining the
timing function and video signal conversion function onto a single chip. We
estimate that sales of semiconductors to the flat panel display market will
grow from under $50 million today to over $450 million by 2004. We believe we
are the market leader in the design of FTG-related products for this market,
and we intend to aggressively pursue this high growth application segment.
Cash Deposit
We maintain a cash deposit with Chartered Semiconductor Manufacturing PTE
Ltd. ("CSM"), a wafer fabrication operation owned by the Singapore government.
We first made this deposit in November 1995 to
51
<PAGE>
procure increased wafer fabrication from CSM. At the time, suppliers commonly
used cash deposits when establishing customer relationships. As of July 3,
1999, CSM held $15.3 million of this deposit. By contractual agreement, CSM is
required to return $11.3 million to us by December 31, 2000 and $4.0 million by
June 30, 2002, regardless of how many wafers we order. This schedule can be
accelerated, however, if we exceed certain minimum order levels. We believe
that we are likely to exceed these minimum order levels, and, therefore,
accelerated returns are likely. As of July 3, 1999, CSM has returned, in total,
approximately $6.7 million to us prior to scheduled returns.
Manufacturing Relationships
We qualify and utilize third-party suppliers for the manufacture of
silicon wafers. All of our wafers currently are manufactured by outside
suppliers, three of which supply the substantial majority of our wafers. These
manufactured wafers are packaged at two primary assemblers. We agree with our
suppliers on production schedules based on order backlog and demand forecasts
for the approaching three month period.
Top Suppliers
<TABLE>
<CAPTION>
Length of
Name Relationship
---- ------------
<S> <C>
Wafer Fabs:
Chartered Semiconductor....................................... 4 years
United Microelectronics Corporation........................... 12 years
American Microsystems Inc. ................................... 17 years
Assemblers:
Amkor/Anam International...................................... 17 years
P.T. Astra.................................................... 8 years
</TABLE>
During the fourth quarter of fiscal year 1997, we set up a test and drop-
ship facility in Singapore's Kolam Ayer Industrial Park to achieve faster
delivery of our products to customers throughout the Pacific Rim. The Singapore
facility handles wafer probe and final testing for over 95% of our FTG
products. The facility began testing devices in the first quarter of fiscal
year 1998 and shipments began in the second quarter of fiscal year 1998.
Sales Support and Customers
We market our products through a direct sales force that manages a worldwide
network of independent sales representatives and distributors. We direct our
sales efforts through our offices in Norristown (PA), San Jose (CA), Houston
(TX) and Taipei (Taiwan).
We believe that our customers' purchase decisions are based on performance,
time-to-market, service and cost. Many customers have long relationships with
us based on our success in meeting these criteria. We believe that our ability
to rapidly respond to changes in demand for new or modified designs with
consistent high quality is a major factor in our success at sustaining customer
partnerships. For example, we are considered a strategic supplier to Intel as
we have developed a close relationship with the world's largest chip maker
since 1993. We are currently in the process of developing the next generation
of designs to support Intel's new family of products.
We currently have more than 400 customers, with no single customer
accounting for 10% or more of our revenue in the fiscal year ended July 3, 1999
other than Maxtek Technology, which accounted for 12% of our fiscal year 1999
total revenue.
52
<PAGE>
MAJOR CUSTOMERS IN EACH PRODUCT AREA
<TABLE>
<C> <S>
Clocks: Non-Clocks:
Acer 3Com
Asustek Computer 3DFX
Compaq A-Trend Technology
Dell Computer Bay Networks
Fujitsu Devices Cochlear Pty. Ltd.
Giga-Byte Technology Creative Technology
Hewlett Packard KDI Precision
Hitachi Lexmark International
IBM LifeScan
Intel Nortel
Intergraph Ricoh
LG Electronics Wells Fargo Security Systems
Maxtek Technology Xircom
MDL
MEC Technology
Micro Summit K. K.
Nu Horizons
Philips
Samsung Americas
Sanyo
Seagate Technology
Wyle Electronics
</TABLE>
Research and Development
The design process for our products is extremely complex and iterative,
involving the development of a prototype through computer-aided design, the use
of simulation methodology, the generation of photo masks for the manufacturing
process, the fabrication of wafers and the characterization of the prototype on
test systems before submission to customers for qualification. Research and
development efforts concentrate on the design and development of new leading-
edge products for our markets and the continual enhancement of our design
capabilities.
Over the last three fiscal years, we have developed and introduced to market
approximately 300 new products. For over twenty years, we have developed
libraries of proprietary mixed-signal integrated circuit designs and have
invested in extensive computer-aided design and engineering resources
specifically designed to support the increasing complexity and customized
nature of FTGs. Investments in research and development were approximately
$21.3 million, $19.8 million and $13.5 million in fiscal years 1999, 1998 and
1997, respectively. Such expenses typically include costs for engineering
personnel, prototype and wafer mask costs, and investment in design tools and
support overhead related to new and existing product development. As of
July 3, 1999, our research and development staff comprised 79 people. We will
continue to invest in research and new product development within our Clocks
and Non-Clocks product groups. We believe our ability to consistently develop
and market new generations of FTGs has become a key competitive advantage and
has contributed significantly to our leading market share.
Patents/Trademarks
We hold several patents, as well as copyrights, mask works and trademarks
with respect to our various products and expect to continue to file
applications for additional intellectual property rights in the future as a
means of protecting our technology and market position. These patents generally
have a 17-year life and begin expiring in fiscal year 2009. In addition, we
seek to protect our proprietary information and know-how through
53
<PAGE>
the use of trade secrets, confidentiality agreements and other security
measures. To augment product feature sets or accelerate development schedules,
we also license certain technologies. We do not consider any single patent or
license to be material to our business. In certain instances, we have performed
design services for OEM customers pursuant to an agreement by which we provide
certain of our intellectual property rights with the final product to our
customers. Such transfers are also not deemed material to our business. See
"Risk Factors--We Depend on Patents, Trade Secrets and Proprietary Technology."
Employees
As of July 3, 1999, we had 246 full-time employees, 79 of whom were engaged
in research and development, 24 in sales, 18 in marketing and technical
support, 36 in finance and administration and 89 in manufacturing support and
operations. We have incentive programs to retain our key research and
development staff. As of July 3, 1999, the senior management team and many
other employees own new common stock and options, together representing up to
approximately 33% of our common stock on a fully-diluted basis.
Facilities
Our corporate headquarters, covering 61,000 square feet, is located in
Norristown, Pennsylvania. We purchased this property in September 1992. On
January 18, 1999, we entered into an agreement of sale with BET Investments
III, L.P. to sell the land and property of our Norristown location for $5.5
million. The sale transaction was completed on April 13, 1999. On January 29,
1999, we signed a lease with BET Investments IV, the assignee of BET
Investments III, L.P., to lease back the Norristown building for a term of
eight years commencing upon the closing of the sale, with monthly rent
beginning at approximately $51,000 for the first year and progressively
increasing each year to approximately $63,000 in the eighth year. We also have
a renewal option of three or more years after the initial eight-year term.
We utilize a sales office located in Taipei, Taiwan, which consists of 1,300
square feet of office space leased pursuant to an agreement which expires in
November 2000. We also utilize a facility located in Singapore for testing,
warehousing, sales and administration, which consists of 16,000 square feet of
space leased pursuant to an agreement which expires in August 2000.
In November 1998, we relocated our San Jose operations to a new facility in
San Jose with 70,000 square feet of office space pursuant to a new lease
agreement which will expire in December 2008. We believe that this new facility
is adequate to meet our requirements going forward.
Legal Proceedings
On January 27, 1999, Harbor Finance Partners and John P. McCarthy Money
Purchase Plan filed a complaint on behalf of a purported class of our
shareholders in the Court of Common Pleas of Montgomery County, Pennsylvania
against us and Mr. Henry I. Boreen in his capacity as our interim Chief
Executive Officer alleging that the consideration to be paid in the merger is
inadequate and seeking to enjoin the merger as well as unspecified compensatory
damages. In March 1999, the plaintiffs amended their complaint to add Mr. Hock
E. Tan as a defendant in his capacity as our Senior Vice President, Chief
Financial Officer, Chief Operating Officer and Secretary. In September 1999,
the plaintiffs dismissed their complaint without requiring any payment or other
consideration from us or any of the other defendants.
On July 31, 1998, Lemelson Medical, Education & Research Foundation, L.P.
("Lemelson") filed a patent infringement action in the U.S. District Court for
the District of Arizona against over 20 companies, including the Company. This
litigation involves 16 patents, all derived from an original 1954 filing.
Lemelson claims that the patents cover a number of aspects of semiconductor
chip manufacturing, in particular optical
54
<PAGE>
imaging using alignment marks on the semiconductor chips, on assembly of the
chips into packages, as well as bar-coding for inventory control. The liability
of the Company is alleged under the U.S. Process Patent Act, which makes a
seller of goods liable for a process abroad that would infringe a U.S. patent
if made here. A few of ICS' foundries are already licensed under the patents,
thus reducing the potential liability of the Company. Some of the defendants
have settled with Lemelson, and the Company is currently in settlement
discussions with Lemelson.
On July 2, 1999, Motorola, Inc. filed an action against the Company and four
former employees of Motorola in the Superior Court of Arizona, Maricopa County,
for unfair competition, breach of contract, misappropriation of trade secrets
and intentional interference with contractual relations. The four former
employees left Motorola and began employment with the Company in May 1999.
Motorola is seeking an injunction to prevent the Company from employing the
former Motorola employees for a reasonable period of time and to enjoin the
Company from using Motorola's trade secrets. Motorola is also suing to recover
its attorneys' fees, unspecified damages and other relief in this matter. The
Company is currently in settlement discussions with Motorola.
In addition to the foregoing, from time to time, various inquiries,
potential claims and charges and litigation (collectively "claims") are made,
asserted or commenced by or against the Company, principally arising from or
related to contractual relations and possible patent infringement. The Company
believes that any such claims currently pending, and the other litigation
matters discussed above, individually and in the aggregate, have been
adequately reserved and will not have any material adverse effect on the
Company's consolidated financial position or results of operations, although no
assurance can be made in this regard.
55
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information about our directors and
the executive officers.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Hock E. Tan.............. 48 Chief Executive Officer, President and Director
Lewis C. Eggebrecht...... 55 Vice President and Chief Scientist
Henry I. Boreen.......... 72 Director
David Dominik............ 43 Director
Michael A. Krupka........ 34 Director
Prescott Ashe............ 32 Director
John Howard.............. 47 Director
</TABLE>
Hock E. Tan began serving as Chief Executive Officer and President after the
recapitalization in May 11, 1999. Mr. Tan joined us in August 1994 and has
served as Senior Vice President and Chief Financial Officer since February
1995. In April 1996, Mr. Tan was appointed to the additional post of Chief
Operating Officer. Mr. Tan was Vice President of Finance of Commodore
International, Ltd. from 1992 to 1994. Mr. Tan has served as Managing Director
of Pacven Investment, Ltd. from 1988 to 1992 and was Managing Director of Hume
Industries (M) Ltd. from 1983 to 1988. His career also includes senior
financial positions with PepsiCo, Inc. and General Motors Corporation. Mr. Tan
holds an M.B.A. from Harvard Business School and an M.S. in Mechanical
Engineering from Massachusetts Institute of Technology.
Lewis C. Eggebrecht was appointed Vice President and Chief Scientist in 1998
and possesses over 30 years of experience in the integrated circuit and
personal computer industries. Prior to his employment with us, Mr. Eggebrecht
was Chief Architect for the Multimedia Products Group at Philips Semiconductor
from 1996 to 1998. Mr. Eggebrecht has also held senior engineering positions at
S3, Commodore International, Franklin Computer and IBM. Mr. Eggebrecht holds
numerous patents and industry awards and has authored over 25 articles for a
variety of technical publications. Mr. Eggebrecht holds a B.S.E.E. degree from
the Michigan Technological University and has accomplished advanced degree work
at the University of Minnesota.
Henry I. Boreen has been a director since December 1984 and chairman of the
board of directors since April 1995. He served as Interim Chief Executive
officer from March 1998 through October 1998. Since 1984, Mr. Boreen has been a
principal of HIB International. From 1989 to January 1998, Mr. Boreen has also
served as chairman of AM Communications, Inc., a manufacturer of
telecommunications equipment. Mr. Boreen has over 35 years of experience in the
integrated circuits industry and was the founder and chairman of Solid State
Scientific, a semiconductor manufacturer.
David Dominik joined Bain Capital in 1990 as a Managing Director. Prior to
joining Bain Capital, Mr. Dominik was a general partner of Zero Stage Capital,
a venture capital firm focused on early-stage companies. Previously, Mr.
Dominik was a venture capital investor and assistant to the Chairman of Genzyme
Corporation, a biotechnology firm. From 1982 to 1984, Mr. Dominik was a
management consultant at Bain & Company. Mr. Dominik serves on the board of
directors of Oasis Healthcare, Therma-Wave, Inc. and Dynamic Details,
Incorporated.
Michael A. Krupka joined Bain Capital in 1991 and has been a Managing
Director since 1997. Prior to joining Bain Capital, Mr. Krupka spent several
years as a management consultant at Bain & Company where he focused on
technology and technology-related companies. In addition, he has served in
several senior operating roles at Bain Capital portfolio companies. Mr. Krupka
currently serves on the board of directors of Sealy Corporation.
Prescott Ashe joined Bain Capital in 1991 and has been a Principal at Bain
Capital since 1998. Prior to Bain Capital, Mr. Ashe was a management consultant
at Bain & Company. Mr. Ashe currently serves on the board of directors of
Dynamic Details, Incorporated.
56
<PAGE>
John D. Howard joined Bear Stearns in March of 1997 to develop and build its
Merchant Banking business. He is a Senior Managing Director of Bear Stearns and
Head of Merchant Banking. Prior to joining Bear Stearns, Mr. Howard founded
Gryphon Capital Partners, a private investment firm. From 1990 to 1996, he was
co-Chief Executive Officer of Vestar Capital Partners, Inc., a private
investment firm specializing in management buyouts. In addition, Mr. Howard was
a Senior Vice President and partner of Wesray Capital Corporation, one of the
foremost private equity sponsors and a pioneer of leveraged buyouts, from 1985
to 1990. Formerly, Mr. Howard was a Vice President in the mergers and
acquisitions group of Bear Stearns.
Employment and Consulting Agreement
In connection with the closing of the recapitalization, Mr. Tan entered into
an employment contract pursuant to which he serves as our Chief Executive
Officer and President with a base salary of $250,000 per year. In addition to
the base salary, Mr. Tan is eligible to earn an annual bonus of up to 120% of
his base salary based upon our attaining certain performance targets
established annually by the board of directors. During his term of employment,
Bain Capital has agreed to nominate and vote for Mr. Tan to serve as a member
of the board of directors.
In connection with the closing of the recapitalization, Mr. Boreen entered
into a three-year consulting contract providing for compensation of $350,000
annually. During the term of the consulting agreement, Mr. Boreen will make
himself reasonably available to render advice and services to us as we may
reasonably require and as are consistent with the type of duties and services
he has previously rendered to us. In no event will Mr. Boreen be required to be
available to us for more than twelve days in any one-year period. We or Mr.
Boreen may terminate the consulting agreement upon thirty days prior written
notice. In the event we terminate Mr. Boreen for any reason, he will be
entitled to receive any remaining payments in a lump sum within thirty days of
his termination.
Compensation of Directors
We will reimburse members of the board of directors for any out-of-pocket
expenses incurred by them in connection with services provided in such
capacity. In addition, we may compensate independent members of the board of
directors for services provided in such capacity.
57
<PAGE>
Executive Compensation
Summary Compensation Table
The following table sets forth, for the fiscal years ended July 3, 1999,
June 27, 1998 and June 28, 1997, the compensation paid to those persons who
were, at any time during fiscal year 1999, our chief executive officer and our
next most highly compensated executive officers whose total annual salary and
bonus was in excess of $100,000 for fiscal year 1999.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------- ------------
Securities
Underlying All Other
Salary Bonus Options/SARS Compensation
Fiscal Year ($) ($)(1) (#) ($)(2)
----------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Hock E. Tan (3).......... 1999 232,565 70,560 705,469 107,340
Chief Executive Officer
and 1998 209,997 168,000 -- 5,254
President (since May
1999) 1997 166,273 112,660 50,000 5,182
Lewis C. Eggebrecht...... 1999 180,560 80,490 400,000 64,214
Vice President and
Chief Scientist 1998 78,923 84,857 100,000 5,204
K. Venkateswaren......... 1999 170,618 56,054 367,444 104,055
Vice President, 1998 169,423 69,483 3,000 5,178
Engineering Services 1997 158,471 49,047 49,500 5,106
Henry I. Boreen (4)...... 1999 72,262 26,880 38,000 364
Chief Executive Officer 1998 66,923 -- 58,000 --
(May 1998--November
1998) 1997 96,923 40,020 75,000 --
Rudolf S. Gassner (5).... 1999 74,031 -- 212,000 14,788
Chairman of the Board
(January 1999--May
1999)
</TABLE>
- --------
(1) Includes cash bonuses for services rendered in the applicable fiscal year.
(2) Includes amounts contributed by the Company (i) under the Company's 401(k)
Plan as follows: Mr. Tan--$4,750 for 1999, $4,750 for 1998 and $4,750 for
1997; Dr. Venkateswaren--$4,750 for 1999, $4,750 for 1998 and $4,750 for
1997; Mr. Eggebrecht--$3,821 for 1999 and $3,750 for 1998; Mr. Olsen--
$4,750 for 1999, $7,596 for 1998 and $1,904 for 1997; Mr. Bland--$4,750 for
1999, $7,596 for 1998 and $1,904 for 1997; (ii) for premiums for a life
insurance policy as follows: Mr. Tan--$504 for 1999, $504 for 1998, and
$432 for 1997; Dr. Venkateswaren--$428 for 1999; $428 for 1998, and $356
for 1997; Mr. Eggebrecht $454 for 1999 and $454 for 1998; Mr. Olsen--$403
for 1999, $378 for 1998 and $324 for 1997; Mr. Bland--$403 for 1999, $378
for 1998 and $324 for 1997; (iii) for deferred compensation agreements as
follows: Mr. Tan--$102,086 for 1999, Mr. Eggebrecht--$59,940 for 1999 and
Mr. Venkateswaren--$98,877 for 1999 and (iv) car allowance Mr. Gassner--
$7,938 and (v) lawyer fees Mr. Gassner--$6,850.
(3) Mr. Tan was appointed Chief Executive Officer and President at the close of
the recapitalization on May 11, 1999.
(4) Mr. Boreen resigned as Chief Executive Officer effective December 31, 1998.
(5) Effective January 1999, Mr. Gassner was elected chairman of the board of
directors and assigned the responsibilities of chief executive officer. Mr.
Gassner's employment terminated pursuant to the terms of his employment
agreement at the close of the recapitalization on May 11, 1999.
58
<PAGE>
The following table sets forth the option grants during the fiscal year
ended July 3, 1999 for the individuals named in the Summary Compensation table.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------- ---------------------
% of Total Options Exercise
Granted to or Base
Options Employees in Price Expiration
Name Granted Fiscal Year ($/SH) Date 5%($) 10%($)
- ---- ------- ------------------ -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hock E. Tan............. 229,922(1) 4.7% 0.0440 5/11/09 72,278 121,082
25,547(1) 0.5% 3.6000 5/11/09 57,839 146,575
300,000(1) 6.2% 0.2200 5/11/09 41,507 105,187
150,000(1) 0.5% 2.9700 5/11/09 -- --
Lewis C. Eggebrecht..... 135,000(1) 2.8% 0.0440 5/11/09 42,438 71,094
15,000(1) 0.3% 3.6000 5/11/09 33,960 86,062
20,000(2) 0.4% 12.6875 8/03/03 70,106 154,917
166,667(1) 3.4% 0.2200 5/11/09 23,060 58,437
83,333(1) 1.7% 2.9700 5/11/09 -- --
K. Venkateswaren........ 222,700(1) 4.6% 0.0440 5/11/09 70,007 117,279
24,744(1) 0.5% 3.6000 5/11/09 56,021 141,968
80,000(1) 1.6% 0.2200 5/11/09 11,069 28,050
40,000(1) 0.8% 2.9700 5/11/09 -- --
Henry I. Boreen......... 30,000(2) 0.6% 9.9375 9/11/03 82,366 182,008
8,000(2) 0.2% 18.375 2/2/04 40,613 89,745
Rudolf S. Gassner....... 212,000(2) 4.4% 13.875 11/03/03 812,682 1,795,815
</TABLE>
- --------
(1) Granted under the Company's 1999 Stock Option Plan. All such grants are for
our Class A common stock other than those with an exercise price of $3.60
per share, which are for our Class L common stock. Grants under the 1999
Stock Option Plan may not be comparable to previous plans due to the
recapitalization of the Company.
(2) Granted under the Company's 1997 Equity Compensation Plan. In connection
with the recapitalization we paid the holders the following amounts with
respect to the cancellation of such options: Mr. Eggebrecht--$171,250;
Mr. Boreen--$362,375; and Mr. Gassner--$1,297,248.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End(#) FY-End($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
- ---- ----------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Hock E. Tan............. 100,000 $1,021,875 255,469/450,000 (1)
Lewis C. Eggebrecht..... 45,000 $ 341,563 150,000/250,000 (1)
K. Venkateswaren........ 51,500 $ 494,888 247,444/120,000 (1)
Henry I. Boreen......... 88,000 $ 621,750 0/0 (1)
Rudolf S. Gassner....... 235,000 $1,726,625 0/0 (1)
</TABLE>
- --------
(1) Because there is no independent trading market for the Company's common
stock, there is no practicable manner to obtain an aggregate market
valuation.
Executive Employment and Severance Arrangements
As a part of the recapitalization, we entered into an employment agreement
with Hock E. Tan, as CEO and President with a base salary of $250,000 per year.
In addition to his salary, Mr. Tan is eligible to earn an annual bonus of up to
120% of his base salary based upon our attaining certain performance targets
established annually by the board of directors.
59
<PAGE>
We had previously entered into an employment agreement with Henry I. Boreen
on May 6, 1998 to serve as our interim CEO until September 11, 1998. Mr.
Boreen's base compensation was $10,000 per month, plus a grant of 50,000 stock
options with an exercise price of fair market value on the date of the grant,
which immediately vested. On September 14, 1998, we amended the agreement to
extend Mr. Boreen's term to December 31, 1998. The amendment also increased Mr.
Boreen's base compensation to $12,000 per month, plus a grant of 30,000 stock
options with an exercise price of fair market value on the date of the grant.
Those options vested immediately. Mr. Boreen's term as interim CEO ended on
December 31, 1998.
On January 11, 1999, we entered into an employment agreement with Rudolf
Gassner as our Chairman of the Board. The employment period was for one year
commencing on January 1, 1999. Mr. Gassner's responsibilities included finding
a suitable candidate to serve as our Chief Executive Officer, and management of
our day-to-day operations until a suitable Chief Executive Officer is secured.
The agreement provided that we pay Mr. Gassner a monthly salary of $12,000
during the employment term. Mr. Gassner was also entitled to participate in our
incentive compensation plan. This agreement terminated on May 11, 1999 in
connection with the recapitalization.
On November 3, 1998, we granted Mr. Gassner an option to purchase 112,000
shares of our common stock at $13.875 per share, a price equal to fair market
value on the grant date. The options vested on a cumulative basis at a rate of
8,000 shares per month commencing on November 30, 1998, with vesting on
December 31, 1999. On November 3, 1998, we granted Mr. Gassner an option to
purchase an additional 100,000 shares of our common stock at $13.875, a price
equal to the fair market value on the grant date. These options were to vest
and become exercisable on a cumulative basis at the rate of 20,000 shares per
year commencing on the first anniversary of the grant date, with full vesting
an November 3, 2003, with vesting to be accelerated in the event the price of
our common stock were to exceed $20 for 10 consecutive trading days. The
vesting of both of these options was accelerated in connection with the change
of control that resulted from the recapitalization.
Qualified 401(k) and Profit Sharing Plan
We maintain a qualified 401(k) and profit sharing plan. Employees are
permitted to contribute up to 12% of their annual compensation. Under the plan,
we make matching contributions equal to 150% of the first 1% contributed, 125%
of the second 1% contributed, 100% of the third 1% contributed, 75% of the
fourth 1% contributed and 50% of the next 2% contributed up to a maximum of 6%
of annual compensation, subject to the IRS limits. The amounts we contributed
and charged to expense were $0.5 million in both fiscal years 1999 and 1998 and
$0.3 million in fiscal year 1997.
Deferred Compensation Arrangements
As part of the recapitalization, we entered into deferred compensation
arrangements with certain members of our senior management team. The
arrangements expire on May 11, 2009, at which time we will pay the executives
the entire deferred compensation amount regardless of their employment status
at ICS. If a sale of ICS occurs prior to the expiration of the arrangements,
the executives will receive the full benefit amount at that date. In the event
that a Qualified Initial Public Offering (QIPO) occurs prior to the expiration
of the arrangements, the executives will receive 50% of the benefit on that
date. The remaining 50% is payable on that date, one year after the QIPO. The
amount of deferred compensation as of July 3, 1999 was $0.5 million.
Management Equity Participation
Some of the shares of our existing common stock held by some members of
management before the merger were converted into shares of our new common stock
after the merger. In addition, some of the existing stock options held by some
of the members of our management before the merger were converted into options
to purchase shares of our new common stock after the merger and deferred
compensation agreements. Fifteen
60
<PAGE>
members of management participated in the rollover of common stock and stock
options, including Messrs. Henry I. Boreen, Hock E. Tan and Lewis C.
Eggebrecht. These members of management invested an aggregate of $9.8 million
in the recapitalization, consisting primarily of the fair value of certain
common stock and vested stock options.
In order to provide additional financial incentives to certain of our
executives and other key employees, in May 1999 we adopted a stock option plan
under which we will periodically grant options to purchase our new common
stock. These options will vest upon the fulfillment of certain conditions, the
passage of a specified period of time and our achievement of certain
performance goals, as determined by our board of directors. All of the unvested
options of any terminated employee will expire upon termination, and the
exercise period of all vested options will be reduced to sixty days following
the date of termination. We and the equity investors will have the right to
repurchase shares of our common stock issued upon the exercise of options
granted under the stock option plan if any employee ceases to be employed by
us. As of July 3, 1999, the senior management team and many other employees own
new common stock and options, together representing 33% of our common stock on
a fully-diluted basis.
Compensation Committee Interlocks and Insider Participation
Our board of directors does not have a compensation committee. Consequently,
the entire board of directors participates in deliberations concerning
executive officer compensation. Mr. Tan is a member of the board of directors
and is our President and Chief Executive Officer. Mr. Boreen is a member of the
board of directors and is a former officer of the Company. Mr. Gassner was a
member of the board of directors and an officer of the Company prior to the
recapitalization.
On May 11, 1999, we entered into a consulting agreement with Henry Boreen, a
board member, for consulting services. The agreement provides for us to pay Mr.
Boreen $350,000 per year in monthly installments. The term of the consulting
agreement ends on May 11, 2002.
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PRINCIPAL SHAREHOLDERS
Our outstanding equity securities consist of 15,612,588 shares of Class A
common stock, 5,653,079 shares of Class B common stock and 2,362,852 shares of
Class L common stock. The shares of Class A common stock will entitle the
holder to one vote per share on all matters to be voted upon by shareholders.
The Class B common stock and the Class L common stock will be non-voting. The
Class L common stock will be identical to the Class A common stock and the
Class B common stock except that the Class L common stock will be entitled to a
preference over the Class A common stock and the Class B common stock, with
respect to any distribution to holders of our capital stock, equal to the
original cost of such share ($18.00) plus an amount which accrues at a rate of
9% per annum, compounded quarterly. The Class L common stock will be
convertible into Class A common stock upon an initial public offering. Class A
common stock is convertible into Class B common stock at any time, and Class B
common stock is convertible into Class A common stock at any time so long as
after giving effect to the conversion the converting Class B common stock
holders and their affiliates do not own more than 49.9% of the outstanding
shares of Class A common stock.
The following tables set forth certain information regarding the approximate
beneficial ownership of: (i) each class of our equity securities by each person
known to us to own more than 5% of any class of our outstanding voting
securities and (ii) each class of our equity securities by each of our
directors and executive officers and all of the directors and executive
officers as a group, in each case as of July 3, 1999. Unless otherwise noted,
to our knowledge, each of the following shareholders has sole voting and
investment power as to the shares shown.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
---------------------------------------------------------------
Class A Common Stock Class B Common Stock Class L Common Stock
--------------------- -------------------- --------------------
Number of Percentage Number of Percentage Number of Percentage
Name and Address Shares of Class Shares of Class Shares of Class
- ---------------- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Principal Shareholders:
Bain Capital Funds (2).. 7,650,168 49.0% 5,653,079 100% 1,478,139 62.6%
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts
02116
Bear, Stearns & Co. 4,434,416 28.4% -- -- 492,713 20.9%
Inc. .. 245 Park Avenue
New York, New York
10167
Other Investors......... 360,000 2.3% -- -- 40,000 1.7%
Directors and Executive
Officers:
Henry I. Boreen......... 2,065,500 13.2% -- -- 229,500 9.7%
Hock E. Tan (3)......... 364,922 2.3% -- -- 40,547 1.7%
Lewis C. Eggebrecht
(3).................... 135,000 * -- -- 15,000 *
David Dominik (4)....... 7,650,168 49.0% 5,653,079 100% 1,478,139 62.6%
Michael A. Krupka (4)... 7,650,168 49.0% 5,653,079 100% 1,478,139 62.6%
Prescott Ashe (5)....... -- -- -- -- -- --
John Howard (6)......... 4,434,416 28.4% -- -- 492,713 20.9%
Directors and executive
officers as a group (7
persons)............... 14,650,006 93.8% 5,653,079 100% 2,255,899 95.5%
</TABLE>
- --------
* represents less than 1%
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(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of, a security, or the sole or shared
power to dispose, or direct the disposition of, a security and includes
options and warrants exercisable within sixty days.
(2) Includes shares of Class A common stock, Class B common stock and Class L
common stock owned by Bain Capital Fund VI, L.P. ("Fund VI"); BCIP
Associates II ("BCIP II"); BCIP Trust Associates II ("BCIP Trust II"); BCIP
Associates II-B ("BCIP II-B"); BCIP Trust Associates II-B ("BCIP Trust
II-B"); BCIP Associates II-C ("BCIP II-C" and collectively with BCIP II,
BCIP Trust II, BCIP Trust II-B and BCIP II-B, the "BCIPs"); and PEP
Investment PTY Ltd. ("PEP"). The BCIPs, PEP and Fund VI are collectively
referred to as the "Bain Capital Funds."
(3) Includes a total of 364,922 shares of Class A common stock issuable upon
exercise of options and a total of 40,547 shares of Class L Common Stock
issuable upon exercise of options.
(4) Mr. Dominik and Mr. Krupka are Managing Directors of Bain Capital, Inc.,
limited partners of Bain Capital Partners VI, L.P., the sole general
partner of Fund VI, and Managing Directors of Bain Capital Investors VI,
Inc. ("Bain Investors VI"), the sole general partner of Bain Capital
Partners VI, L.P. In addition, (i) Bain Capital, Inc., of which Messrs.
Dominik and Krupka are Managing Directors, is the managing general partner
of each of the BCIPs and has voting and investment power with respect to
the shares owned by PEP, (ii) Messrs. Dominik and Krupka (or affiliated
entities) are general partners of BCIP Trust II, BCIP Trust II-B, BCIP II
and/or BCIP II-B, and (iii) Bain Investors VI is a general partner of BCIP
II-C. Accordingly, each of Mr. Dominik and Mr. Krupka may be deemed to
beneficially own some or all of the shares owned by the Bain Capital Funds.
Each of Mr. Dominik and Mr. Krupka disclaims beneficial ownership of any
such shares.
(5) Mr. Ashe is a Principal of Bain Capital, Inc. and he (or an affiliated
entity) is a general partner of BCIP Trust II, BCIP Trust II-B, BCIP II
and/or BCIP II-B. Accordingly, Mr. Ashe may be deemed to beneficially own
some or all of the shares owned by BCIP II, BCIP II-B, BCIP Trust II and
BCIP Trust II-B. Mr. Ashe disclaims beneficial ownership of any such
shares.
(6) Mr. Howard is a Senior Managing Director of Bear Stearns. Accordingly, Mr.
Howard may be deemed to beneficially own some or all of the shares owned by
Bear, Stearns & Co. Inc. Mr. Howard disclaims beneficial ownership of any
such shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the recapitalization, we, each of the equity investors
and all of our other equity holders have entered into agreements that, among
other things, provide for tag-along rights, drag-along rights, registration
rights, restrictions on the transfer of shares and certain preemptive rights.
The shareholders agreement provides that in certain circumstances various
specified actions, including among others, major corporate transactions such as
acquisitions, divestitures, financings, recapitalizations and mergers, as well
as other actions such as hiring and firing senior managers, setting management
compensation and establishing capital and operating budgets and business plans,
require the approval of a majority of the shares of common stock held by Bain
Capital. Pursuant to a voting agreement, our board of directors is comprised of
three representatives designated by Bain Capital, one representative designated
by Bear Stearns, our chief executive officer so long as he is employed by us as
chief executive officer and Mr. Boreen so long as he owns at least 50% of the
common stock he owns at the closing of the recapitalization.
In connection with the recapitalization, we entered into an advisory
agreement with each of the Equity Investors pursuant to which they agree to
provide financial advisory and consulting services. In exchange for such
services, the equity investors are entitled to an aggregate annual shareholder
advisory fee of $1 million and their out-of-pocket expenses. In addition, the
Equity Investors will receive an aggregate fee not to exceed 1% of the
aggregate value of any acquisition, divesture or financing transaction of us in
which Bain Capital is involved. Each advisory agreement will remain in effect
for an initial term of ten years, subject to termination if Bain Capital and
its affiliates hold less than 50% of our common stock and by the equity
investors or by us upon written notice 90 days prior to the expiration of the
initial term. Each advisory agreement includes customary indemnification
provisions in favor of each of the equity investors. During fiscal 1999, the
Company paid Bain Capital and Bear Stearns shareholder advisory fees of $3.4
million and $4.9 million respectively.
On May 11, 1999, certain members of the management team entered into stock
purchase agreements. In exchange for the purchase of Class A common shares and
Class L common shares, the executives delivered to
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us a promissory note. The notes accrue interest at 8% per annum and mature on
May 11, 2006. The executives may prepay the notes at any time, in full or
increments of $1,000. If the executives receive a bonus from us, the executives
have the obligation to prepay their notes in an amount equal to 50% of the
amount of such bonus, net of the amount of any customary withholding taxes and
such amount paid to us. The total amount outstanding as of July 3, 1999 was
$0.5 million, of which $0.3 million was owed by Mr. Tan.
On May 11, 1999, we entered into a consulting agreement with Henry Boreen, a
board member, for consulting services. The agreement provides for us to pay Mr.
Boreen $350,000 per year in monthly installments. The term of the consulting
agreement ends on May 11, 2002.
DESCRIPTION OF SENIOR CREDIT FACILITY
The senior credit facility provides for two groups of term loans: the term A
loans for $30.0 million and the term B loans for $40.0 million. The senior
credit facility will also provide for revolving loans for up to $25.0 million,
including letters of credit. At the closing of the recapitalization, we
borrowed $3.9 million against the $25.0 million maximum. Subject to certain
restrictions, we may use the senior credit facility in the future for our
working capital and general corporate purposes.
Repayment.
The different loans under the senior credit facility are due as follows:
. The revolving loans--five years after the completion of the
recapitalization;
. The term A loans--2.0% in 2000, 14.0% in 2001, 20.0% in 2002, 28.0% in
2003 and 36.0% in 2004; and
. The term B loans--1.0% in each of 2000, 2001, 2002, 2003 and 2004, 40.0%
in 2005 and 55.0% in 2006.
We may repay any of our borrowings, or reborrowings in the case of the
revolving loans, under the senior credit facility without paying a premium or
penalty, other than payment of breakage costs and reimbursement of the lenders'
actual re-employment costs under certain circumstances.
Also, it is mandatory that we repay any outstanding borrowings out of
certain net cash proceeds we receive from the following events:
. 100% of sales of assets, except for sales in the ordinary course of
business and subject to certain exceptions, including the right to
reinvest the proceeds in our business under certain circumstances;
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<PAGE>
. 100% of insurance recovery and condemnation events, subject to certain
exceptions, including the right to reinvest the proceeds in our business
under certain circumstances;
. 100% of permitted debt issuances, subject to certain exceptions;
. 100% of any refund of the CSM deposit;
. 50% of permitted equity issuances, but no amount required to be repaid
when the leverage ratio is less than 3.5:1, subject to certain
exceptions; and
. 50% of annual excess cash flow, but no amount required to be repaid when
the leverage ratio is less than 3.0:1.
Security; Guaranty. Each of our direct and indirect domestic subsidiaries
(and, if at some point in the future there are no adverse tax consequences,
foreign subsidiaries), have guaranteed our obligations under the senior credit
facility. The following secure our obligations under the senior credit facility
and each of the guarantors under its guarantee:
. a security interest in substantially all of our assets and the assets of
the subsidiary guarantors;
. a pledge of all of the capital stock of each our direct and indirect
domestic subsidiaries; and
. a pledge of 65% of the capital stock of each of our direct foreign
subsidiaries.
Interest. At our option, the interest rates under the senior credit facility
are either: (1) the base rate, which is the higher of the prime lending rate or
0.5% in excess of the Federal funds effective rate, plus a margin or (2)
adjusted LIBOR plus a margin. The margins of the different loans under the
senior credit facility will initially be set and then will vary according to a
pricing grid based upon our consolidated leverage ratio as follows:
. the initial margin on the term A loans and revolving loans will be 2%
over the base rate or 3% over adjusted LIBOR, and then on each of the
term A loans and revolving loans the margins will range from 1.75%-.75%
for base rate or from 2.75%-1.75% for adjusted LIBOR; and
. the initial margin on the term B loans will be 2.5% over the base rate
or 3.5% over adjusted LIBOR, and then on the term B loans the margins
will range from 2.25%-2.00% for base rate or from 3.25%-3.00% for
adjusted LIBOR.
Fees. We have agreed to pay certain fees in connection with the senior
credit facility, including: (1) letter of credit fees; (2) agency fees; and (3)
commitment fees. Commitment fees are payable at a rate per annum of 0.5% on the
undrawn amounts of the revolving loans but may reduce to 0.375% depending upon
our consolidated leverage ratio.
Covenants. The senior credit facility requires that we meet certain
financial tests which include a maximum leverage ratio, a minimum interest
coverage ratio and minimum EBITDA levels. The senior credit
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<PAGE>
facility will also contain covenants which, among other things, restrict our
ability, subject to certain exceptions, to do the following:
. incur liens;
. engage in transactions with affiliates;
. incur indebtedness;
. declare dividends or redeem or repurchase capital stock;
. make loans and investments;
. engage in mergers, acquisitions, consolidations and asset sales;
. acquire assets, stock or debt securities of any person;
. amend our certificate of incorporation; and
. make capital expenditures.
The senior credit facility also requires that we satisfy certain customary
affirmative covenants and make certain customary indemnifications to our
lenders and the administrative agent under the senior credit facility.
Events of Default. The senior credit facility contains customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults, cross-defaults to certain
other indebtedness and a change in control.
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<PAGE>
DESCRIPTION OF NEW NOTES
General
We will issue new notes ("Notes") pursuant to the indenture dated May 11,
1999 (the "Indenture") among the Subsidiary Guarantors, Chase Manhattan Trust
Company, National Association, as trustee (the "Trustee") and us. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), as in effect on the date of the Indenture. The
following is a summary of the material terms and provisions of the Indenture.
It does not include all of the provisions of the Indenture. We urge you to read
the Indenture because it defines your rights. A copy of the Indenture is and
Registration Rights Agreement are available as set forth below under "Available
Information". You can find definitions of certain capitalized terms used in the
following summary under "--Certain Definitions" and throughout this summary.
For purposes of this summary, the term "Company" refers only to Integrated
Circuit Systems, Inc. and not to any of its subsidiaries.
Initially, the Trustee will act as paying agent and registrar for the Notes.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all current and future Senior Debt of the
Company. As of July 3, 1999, the Company had old notes of $100.0 million,
Senior Debt of approximately $70.0 million and, including through its
Subsidiaries, had additional liabilities (including trade payables and lease
obligations) aggregating approximately $24.7 million. In September 1999, we
repurchased $2.0 million of old notes in a privately negotiated transaction.
The Indenture permits the incurrence of additional Senior Debt in the future.
The Notes will be effectively subordinated to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's Subsidiaries except to the extent of the Note Guarantees.
Initially, only the Company's domestic Subsidiaries will be Subsidiary
Guarantors of the Notes. Any right of the Company to receive assets of any of
its Non-Guarantor Subsidiaries upon the latter's liquidation or reorganization
(and the consequent right of the Holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that Subsidiary's
creditors (including trade creditors), except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, in which case the claims of
the Company would still be subordinate to any security in the assets of such
Subsidiary and any Indebtedness of such Subsidiary senior to that held by the
Company. As of July 3, 1999, the Company's Non-Guarantor Subsidiaries had, in
the aggregate, approximately $7.7 million of liabilities (of which $5.8 million
represent intercompany liabilities). See "Risk Factors--Effective
Subordination" and "--Ability to Service Debt."
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture. See "--Certain Covenants-
Restricted Payments."
Subordination
The payment of the Company's Obligations with respect to the Notes will be
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or Cash Equivalents of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full, in cash or Cash Equivalents of all Obligations due in respect
of such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before the
Holders of Notes will be entitled to
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<PAGE>
receive any payment with respect to the Notes, and until all Obligations with
respect to Senior Debt are paid in full in cash or Cash Equivalents, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of Senior Debt (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
"--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") if
(i) a default in the payment of the principal of, premium, if any, interest
or liquidated damages, if any, on Designated Senior Debt occurs and is
continuing beyond any applicable period of grace, or
(ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to
which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from
the Company or the holders of any Designated Senior Debt.
Payments on the Notes may and shall be resumed
(a) in the case of a payment default, upon the date on which such default
is cured or waived, and
(b) in case of a nonpayment default, the earliest of
(x) the date on which such nonpayment default is cured or waived,
(y) 179 days after the date on which the applicable Payment Blockage
Notice is received, or
(z) the Trustee receiving notice from the representative in respect of
such Designated Senior Debt rescinding such Payment Blockage
Notice,
unless the maturity of any Designated Senior Debt has been accelerated.
No new period of payment blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice, and
(ii) all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
waived for a period of not less than 180 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
The terms of the subordination provisions described above with respect to
the Company's obligations under the Notes apply equally to a Subsidiary
Guarantor and the obligations of such Subsidiary Guarantor under its Note
Guarantee.
"Designated Senior Debt" means
(i) any Indebtedness outstanding under the Senior Credit Agreements, and
(ii) after payment in full of all Indebtedness outstanding under the Senior
Credit Agreements, any other Senior Debt permitted under the
Indenture, the principal amount of which is $25.0 million or more, and
that has been designated by the Company as "Designated Senior Debt".
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"Permitted Junior Securities" means Equity Interests in the Company or any
Subsidiary Guarantor or debt securities that are unsecured and are subordinated
to all Senior Debt (and any debt securities issued in exchange for Senior Debt)
to substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to the subordination provisions of the
Indenture (without limiting the foregoing, such securities shall have no
required principal payments until after the final maturity of all Senior Debt).
"Senior Debt" means
(i) all Indebtedness of the Company or any of the Subsidiary Guarantors
outstanding under Credit Facilities and all Hedging Obligations with
respect thereto,
(ii) any other Indebtedness permitted to be incurred by the Company or the
Subsidiary Guarantors under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of
payment to the Notes or the relevant Note Guarantee, as the case may
be, and
(iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include
(v) any liability for foreign, Federal, state, local or other taxes owed or
owing by the Company or any Subsidiary Guarantor,
(w) any Indebtedness of the Company or any Subsidiary Guarantor to any of
its Subsidiaries or other Affiliates,
(x) any trade payables,
(y) any Indebtedness that is incurred in violation of the Indenture, or
(z) any Capital Lease Obligations.
Note Guarantees
The Company's payment obligations under the Notes will be fully and
unconditionally guaranteed (the "Note Guarantees"), on a joint and several
basis, by the Subsidiary Guarantors. Note Guarantees will not be provided by
the Non-Guarantor Subsidiaries. The Note Guarantee of each Subsidiary Guarantor
is subordinated to the prior payment in full in cash or cash equivalents of all
Senior Debt of each such Subsidiary Guarantor, which was $70 million as of July
3, 1999, and the amounts for which the Subsidiary Guarantors will be liable
under the guarantees issued from time to time in the future with respect to
Senior Debt. The obligations of each Subsidiary Guarantor under its Note
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. See, however, "Risk Factors--Fraudulent Conveyance Matters."
Subject to the provisions of the following paragraph, the Indenture provides
that no Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Subsidiary
Guarantor unless
(i) subject to the provisions of the following paragraph, the Person formed
by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Indenture
and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(iii) either
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<PAGE>
(x) the Company would be permitted by virtue of the Company's pro forma
Consolidated Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Fixed Charge Coverage
Ratio test set forth in the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock," or
(y) immediately after giving effect to such transaction, the
Consolidated Fixed Charge Coverage Ratio of the Company shall be
higher than the Consolidated Fixed Charge Coverage Ratio of the
Company immediately prior to such transaction.
Except as set forth in this paragraph, the Indenture does not prohibit the
merger of two of the Company's Restricted Subsidiaries or the merger of a
Restricted Subsidiary into the Company.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Note Guarantees; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "Repurchase at the Option of Holders--Asset Sales."
Principal, Maturity and Interest
The Notes will initially be issued in an aggregate principal amount of $98.0
million and will mature on May 15, 2009. Interest on the Notes will accrue at
the rate of 11 1/2% per annum and will be payable semi-annually in arrears on
May 15 and November 15 of each year, commencing on November 15, 1999, to
Holders of record on the immediately preceding May 1 and November 1. Additional
Notes ("Additional Notes") in an unlimited principal amount may be issued from
time to time after the date of the Indenture, subject to the provisions of the
Indenture, including those described below under the caption "--Certain
Covenants-- Incurrence of Indebtedness and Issuance of Preferred Stock."
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal, premium, if any, and interest, on the Notes
will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments of principal, premium, and interest with respect to
Notes the Holders of which have given wire transfer instructions to the Company
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Until otherwise designated by
the Company, the Company's office or agency in New York will be the office of
the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
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Optional Redemption
Except as provided below, the Notes will not be redeemable at the Company's
option prior to May 15, 2004. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 15 of the years indicated below:
<TABLE>
<CAPTION>
Percentage
of
Principal
Year Amount
---- ----------
<S> <C>
2004.............................. 105.750%
2005.............................. 103.833%
2006.............................. 101.916%
2007 and thereafter............... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after May 15,
1999, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of Notes originally issued under the Indenture
(including the original principal amount of any Additional Notes) at a
redemption price of 111.50% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date, with the net cash
proceeds from one or more Equity Offerings; provided that at least $65.0
million of the original aggregate principal amount of Notes (including the
original principal amount of any Additional Notes) remains outstanding
immediately after the occurrence of such redemption (excluding Notes held by
the Company and its Subsidiaries); and provided, further, that such redemption
shall occur within 120 days of the date of the closing of any such Equity
Offering.
At any time prior to May 15, 2004, the Notes may also be redeemed, as a
whole but not in part, 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 may any such redemption occur 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 to, the date of redemption (the "Redemption Date").
"Applicable Premium" means, with respect to any Note on any Redemption Date,
the greater of
(i) 1.0% of the principal amount of such Note or
(ii) the excess of
(A) the present value at such Redemption Date of
(1) the redemption price of such Note at May 15, 2004 (such
redemption price being set forth in the table above) plus
(2) all required interest payments due on such Note through May 15,
2004 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Treasury Rate at such Redemption Date
plus 75 basis points, over
(B) the principal amount of such Note, if greater.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee from among the Notes that are
then outstanding in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed, or, if the Notes
are not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; provided
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that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any Note
is to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. Notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest ceases to accrue on Notes or
portions of them called for redemption.
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash (the
"Change of Control Payment") equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon to the date of purchase.
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment
Date"), pursuant to the procedures required by the Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful,
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered, and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Indenture provides that, prior to the mailing of any notice required by
the Indenture, but in any event within 30 days following any Change of Control,
the Company will
(i) repay in full in cash and terminate all commitments under Indebtedness
under the Senior Credit Agreements and all other Senior Debt the terms
of which require repayment upon a Change of
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Control or offer to repay in full in cash and terminate all commitments
under all Indebtedness under the Senior Credit Agreements and all other
such Senior Debt and to repay the Indebtedness owed to each lender under
the Senior Credit Agreements that has accepted such offer, or
(ii) obtain the requisite consents under the Senior Credit Agreements and
all such other Senior Debt to permit the repurchase of the Notes as
provided above.
The Company shall first comply with this covenant before it shall be
required to repurchase Notes pursuant to the provisions described in the
Indenture. The Company's failure to comply with the immediately preceding
sentence shall constitute an Event of Default described in clause (iii) and
not in clause (ii) under "Events of Default" below.
The Senior Credit Agreements restrict the Company's ability to prepay debt,
including the Notes, and also provide that certain change of control events
with respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Debt to which the
Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its lenders to
the purchase of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Senior Credit Agreements. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if
(i) a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in
the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer, or
(ii) the Company exercises its option to purchase all the Notes upon a
Change of Control as described above under the caption "Optional
Redemption".
"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, as
defined in Section 13(d) of the Exchange Act (a "Group"), whether or
not otherwise in compliance with the provisions of the Indenture, other
than the Principals and their respective Related Parties and members of
the Permitted Group;
(ii) the approval by the holders of Capital Stock of the Company of any
plan or proposal for the liquidation or dissolution of the Company
(whether or not otherwise in compliance with the provisions of the
Indenture);
(iii) any Person or Group (other than the Principals and their respective
Related Parties and members of the Permitted Group) shall become the
owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding Voting Stock of the Company
or any successor to all or substantially all of its assets; or
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(iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who
(i) was a member of such Board of Directors on the date of the Indenture,
or
(ii) was nominated for election or elected to such Board of Directors by
any of the Principals or with the approval of a majority of the
Continuing Directors who were members of such Board at the time of
such nomination or election. "Permitted Group" means any group of
investors if deemed to be a "person" (as such terms is used in Section
13(d)(3) of the Exchange Act) by virtue of the Shareholders Agreement,
as the same may be amended, modified or supplemented from time to
time, provided that
(i) the Principals are party to such Shareholders Agreement,
(ii) the persons party to the Shareholders Agreement as so amended,
supplemented or modified from time to time that were not parties, and
are not Affiliates of persons who were parties, to the Shareholders
Agreement as of the date of the Indenture, together with their
respective Affiliates (collectively, the "New Investors"), are not
direct or indirect beneficial owners (determined without reference to
the Shareholders Agreement) of more than 50% of the Voting Stock owned
by all parties to the Shareholders Agreement as so amended,
supplemented or modified, and
(iii) the New Investors, individually or in the aggregate, do not, directly
or indirectly, have the right, pursuant to the Shareholders Agreement
(as so amended, supplemented or modified) or otherwise to designate
more than 50% of the members of the Board of Directors of the Company
or any direct or indirect parent entity of the Company.
"Principals" means Bain Capital, Inc. and Bear, Stearns & Co. Inc.
"Related Party" with respect to any Principal means
(i) any controlling stockholder, or 80% (or more) owned Subsidiary of such
Principal, or
(ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such
Principal and/or such other Persons referred to in the immediately
preceding clause (i).
"Shareholders Agreement" means collectively that certain shareholders
agreement and that certain voting agreement, each dated as of the date of the
Indenture, among the Principals and the other shareholders of the Company named
as parties therein from time to time.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed
of (as determined in good faith by the Company's Board of Directors),
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(ii) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall
be cash or Cash Equivalents; provided that the amount of
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any such
Restricted Subsidiary (other than liabilities that are by their
terms subordinated to the Notes) that are assumed by the transferee
of any such assets, and
(b) any notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received), shall be deemed to be cash
for the purposes of this provision, and
(iii) upon the consummation of an Asset Sale, the Company shall apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 365 days of receipt thereof either
(A) to repay any Senior Debt and, in the case of any Senior Debt under
any revolving credit facility, effect a commitment reduction under
such revolving credit facility,
(B) to reinvest in Productive Assets, or
(C) a combination of prepayment, repurchase and investment permitted by
the foregoing clauses (iii)(A) and (iii)(B).
Pending the final application of any such Net Cash Proceeds, the Company or
such Restricted Subsidiary may temporarily reduce Indebtedness under a
revolving credit facility, if any, or otherwise invest such Net Cash Proceeds
in Cash Equivalents. On the 366th day after an Asset Sale or such earlier date,
if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (iii)(A), (iii)(B) or (iii)(C) of the next
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), the aggregate
amount of Net Cash Proceeds that have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount")
shall be applied by the Company or such Restricted Subsidiary to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the applicable
Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis that
amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100%
of the principal amount of the Notes to be purchased, plus accrued and unpaid
interest thereon to the date of purchase; provided, however, that if at any
time any non-cash consideration received by the Company or any Restricted
Subsidiary of the Company, as the case may be, in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof shall be applied in accordance with this
covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Restricted Subsidiaries aggregates at least $5.0 million, at
which time the Company or such Restricted Subsidiary shall apply all Net Cash
Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred
to make a Net Proceeds Offer (the first date the aggregate of all such deferred
Net Proceeds Offer Amounts is equal to $5.0 million or more shall be deemed to
be a "Net Proceeds Offer Trigger Date").
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Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent
(i) at least 75% of the consideration for such Asset Sale constitutes
Productive Assets, cash, Cash Equivalents and/or Marketable Securities,
and
(ii) such Asset Sale is for fair market value (as determined in good faith
by the Company's Board of Directors); provided that any consideration
not constituting Productive Assets received by the Company or any of
its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall be subject to
the provisions of the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A
Net Proceeds Offer shall remain open for a period of at least 20 (but not more
than 30) business days or such longer period as may be required by law. To the
extent that the aggregate amount of Notes tendered pursuant to a Net Proceeds
Offer is less than the Net Proceeds Offer Amount, the Company may use any
remaining Net Proceeds Offer Amount for general corporate purposes. Upon
completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall
be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Asset Sale provisions of the Indenture by virtue thereof.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution
on account of the Equity Interests of the Company or any Restricted
Subsidiary (including, without limitation, any payment in connection
with any merger or consolidation involving the Company or any
Restricted Subsidiary) or to the direct or indirect holders of the
Equity Interests of the Company or any Restricted Subsidiary in their
capacity as such (other than dividends or distributions payable in
Qualified Capital Stock of the Company and dividends or distributions
payable solely to the Company or a Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving the Company or any Restricted Subsidiary) any Equity
Interests of the Company or any Restricted Subsidiary or any direct or
indirect parent of the Company; or
(iii) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iii)
above being collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
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(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable Four-Quarter Period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Consolidated Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described below under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (2)(i), (3), (6) and (7) of the next
succeeding paragraph), is less than the sum, without duplication, of
(i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end
of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds (including the fair market
value (as determined in good faith by a resolution of the Board of
Directors of the Company) of property other than cash that would
constitute Marketable Securities or a Permitted Business) received
by the Company since the date of the Indenture as a contribution to
its common equity capital (other than from a Subsidiary or that
were financed with loans from the Company or any Restricted
Subsidiary) or from the issue or sale of Qualified Capital Stock
(including Capital Stock issued upon the conversion of convertible
Indebtedness or in exchange for outstanding Indebtedness) of the
Company (excluding any net proceeds from an Equity Offering or
capital contribution to the extent used to redeem Notes in
accordance with the optional redemption provisions of the Notes) or
from the issue or sale of Disqualified Stock or debt securities of
the Company that have been converted into Qualified Capital Stock
(other than Qualified Capital Stock (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company),
plus
(iii) an amount equal to the aggregate net proceeds (including the fair
market value (as determined in good faith by a resolution of the
Board of Directors of the Company) of property other than cash
that would constitute Marketable Securities or a Permitted
Business) of any
(A) sale or other disposition of Restricted Investments made by the
Company and its Restricted Subsidiaries, or
(B) dividend from, or the sale of the stock of, an Unrestricted
Subsidiary;
provided, however, that the foregoing amount shall not exceed, in
the case of clause (A), the amount of such Restricted Investment
previously made (and treated as a Restricted Investment) by the
Company or any Restricted Subsidiary, and, in the case of any such
clause (B), the amount of Investments previously made (and treated
as a Restricted Payment) by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit
(1) the payment of any dividend or the consummation of any irrevocable
redemption within 60 days after the date of declaration of such
dividend or notice of such redemption if the dividend or payment of the
redemption price, as the case may be, would have been permitted on the
date of declaration or notice;
(2) if no Event of Default shall have occurred and be continuing or shall
occur as a consequence thereof, the acquisition of any shares of
Capital Stock of the Company (the "Retired Capital Stock") either
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(i) solely in exchange for shares of Qualified Capital Stock of the
Company (the "Refunding Capital Stock"), or
(ii) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company,
and, in the case of subclause (i) of this clause (2), if immediately
prior to the retirement of the Retired Capital Stock the declaration
and payment of dividends thereon was permitted under clause (3) of this
paragraph, the declaration and payment of dividends on the Refunding
Capital Stock in an aggregate amount per year no greater than the
aggregate amount of dividends per annum that was declarable and payable
on such Retired Capital Stock immediately prior to such retirement;
provided that at the time of the declaration of any such dividends on
the Refunding Capital Stock, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof;
(3) if no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof, the declaration and payment of
dividends to holders of any class or series of Designated Preferred
Stock (other than Disqualified Stock) issued after the date of the
Indenture (including, without limitation, the declaration and payment
of dividends on Refunding Capital Stock in excess of the dividends
declarable and payable thereon pursuant to clause (2) of this
paragraph); provided that, at the time of such issuance, the Company,
after giving effect to such issuance on a pro forma basis, would have
had a Consolidated Fixed Charge Coverage Ratio of at least 2.0 to 1.0
for the most recent Four-Quarter Period;
(4) payments to redeem or repurchase the Company's common equity or options
in respect thereof, in each case in connection with the repurchase
provisions of employee stock option or stock purchase agreements or
other agreements to compensate management and other employees and
consultants; provided that all such redemptions or repurchases pursuant
to this clause (4) shall not exceed $10.0 million in the aggregate
since the date of the Indenture (which amount shall be increased by the
amount of any net cash proceeds received from the sale since the date
of the Indenture of Equity Interests (other than Disqualified Stock) to
members of the Company's management and other employees and consultants
that have not otherwise been applied to the payment of Restricted
Payments pursuant to the terms of the preceding paragraph (c) and by
the cash proceeds of any "key-man" life insurance policies which are
used to make such redemptions or repurchases); provided, however,
notwithstanding the foregoing limitations, that
(A) for so long as any Indebtedness is outstanding under the Senior
Credit Agreements, the Company shall be permitted to make any
redemptions or repurchases not prohibited by the terms of such
Senior Credit Agreements, and
(B) after payment in full of all Indebtedness outstanding under the
Senior Credit Agreements, the aggregate limitation set forth above
shall increase to an amount equal to the greater of
(x) $10.0 million, and
(y) 7.5% of Total Assets,
provided, further, however, that the cancellation of Indebtedness owing
to the Company from members of management of the Company or any of its
Restricted Subsidiaries in connection with such a repurchase of Capital
Stock of Parent will not be deemed to constitute a Restricted Payment
under the Indenture;
(5) if no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof and the Company would be
permitted to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock," other Restricted Payments in an aggregate amount not
to exceed $7.5 million since the date of the Indenture;
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(6) repurchases of Capital Stock deemed to occur upon the exercise of stock
options if such Capital Stock represents a portion of the exercise
price thereof; and
(7) payments in connection with the Recapitalization and related
transactions (as described under "Use of Proceeds") made on or
subsequent to the date of the Indenture.
In determining the aggregate amount of Restricted Payments made subsequent
to the date of the Indenture in accordance with clause (c) of the immediately
preceding paragraph,
(a) amounts expended pursuant to clauses (1), (2)(ii), (4), and (5) shall
be included in such calculation; provided such expenditures pursuant to
clause (4) shall not be included to the extent of the cash proceeds
received by the Company from any "key man" life insurance policies, and
(b) amounts expended pursuant to clauses (2)(i), (3), (6) and (7) shall be
excluded from such calculation.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness and that the Company will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock and any
Subsidiary Guarantor may issue shares of preferred stock (provided, that either
(x) such Subsidiary Guarantor is a Wholly Owned Restricted Subsidiary or (y) if
such series of preferred stock does not pay cash dividends during any period
prior to the maturity date of the Notes, such preferred stock is Qualified
Capital Stock) if
(i) no Default or Event of Default shall have occurred and be continuing at
the time or as a consequence of the incurrence of any such Indebtedness
or the issuance of any such Disqualified Stock, and
(ii) the Consolidated Fixed Charge Coverage Ratio for the Company's most
recently ended Four-Quarter Period would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been
issued, at the beginning of such Four-Quarter Period.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Indebtedness"):
(i) the Notes (other than Additional Notes) and the Note Guarantees
thereof;
(ii) Indebtedness incurred pursuant to one or more Credit Facilities in an
aggregate principal amount at any time outstanding (with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Subsidiaries thereunder)
not to exceed, at any given date, the greater of
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(A) $110.0 million, or
(B) $95.0 million, multiplied by a fraction
(1) the numerator of which shall be the Consolidated EBITDA of the
Company for its most recently ended fiscal year, and
(2) the denominator of which shall be the Consolidated EBITDA of the
Company for its fiscal year ended July 3, 1999,
provided that the amount of Indebtedness permitted to be incurred
pursuant to the Senior Credit Agreements in accordance with this clause
(ii) shall be in addition to any Indebtedness permitted to be incurred
pursuant to the Senior Credit Agreements in reliance on, and in
accordance with, the first paragraph of this covenant or clauses (x)
and (xv) below;
(iii) the incurrence of Indebtedness and/or the issuance of Permitted
Foreign Subsidiary Preferred Stock by Foreign Subsidiaries of the
Company, which together with the aggregate principal amount of
Indebtedness incurred pursuant to this clause (iii) and the aggregate
liquidation value of all Permitted Foreign Subsidiary Preferred Stock
issued pursuant to this clause (iii) does not exceed $15.0 million at
any one time outstanding;
(iv) other Indebtedness of the Company and its Subsidiaries outstanding on
the date of the Indenture for so long as such Indebtedness remains
outstanding;
(v) Hedging Obligations of the Company covering Indebtedness of the
Company; provided that any Indebtedness to which any such Hedging
Obligations correspond is otherwise permitted to be incurred under the
Indenture; and provided, further, that such Hedging Obligations are
entered into, in the judgment of the Company, to protect the Company
from fluctuation in interest rates on its outstanding Indebtedness;
(vi) Indebtedness of the Company under Currency Agreements;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; provided, however, that
(a) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the Notes,
(b) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
the Company or a Subsidiary thereof, and
(c) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Restricted Subsidiary thereof
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (vii);
(viii) the incurrence of Acquired Indebtedness of Restricted Subsidiaries
of the Company to the extent the Company could have incurred such
Indebtedness in accordance with the first paragraph of this covenant
on the date such Indebtedness became Acquired Indebtedness;
(ix) Guarantees by the Company and the Subsidiary Guarantors of each
other's Indebtedness; provided that such Indebtedness is permitted to
be incurred under the Indenture;
(x) Indebtedness (including Capital Lease Obligations) incurred by the
Company or any of its Restricted Subsidiaries to finance the purchase,
lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of
any Person owning such assets) in an aggregate principal amount
outstanding not to exceed 7.5% of Total Assets at the time of any
incurrence thereof (including any Refinancing Indebtedness with respect
thereto) (which amount may, but need not, be incurred in whole or in
part under the Senior Credit Agreements);
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(xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business,
including, without limitation, letters of credit in respect of
workers' compensation claims or self-insurance, or other Indebtedness
with respect to reimbursement type obligations regarding workers'
compensation claims;
(xii) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment
of purchase price, earn out or other similar obligations, in each
case, incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Company, other
than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Restricted Subsidiary for
the purpose of financing such acquisition; provided that the maximum
assumable liability in respect of all such Indebtedness shall at no
time exceed the gross proceeds actually received by the Company and
its Restricted Subsidiaries in connection with such disposition;
(xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary of the Company in the ordinary course of business;
(xiv) any refinancing, modification, replacement, renewal, restatement,
refunding, deferral, extension, substitution, supplement, reissuance
or resale (collectively, "Refinances," and "Refinanced" shall have a
correlative meaning) of existing or future Indebtedness (other than
intercompany Indebtedness), including any additional Indebtedness
incurred to pay interest or premiums required by the instruments
governing such existing or future Indebtedness as in effect at the
time of issuance thereof ("Required Premiums") and fees in connection
therewith ("Refinancing Indebtedness"); provided that any such event
shall not
(1) directly or indirectly result in an increase in the aggregate
principal amount of Permitted Indebtedness of the Company and its
Restricted Subsidiaries, except to the extent such increase is a
result of a simultaneous incurrence of additional Indebtedness
(A) to pay Required Premiums and related fees, or
(B) otherwise permitted to be incurred under the Indenture, or
(2) create Indebtedness with a Weighted Average Life to Maturity at the
time such Indebtedness is incurred that is less than the Weighted
Average Life to Maturity at such time of the Indebtedness being
Refinanced (except that this subclause (2) will not apply in the
event the Indebtedness being Refinanced, was originally incurred in
reliance upon clauses (ii) or (xv) of this paragraph);
provided, further, however, that
(x) Refinancing Indebtedness shall not include
(1) Indebtedness of a Subsidiary that is not a Subsidiary
Guarantor that Refinances Indebtedness of the Company, or
(2) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary,
(y) if the Indebtedness being Refinanced is not Senior Debt, then such
Refinancing Indebtedness shall rank no more senior than, and shall
be at least as subordinated in right of payment, to the Notes as
the Indebtedness being Refinanced, and
(z) Refinancing Indebtedness shall be secured only by assets of a
similar type and in a similar amount to those that secured the
Indebtedness so refinanced; and
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(xv) the incurrence of additional Indebtedness by the Company or any of its
Restricted Subsidiaries and/or the issuance of Permitted Domestic
Subsidiary Preferred Stock by the Company's U.S. Subsidiaries, which
together with the aggregate principal amount of other Indebtedness
incurred pursuant to this clause (xv) and the aggregate liquidation
value of all other Permitted Domestic Subsidiary Preferred Stock
issued pursuant to this clause (xv), does not exceed $12.5 million at
any one time outstanding (which amount, in the case of Indebtedness,
may, but need not, be incurred in whole or in part under the Senior
Credit Agreements).
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Indebtedness described in clauses (i) through (xv) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant. Accrual of interest and accretion
or amortization of original issue discount will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of
this covenant; provided, in each such case, that the amount thereof is included
in Consolidated Fixed Charges of the Company as accrued.
No Senior Subordinated Debt
The Indenture provides that
(i) the Company will not incur, create, issue, assume, Guarantee or
otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect
in right of payment to the Notes, and
(ii) no Subsidiary Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt of any Subsidiary
Guarantor and senior in any respect in right of payment to the Note
Guarantees.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets, or any proceeds therefrom, unless
(i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior
in priority to such Liens, and
(ii) in all other cases, the Notes are equally and ratably secured,
except for
(A) Liens existing as of the date of the Indenture and any extensions,
renewals or replacements thereof,
(B) Liens securing Senior Debt,
(C) Liens securing the Notes,
(D) Liens securing Indebtedness that is incurred to refinance Indebtedness
that was secured by a Lien permitted under the Indenture that was
incurred in accordance with the provisions of the Indenture; provided,
however, that such Liens do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced, and
(E) Permitted Liens.
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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to
(a) pay dividends or make any other distributions on or in respect of its
Capital Stock,
(b) make loans or advances or to pay any Indebtedness or other obligation
owed to the Company or any other Restricted Subsidiary of the Company,
or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of:
(1) applicable law;
(2) the Indenture;
(3) non-assignment provisions of any contract or any lease entered into in
the ordinary course of business;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or
assets of the Person so acquired;
(5) agreements existing on the date of the Indenture (including, without
limitation, the Senior Credit Agreements);
(6) restrictions on the transfer of assets subject to any Lien permitted
under the Indenture imposed by the holder of such Lien;
(7) restrictions imposed by any agreement to sell assets or Capital Stock
permitted under the Indenture to any Person pending the closing of
such sale;
(8) any agreement or instrument governing Capital Stock of any Person that
is in effect on the date such Person is acquired by the Company or a
Restricted Subsidiary of the Company;
(9) any agreement or instrument governing Indebtedness or Permitted
Foreign Subsidiary Preferred Stock (whether or not outstanding) of
Foreign Subsidiaries of the Company that was permitted by the
Indenture to be incurred;
(10) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(11) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (c) above;
(12) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(13) Indebtedness incurred after the date of the Indenture in accordance
with the terms of the Indenture; provided that the restrictions
contained in the agreements governing such new Indebtedness are, in
the good faith judgment of the Board of Directors of the Company, not
materially less favorable, taken as a whole, to the Holders of the
Notes than those contained in the agreements governing Indebtedness
outstanding on the date of the Indenture; and
(14) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments
or obligations referred to in clauses (1) through (13) above; provided
that such amendments, modifications, restatements, renewals,
increases, supplements, refundings,
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replacements or refinancings are, in the good faith judgment of the
Company's Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless:
(i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which
such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and the
Indenture pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default
exists; and
(iv) except in the case of a merger of the Company with or into a Wholly
Owned Subsidiary of the Company and except in the case of a merger
entered into solely for the purpose of reincorporating the Company in
another jurisdiction, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made will, at the time
of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable Four-
Quarter Period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock".
The "Merger, Consolidation, or Sale of Assets" covenant will not apply to a
sale, assignment, transfer, conveyance or other disposition of assets between
or among the Company and any of its Wholly Owned Restricted Subsidiaries which
are Subsidiary Guarantors.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to occur any
transaction or series or related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates involving
aggregate consideration in excess of $2.5 million (an "Affiliate
Transaction"), other than
(x) Affiliate Transactions permitted under the following paragraph below,
and
(y) Affiliate Transactions on terms that are not materially less favorable
than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is
not an Affiliate of the Company and, at the Company's option, either
(i) a majority of the disinterested members of the Board of Directors of
the Company shall determine in good faith that such Affiliate
Transaction is on terms that are not materially less
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favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company, or
(ii) the Board of Directors of the Company or any such Restricted
Subsidiary party to such Affiliate Transaction shall have received
an opinion from a nationally recognized investment banking firm
that such Affiliate Transaction is on terms not materially less
favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company; and
provided, further, that for an Affiliate Transaction with an aggregate
value of $5.0 million or more the Board of Directors of the Company or
any such Restricted Subsidiary party to such Affiliate Transaction
shall have received an opinion from a nationally recognized investment
banking firm that such Affiliate Transaction is on terms not materially
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company.
The foregoing restrictions shall not apply to
(i) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employee or consultants of the Company
or any Subsidiary as determined in good faith by the Company's Board of
Directors or senior management;
(ii) transactions exclusively between or among the Company and any of its
Restricted Subsidiaries or exclusively between or among such
Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by the Indenture;
(iii) any agreement as in effect as of the date of the Indenture or any
amendment or replacement thereto or any transaction contemplated
thereby (including pursuant to any amendment or replacement thereto)
so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the
original agreement as in effect on the date of the Indenture;
(iv) Restricted Payments permitted by the Indenture;
(v) the payment of customary management, consulting and advisory fees and
related expenses to the Principals and their Affiliates made pursuant
to any financial advisory, financing, underwriting or placement
agreement or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or
divestitures which fees and expenses are approved by the Board of
Directors of the Company or such Restricted Subsidiary in good faith;
(vi) payments or loans to employees or consultants that are approved by the
Board of Directors of the Company in good faith;
(vii) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any
shareholders agreement (including any registration rights agreement
or purchase agreement related thereto) to which it is a party as of
the date of the Indentures and any similar agreements which it may
enter into thereafter; provided, however, that the existence of, or
the performance by the Company or any of its Restricted Subsidiaries
of obligations under, any future amendment to any such existing
agreement or under any similar agreement entered into after the date
of the Indenture shall only be permitted by this clause (vii) to the
extent that the terms of any such amendment or new agreement are not
disadvantageous to the Holders of the of Notes in any material
respect; and
(viii) transactions with customers, clients, suppliers, joint venture
partners or purchasers or sellers of goods or services, in each case
in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance
with the terms of the Indenture which are fair to the Company or its
Restricted Subsidiaries, in the reasonable determination of the
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Board of Directors of the Company or the senior management thereof, or
are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party.
Additional Note Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another U.S. Subsidiary after the date of
the Indenture, or if any Subsidiary becomes a U.S. Subsidiary after the date
of the Indenture, then such newly acquired or created Subsidiary, shall
execute a Note Guarantee and deliver an Opinion of Counsel, in accordance with
the terms of the Indenture; provided, that all Subsidiaries that have properly
been designated as Unrestricted Subsidiaries in accordance with the Indenture
shall not be subject to the requirements of this covenant for so long as they
continue to constitute Unrestricted Subsidiaries.
Conduct of Business
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any businesses a majority of
whose revenues are not derived from the same or reasonably similar, ancillary
or related to, or a reasonable extension, development or expansion of, the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the date of the Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the SEC, so long as any Notes are outstanding, the Company will
furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in
the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition
and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Company) and, with
respect to the annual information only, a report thereon by the
Company's certified independent accountants, and
(ii) all current reports that would be required to be filed with the SEC on
Form 8-K if the Company were required to file such reports, in each
case within the time periods specified in the SEC's rules and
regulations.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the SEC, the Company will file a copy of all such information
and reports with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the
Subsidiary Guarantors have agreed that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due and
payable if the default continues for a period of 30 days, whether or
not such payment shall be prohibited by the subordination provisions of
the Indenture;
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(ii) the failure to pay the principal on any Notes when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer),
whether or not such payment shall be prohibited by the subordination
provisions of the Indenture;
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture if the default continues for a
period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied)
from the Trustee or the Holders of at least 25% of the outstanding
principal amount of the Notes;
(iv) the failure to pay at final stated maturity (giving effect to any
extensions thereof) the principal amount of any Indebtedness of the
Company or any Restricted Subsidiary, which failure continues for at
least 10 days, or the acceleration of the maturity of any such
Indebtedness, which acceleration remains uncured and unrescinded for
at least 10 days, if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity
or which has been accelerated, aggregates $7.5 million or more at any
time;
(v) one or more judgments in an aggregate amount in excess of $7.5 million
shall have been rendered against the Company or any of its Significant
Subsidiaries and such judgments remain undischarged, unpaid or unstayed
for a period of 60 days after such judgment or judgments become final
and non-appealable;
(vi) except as permitted by the Indenture, any Note Guarantee of a
Significant Subsidiary shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Subsidiary Guarantor which is a Significant
Subsidiary, or any Person acting on behalf of any such Subsidiary
Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee; and
(vii) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries.
Upon the happening of any Event of Default specified in the Indenture, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare 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 such notice 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 either of the Senior Credit
Agreements, shall become immediately due and payable upon the first to
occur of an acceleration under either of the Senior Credit Agreements
or five Business Days after receipt by the Company and the
Representative under the applicable Senior Credit Agreement of such
Acceleration Notice but only if such Event of Default is then
continuing.
If an Event of Default with respect to bankruptcy proceedings of the Company
occurs and is continuing, then such amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of Notes.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of Notes may rescind and cancel such
declaration and its consequences as to such series
(i) if the rescission would not conflict with any judgment or decree,
(ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because
of the acceleration,
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(iii) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has
been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances,
and
(v) in the event of the cure or waiver of an Event of Default of the type
described in clause (vi) of the description above of Events of Default,
the Trustee shall have received an Officers' Certificate and an Opinion
of Counsel that such Event of Default has been cured or waived.
The holders of a majority in principal amount of Notes may waive any existing
Default or Event of Default under the Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Notes.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the Notes ("Legal Defeasance") except
for
(i) the rights of Holders of outstanding Notes of to receive payments in
respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below,
(ii) the Company's obligations with respect to such Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith, and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to such Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to such Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, interest and Liquidated Damages, if any, on all
outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be,
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and the Company must specify whether such Notes are being defeased to
maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or
(B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding 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;
(iii) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding 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;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (including the Indenture and the Senior Credit
Agreements) (other than a default under the Indenture resulting from
the borrowing of funds to be applied to such deposit) to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(vii) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent
of preferring the Holders of such Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
(viii) the Company must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
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Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture and
Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver,
(ii) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under
the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any
Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration),
(v) make any Note payable in money other than that stated in the Notes,
(vi) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), or
(viii) make any change in the foregoing amendment and waiver provisions.
In addition, any amendment to the subordination provisions of the Indenture
that would adversely affect the Holders of the Notes will require the consent
of the Holders of at least 75% in aggregate principal amount of the Notes then
outstanding. Any amendment to the subordination provisions of the Indenture or
the related definitions will also require the consent of the holders of a
majority of the Indebtedness then outstanding under each of the Senior Credit
Agreements.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to
(i) cure any ambiguity, defect or inconsistency,
(ii) provide for uncertificated Notes in addition to or in place of
certificated Notes,
(iii) provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets,
(iv) make any change that would provide any additional rights or benefits
to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or
(v) comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indentures Act.
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Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if the Trustee acquires any conflicting
interest the Trustee must eliminate such conflict within 90 days, apply to the
SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain copies of the Indenture
without charge, by writing to Integrated Circuit Systems, Inc., 2435 Boulevard
of the Generals, Norristown, PA 19403, Attention: Chief Financial Officer.
Certain Definitions
Set forth below is a summary of certain defined terms used in the Indenture.
We refer you to the Indenture for the full definition of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or that is assumed by the Company or any of its Restricted
Subsidiaries in connection with the acquisition of assets from such Person, in
each case excluding any Indebtedness incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person whether through the ownership of voting securities, by contract or
otherwise.
"Asset Acquisition" means
(a) an Investment by the Company or any Restricted Subsidiary of the
Company in any other Person if, as a result of such Investment, such
Person shall become a Restricted Subsidiary of the Company, or shall be
merged with or into the Company or any Restricted Subsidiary of the
Company, or
(b) the acquisition by the Company or any Restricted Subsidiary of the
Company of all or substantially all of the assets of any other Person
or any division or line of business of any other Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries to any Person other than the Company or a
Restricted Subsidiary of the Company of
(a) any Capital Stock of any Restricted Subsidiary of the Company, or
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(b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of
business;
provided, however, that Asset Sales shall not include
(i) a transaction or series of related transactions for which the Company
or its Restricted Subsidiaries receive aggregate consideration of less
than $1.0 million,
(ii) the sale, lease, conveyance, disposition or other transfer of all
substantially all of the assets of the Company as permitted under the
provisions described above under the caption "--Certain Covenants--
Merger, Consolidation, or Sale of Assets" or any disposition that
constitutes a Change of Control,
(iii) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof,
(iv) the factoring of accounts receivable arising in the ordinary course of
business pursuant to arrangements customary in the industry,
(v) disposals or replacements of obsolete, uneconomical, negligible, worn
out or surplus property in the ordinary course of business,
(vi) the licensing of intellectual property in the ordinary course of
business or in accordance with industry practice, and
(vii) the sale, lease conveyance, disposition or other transfer by the
Company or any Restricted Subsidiary of assets or property to one or
more Restricted Subsidiaries in connection with Investments permitted
by the covenant described under the caption "--Restricted Payments."
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means
(i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock,
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited), and
(iv) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(i) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States
of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either S&P or Moody's;
(iii) commercial paper maturing no more than one year from the date of
creation thereof and at the time of acquisition, having a rating of
at least A-1 from S&P or at least P-1 from Moody's;
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(iv) certificates of deposit or bankers' acceptances (or, with respect to
foreign banks, similar instruments) maturing within one year from the
date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the
District of Columbia, Japan or any member of the European Economic
Community or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than
$200.0 million; provided that instruments issued by banks not having
one of the two highest ratings obtainable from either S&P or Moody's
or by banks organized under the laws of Japan or any member of the
European Economic Community shall not constitute Cash Equivalents for
purposes of the subordination provisions of the applicable Indenture;
(v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in
clause (iv) above; and
(vi) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v)
above.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of such Person's
(i) Consolidated Net Income, and
(ii) to the extent Consolidated Net Income has been reduced thereby,
(A) all income taxes and foreign withholding taxes (including, without
limitation, any state single business, unitary or similar taxes) of
such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period,
(B) Consolidated Interest Expense,
(C) Consolidated Noncash Charges, and
(D) all one-time cash compensation payments made in connection with the
Recapitalization.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the most recent
four full fiscal quarters for which internal financial statements are available
(the "Four-Quarter Period") ending on or prior to the date of the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for
the Four-Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, Consolidated EBITDA and
Consolidated Fixed Charges shall be calculated after giving effect on a pro
forma basis for the period of such calculation to
(i) the incurrence of any Indebtedness or the issuance of any preferred
stock of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) and any repayment of other
Indebtedness or redemption of other preferred stock occurring during
the Four-Quarter Period or at any time subsequent to the last day of
the Four-Quarter Period and on or prior to the Transaction Date, as if
such incurrence, repayment, issuance or redemption, as the case may be
(and the application of the proceeds thereof), occurred on the first
day of the Four-Quarter Period, and
(ii) any Asset Sale or Asset Acquisition (including, without limitation,
any Asset Acquisition giving rise to the need to make such calculation
as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result
of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any Consolidated
EBITDA (including any Pro Forma Cost Savings) associated with any such
Asset Acquisition) occurring during the Four-Quarter Period or at any
time subsequent to the last day of the Four-Quarter Period and on or
prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence of, or assumption or liability
for any such Indebtedness or Acquired Indebtedness) occurred on the
first day of the Four-Quarter Period.
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If such Person or any of its Restricted Subsidiaries directly or indirectly
Guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating Consolidated
Fixed Charges for purposes of determining the denominator (but not the
numerator) of this Consolidated Fixed Charge Coverage Ratio,
(1) interest on outstanding Indebtedness determined on a fluctuating basis
as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;
(2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four-
Quarter Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of
(i) Consolidated Interest Expense (before amortization or write-off of debt
issuance costs), plus
(ii) the amount of all cash dividend payments on
(x) any series of preferred stock of such Person,
(y) any Refunding Capital Stock of such Person, to the extent paid pursuant
to the terms of clause (2) of the second paragraph of the covenant
described under the caption "--Restricted Payments," and
(z) any series of preferred stock of any Restricted Subsidiary of such
Person;
provided that with respect to any series of preferred stock or
Refunding Capital Stock that was not paid cash dividends during such
period but that is eligible to be paid cash dividends during any
period, or matures or is mandatorily redeemable, prior to the maturity
date of the Notes, cash dividends shall be deemed to have been paid
with respect to such series of preferred stock or Refunding Capital
Stock during such period for purposes of clause (ii) of this
definition.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication,
(i) the aggregate of all cash and non-cash interest expense with respect to
all outstanding Indebtedness of such Person and its Restricted
Subsidiaries, including the net costs associated with Interest Swap
Obligations, for such period determined on a consolidated basis in
conformity with GAAP,
(ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, and
(iii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP,
provided that there shall be excluded therefrom
(a) gains and losses from Asset Sales (without regard to the $1.0 million
limitation set forth in the definition thereof) or abandonments or
reserves relating thereto and the related tax effects according to
GAAP,
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(b) gains and losses due solely to fluctuations in currency values and the
related tax effects according to GAAP,
(c) items classified as a cumulative effect of an accounting change or as
extraordinary, unusual or nonrecurring gains and losses (including,
without limitation, severance, relocation and other restructuring
costs), and the related tax effects according to GAAP,
(d) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of the Company or is merged or consolidated with the Company
or any Restricted Subsidiary of the Company,
(e) the net income of any Restricted Subsidiary of the Company to the
extent that the declaration of dividends or similar distributions by
that Restricted Subsidiary of the Company of that income is restricted
by contract, operation, operation of law or otherwise,
(f) the net income of any Person, other than a Restricted Subsidiary of the
Company, except to the extent of cash dividends or distributions paid
to the Company or a Restricted Subsidiary of the Company by such
Person,
(g) the net loss of any Person, other than a Restricted Subsidiary,
(h) only for the purposes of the definition of Consolidated EBITDA, one-
time cash charges resulting from any merger, recapitalization or
acquisition transaction, and
(i) only for purposes of clause (c)(i) of the first paragraph of the
covenant described under the caption "--Restricted Payments," any
amounts included pursuant to clause (c)(iii) of the first paragraph of
such covenant.
For purposes of clause (c)(i) of the first paragraph of the covenant described
under the caption "--Restricted Payments," Consolidated Net Income
(A) shall be reduced by any cash dividends paid with respect to any series
of Designated Preferred Stock, and
(B) shall be increased by the proceeds of any
(1) sale or other disposition of Restricted Investments made by the
Company and its Restricted Subsidiaries, or
(2) dividend from, or the sale of stock of, an Unrestricted Subsidiary;
provided, however, that there shall be deducted from such proceeds, in
the case of clause (1), the amount of such Restricted Investment
previously made (and treated as a Restricted Investment) by the Company
or any Restricted Subsidiary and, in the case of clause (2), the amount
of Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary.
"Consolidated Noncash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person for such period, determined on a consolidated basis in accordance
with GAAP excluding any such non-cash charge constituting an extraordinary item
or loss or any such non-cash charge which requires an accrual of or a reserve
for cash charges for any future period.
"Credit Facilities" means one or more debt facilities (including, without
limitation, the Senior Credit Agreements) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) and/or letters of credit.
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"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Preferred Stock" means Preferred Stock that is so designated as
Designated Preferred Stock, pursuant to an Officers' Certificate executed by
the principal executive officer and the principal financial officer of the
Company, on the issuance date thereof.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of
a Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under the
caption "--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any offering of Qualified Capital Stock of the
Company.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Agreements) in
existence on the date of the Indenture, until such amounts are repaid.
"Foreign Subsidiaries" means the Company's current and future non-U.S.
Subsidiaries which are Restricted Subsidiaries.
"Four-Quarter Period" has the meaning specified in the definition of
Consolidated Fixed Charge Coverage Ratio.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under
(i) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements (including Interest Swap Obligations),
and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates (including Currency
Agreements).
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"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable or representing any Hedging Obligations, if
and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and
(ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Interest Swap Obligations" means the obligations of any Person, pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Persons calculated
by applying a fixed or a floating rate of interest on the same notional amount.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Marketable Securities" means publicly traded debt or equity securities that
are listed for trading on a national securities exchange and that were issued
by a corporation whose debt securities are rated in one of the three highest
rating categories by either S&P or Moody's.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
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"Non-Recourse Debt" means Indebtedness
(i) as to which neither the Company nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or
(c) constitutes the lender;
(ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Indebtedness of the Company or any of
its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"Non-Guarantor Subsidiaries" means the Foreign Subsidiaries.
"Obligations" means any principal, interest (including, without limitation,
interest that, but for the filing of a petition in bankruptcy with respect to
an obligor, would accrue on such obligations), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business (including stock or assets) that
derives a majority of its revenues from the manufacture, distribution or sale
of integrated circuits and activities that are reasonably similar, ancillary or
related to, or a reasonable extension, development or expansion of, the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the date of the Indenture.
"Permitted Domestic Subsidiary Preferred Stock" means any series of
Preferred Stock of a domestic Subsidiary Guarantor that constitutes Qualified
Capital Stock and has a fixed dividend rate, the liquidation value of all
series of which, when combined with the aggregate amount of Indebtedness of the
Company and its Restricted Subsidiaries incurred pursuant to clause (xv) of the
definition of Permitted Indebtedness, does not exceed $12.5 million.
"Permitted Investments" means
(i) Investments by the Company or any Restricted Subsidiary of the Company
in any Restricted Subsidiary of the Company that is a Subsidiary
Guarantor or a Foreign Subsidiary (whether existing on the date of the
Indenture or created thereafter) or in any other Person (including by
means of any transfer of cash or other property) if as a result of
such Investment such Person shall become a Restricted Subsidiary of
the Company that is a Subsidiary Guarantor or a Foreign Subsidiary and
Investments in the Company by any Restricted Subsidiary of the
Company,
(ii) cash and Cash Equivalents,
(iii) Investments existing on the date of the Indenture,
(iv) loans and advances to employees and officers of the Company and its
Restricted Subsidiaries in the ordinary course of business,
(v) accounts receivable created or acquired in the ordinary course of
business,
(vi) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's businesses and otherwise in
compliance with the Indenture,
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(vii) 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,
(viii) guarantees by the Company of Indebtedness otherwise permitted to be
incurred by Restricted Subsidiaries of the Company that are either
Subsidiary Guarantors or Foreign Subsidiaries under the Indenture,
(ix) Investments the payment for which consists exclusively of Qualified
Capital Stock of the Company,
(x) Investments received by the Company or its Restricted Subsidiaries as
consideration for asset sales, including Asset Sales; provided that in
the case of an Asset Sale, such Asset Sale is effected in compliance
with the covenant described under the caption "--Repurchase at the
Option of Holders--Asset Sales," and
(xi) other Investments that do not exceed in the aggregate $15.0 million at
any one time outstanding.
"Permitted Foreign Subsidiary Preferred Stock" means any series of Preferred
Stock of a foreign Restricted Subsidiary of the Company that constitutes
Qualified Capital Stock and has a fixed dividend rate, the liquidation value of
all series of which, when combined with the aggregate amount of Indebtedness of
foreign Restricted Subsidiaries of the Company incurred pursuant to clause
(iii) of the definition of Permitted Indebtedness, does not exceed $15.0
million.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent, or
(b) contested in good faith by appropriate proceedings and as to which
the Company or its Restricted Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed
by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, including any Lien securing letters
of credit issued in the ordinary course of business consistent with
past practice in connection therewith, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the Company or
any Restricted Subsidiary of the Company acquired in the ordinary
course of business; provided, however, that
(a) the related purchase money Indebtedness shall not exceed the cost
of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of
the Company other than the property and assets so acquired, and
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(b) the Lien securing such Indebtedness shall be created with 90 days
of such acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such
Person to facilitate the purchase, shipment, or storage of such
inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating
to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of
offset and set-off;
(xi) Liens securing Interest Swap Obligations or Currency Agreements which
Interest Swap Obligations or Currency Agreements relate to
Indebtedness that is otherwise permitted under the applicable
Indenture;
(xii) Liens securing Indebtedness of foreign Restricted Subsidiaries of the
Company incurred in reliance on clause (iii) of the second paragraph
of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock";
(xiii) Liens securing Acquired Indebtedness incurred in reliance on clause
(viii) of the second paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock";
(xiv) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary with respect to obligations that do not in
the aggregate exceed $5.0 million at any one time outstanding;
(xv) Leases or subleases granted to others that do not materially interfere
with the ordinary course of business of the Company and its Restricted
Subsidiaries;
(xvi) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customer duties in connection
with the importation of goods;
(xviii) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries; and
(xix) Liens existing on the date of the Indenture, together with any Liens
securing Indebtedness incurred in reliance on clause (xiv) of the
definition of Permitted Indebtedness in order to refinance the
Indebtedness secured by Liens existing on the date of the Indenture;
provided that the Liens securing the refinancing Indebtedness shall
not extend to property other than that pledged under the Liens
securing the Indebtedness being refinanced.
"Pro Forma Cost Savings" means, with respect to any period, the reduction in
costs that occurred during the Four-Quarter Period or after the end of the
Four-Quarter Period and on or prior to the Transaction Date that were
(i) directly attributable to an Asset Acquisition and calculated on a
basis that is consistent with Regulation S-X under the Securities Act
as in effect and applied as of May 1, 1999, or
(ii) implemented by the business that was the subject of any such Asset
Acquisition within six months of the date of the Asset Acquisition and
that are supportable and quantifiable by the underlying accounting
records of such business,
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as if, in the case of each of clause (i) and (ii), all such reductions in costs
had been effected as of the beginning of such period.
"Productive Assets" means assets (including Capital Stock) that are used or
usable by the Company and its Restricted Subsidiaries in Permitted Businesses.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Corporation.
"Senior Credit Agreements" mean that certain Credit Agreement, dated as of
May 11, 1999, by and among the Company, the guarantors named therein, Credit
Suisse First Boston, as administrative agent, and the financial institutions
party thereto, initially providing for up to $95.0 million of revolving and
term credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended (including any amendment and restatement thereof),
modified, renewed, refunded, replaced, refinanced or restructured (including,
without limitation, any amendment increasing the amount of available borrowing
thereunder) from time to time and whether with the same or any other agent,
lender or group of lenders.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person,
(i) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination
thereof), and
(ii) any partnership
(a) the sole general partner or the managing general partner of which is
such Person or a Subsidiary of such Person, or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof), but shall
not include any Unrestricted Subsidiary.
"Subsidiary Guarantors" means each of
(i) all Restricted Subsidiaries (but excluding the Non-Guarantor
Subsidiaries), and
(ii) any other subsidiary that executes a Note Guarantee in accordance with
the provisions of the Indenture, and their respective successors and
assigns.
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"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet, adjusted to give pro forma effect to any acquisitions or
dispositions since the date of the relevant balance sheet (including any
acquisitions for which any Indebtedness is proposed to be incurred).
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to such Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from such Redemption Date to May 15, 2004;
provided, however, that if the period from such Redemption Date to May 15, 2004
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.
"Unrestricted Subsidiary" means
(i) any Subsidiary that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution, but only to the
extent that such Subsidiary:
(a) has no Indebtedness other than Non-Recourse Debt;
(b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the
Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company;
(c) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation
(1) to subscribe for additional Equity Interests, or
(2) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating
results;
(d) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and
(e) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its
Restricted Subsidiaries and has at least one executive officer that
is not a director or executive officer of the Company or any of its
Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was permitted by
the covenant described above under the caption "Certain Covenants--Restricted
Payments." Notwithstanding the foregoing, no Subsidiary of the Company that was
a Subsidiary Guarantor as of the date of the Indenture shall be permitted to
become an Unrestricted Subsidiary; provided, however, that any Subsidiary of
the Company that becomes a Subsidiary Guarantor after the date of the Indenture
shall be permitted to become an Unrestricted Subsidiary and the Note Guarantee
of any such Subsidiary Guarantor shall be released upon such designation in
accordance with the terms hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock," the Company shall be in default of such covenant). The
Board of Directors of the Company
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may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if
(i) such Indebtedness is permitted under the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period,
(ii) such Subsidiary shall execute a Note Guarantee and deliver an Opinion
of Counsel, in accordance with the terms of the Indenture, and
(iii) no Default or Event of Default would be in existence following such
designation.
"U.S. Subsidiary" means any Subsidiary of the Company that is incorporated
in a State in the United States or the District of Columbia or that Guarantees
or otherwise becomes an obligor with respect to any Indebtedness of the Company
or another Subsidiary Guarantor.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(i) the sum of the products obtained by multiplying
(a) 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
(b) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
Book-Entry, Delivery and Form
The new notes to be exchanged for old notes that were sold to qualified
institutional buyers under Rule 144A in the United States initially will be in
the form of one or more registered global notes without interest coupons
(collectively, the "Global Note"). Upon issuance, the Global Note will be
deposited with the trustee, as custodian for the Depositary, in New York, New
York, and registered in the name of the Depositary or its nominee, in each case
for credit to the accounts of direct or indirect participants.
The Depositary has advised us as follows: the Depositary is a limited-
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. The Depositary was created to hold securities of institutions that
have accounts with the Depositary ("participants") and to
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facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's participants include
securities brokers and dealers (which may include the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to the Depositary's book-entry system is also available to others such
as banks, brokers, dealers and trust companies (collectively, the "indirect
participants") that clear through or maintain a custodial relationship with a
participant, whether directly or indirectly.
We expect that pursuant to procedures established by the Depositary, upon
the deposit of the Global Note with the Depositary, the Depositary will credit,
on its book-entry registration and transfer system, the principal amount of
notes represented by such Global Note to the accounts of participants. The
accounts to be credited shall be designated by the Initial Purchasers.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer
of those ownership interests will be effected only through, records maintained
by the Depositary (with respect to participants' interests), the participants
and the indirect participants (with respect to the owners of beneficial
interests in the Global Note other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the Global Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Note, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of any related notes
evidenced by the Global Note for all purposes of such notes and the Indenture.
Except as set forth below, as an owner of a beneficial interest in the Global
Note, you will not be entitled to have the Notes represented by the Global Note
registered in your name, will not receive or be entitled to receive physical
delivery of certificated notes and will not be considered to be the owner or
holder of any notes under the Global Note. We understand that under existing
industry practice, in the event an owner of a beneficial interest in the Global
Note desires to take any action that the Depositary, as the holder of the
Global Note, is entitled to take, the Depositary would authorize the
participants to take such action, and the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
We will make payments of principal of, premium, if any, and interest on
notes represented by the Global Note registered in the name of and held by the
Depositary or its nominee to the Depositary or its nominee, as the case may be,
as the registered owner and holder of the Global Note.
We expect that the Depositary or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest on the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depositary or its nominee. We also expect that
payments by participants or indirect participants to owners of beneficial
interests in the Global Note held through such participants or indirect
participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants or indirect participants.
We will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Note for any note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depositary and its participants or indirect
participants or the relationship between such participants or indirect
participants and the owners of beneficial interests in the Global Note owning
through such participants.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the
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company will have any responsibility or liability for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Book Entry Notes for Certificated Notes
Subject to certain conditions, the notes represented by the Global Note are
exchangeable for certificated notes in definitive form of like tenor in
denominations of $1,000 and integral multiples thereof if
(1) the Depositary notifies us that it is unwilling or unable to continue
as Depositary for the Global Note and we are unable to locate a
qualified successor within 90 days or if at any time the Depositary
ceases to be a clearing agency registered under the Securities Exchange
Act of 1934;
(2) the company in its discretion at any time determines not to have all
the notes represented by the Global Note; or
(3) a default entitling the holders of the notes to accelerate the maturity
thereof has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for certificated
notes issuable in authorized denominations and registered in such names as the
Depositary shall direct. Subject to the foregoing, the Global Note is not
exchangeable, except for a Global Note of the same aggregate denomination to be
registered in the name of the Depositary or its nominee. In addition, such
certificates will bear the legend referred to under "Transfer Restrictions"
(unless we determine otherwise in accordance with applicable law), subject,
with respect to such certificated notes, to the provisions of such legend.
EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We originally sold our old notes on May 11, 1999 to Bear, Stearns & Co. Inc.
and Credit Swisse First Boston Corporation (the "Initial Purchasers") pursuant
to a Purchase Agreement dated May 5, 1999. The Initial Purchasers subsequently
resold the old notes to qualified institutional buyers in reliance on Rule 144A
under the Securities Act. As a condition of the purchase agreement, we entered
into an Exchange Offer Registration Rights Agreement (the "Exchange Offer
Registration Rights Agreement") with the Initial Purchasers pursuant to which
we agreed, for the benefit of the holders of the old notes, at our cost, to:
(1) file a registration statement (the "Exchange Offer Registration
Statement") with the SEC on or before October 8, 1999, with respect to
a registered exchange offer to exchange the old notes for new notes of
the company having terms substantially identical in all material
respects to the old notes (except that the new notes will not contain
terms with respect to transfer restrictions);
(2) cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act on or before December 7, 1999
(3) as soon as practicable after the effectiveness of the Exchange Offer
Registration Statement (the "Effectiveness Date"), to offer the new
notes in exchange for surrender of the old notes; and
(4) to keep the exchange offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the exchange offer
is mailed to the holders of the old notes.
For each Transfer Restricted Security (as defined in the Registration Rights
Agreement) tendered to us pursuant to the exchange offer, we will issue to the
holder of such Transfer Restricted Security a new note having a principal
amount equal to that of the surrendered Transfer Restricted Security. Interest
on each
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new note will accrue from the last interest payment date on which interest was
paid on the Transfer Restricted Security surrendered in exchange therefore or,
if no interest has been paid on such Transfer Restricted Security, from the
date of its original issue.
Under existing SEC interpretations contained in several no-action letters to
third parties, we believe the new notes will be freely transferable by holders
other than our affiliates after the exchange offer without further registration
under the Securities Act if the holder of the new notes represents to us in the
exchange offer that
. it is acquiring the new notes in the ordinary course of its business,
. it has no arrangement or understanding with any person to participate in
the distribution of the new notes, and
. it is not an affiliate of the Company within the meaning of Rule 405
under the Securities Act.
Each broker-dealer that receives new notes for its own account in exchange
for old notes in the exchange offer, where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. See "Plan of Distribution." The SEC has
taken the position that participating broker-dealers may fulfill their
prospectus delivery requirements with respect to new notes (other than a resale
of an unsold allotment from the original sale of the old notes) with the
prospectus contained in the Exchange Offer Registration Statement.
Under the Registration Rights Agreement, the company is required to allow
participating broker-dealers and other persons, if any, with similar prospectus
delivery requirements to use the prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of such new notes for 180
days following the effective date of such Exchange Offer Registration Statement
(or such shorter period during which participating broker dealers are required
by law to deliver such prospectus).
A holder of Transfer Restricted Securities (other than certain specified
holders) who wishes to exchange old notes for new notes in the exchange offer
will be required to make certain representations to us (as described in the
Registration Rights Agreement), including the representation that
(1) any new notes to be received by it will be acquired in the ordinary
course of its business;
(2) at the time of the commencement of the exchange offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the new
notes; and
(3) it is not an "affiliate" of the company, as defined in Rule 405 under
the Securities Act, or, if it is an affiliate, that it will comply with
the registration and prospectus delivery requirements of the Securities
Act to the extent applicable.
In the event that changes in law or applicable interpretations of the staff
of the SEC do not permit us to effect such an exchange offer, or if for any
other reason we do not consummate the exchange offer within 240 days of the
date of the Registration Rights Agreement, or if any Initial Purchaser shall
notify us within 10 business days following consummation of the exchange offer
that Transfer Restricted Securities held by it are not eligible to be exchanged
for new notes in the exchange offer, or if any holder shall notify us within 10
business days following consummation of the exchange offer that
(1) such holder is prohibited by law or SEC policy from participating in
the exchange offer;
(2) such holder may not resell the new notes acquired by it in the exchange
offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder; or
(3) such holder is a broker-dealer and holds notes that are part of an
unsold allotment from the original sale of the old notes,
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then, the company and the Subsidiary Guarantors will, at our cost,
(1) as promptly as practicable, file a shelf registration statement (the
"Shelf Registration Statement") covering resales of the old notes or
the new notes, as the case may be;
(2) cause the Shelf Registration Statement to be declared effective under
the Securities Act on or prior to the 60th day after the date we become
obligated to file the Shelf Registration Statement or receive certain
notices from holders; and
(3) keep the Shelf Registration Statement effective until the earlier of
(A) the time when the notes covered by the Shelf Registration Statement
can be sold pursuant to Rule 144 without any limitations under clauses
(c), (e), (f) and (h) of Rule 144, (B) two years from the effective
date, and (C) the date on which all notes registered thereunder are
disposed of in accordance therewith.
We will pay additional cash interest if (each of clause (1) through (3), a
"Registration Default")
(1) by October 8, 1999, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is filed with the SEC;
(2) by January 6, 2000, the exchange offer is not consummated and, if
applicable, the Shelf Registration Statement is not declared effective;
or
(3) after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to
certain exceptions);
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.
The rate of the additional interest will be 0.5% per annum following the
occurrence of such Registration Default, until all Registration Defaults have
been cured; provided, however, that
(1) no holder of notes who is not entitled to the benefits of a Shelf
Registration Statement shall be entitled to receive additional interest
by reason of a Registration Default that pertains to a Shelf
Registration Statement; and
(2) no holder of notes constituting an unsold allotment from the original
sale of the old notes or any other holder of notes who is entitled to
the benefits of a Shelf Registration Statement shall be entitled to
receive additional interest by reason of a Registration Default that
pertains to an exchange offer.
We will pay such additional interest on regular interest payment dates. Such
additional interest will be in addition to any other interest payable from time
to time with respect to the old notes and the new notes.
All references in the Indenture, in any context, to any payment of
principal, purchase prices in connection with a purchase of notes, and interest
or any other amount payable on or with respect to any of the notes shall be
deemed to include payment of any additional cash interest pursuant to the
Registration Rights Agreement.
If we effect the exchange offer, we will be entitled to close the exchange
offer 30 days after the commencement thereof provided that we have accepted all
old notes theretofore validly tendered in accordance with the terms of the
exchange offer.
The summary herein of certain provisions of the Exchange Offer Registration
Rights Agreement is subject to, and is qualified in its entirety by, all the
provisions of the Exchange Offer Registration Rights Agreement, a copy of which
is filed as an exhibit to the Exchange Offer Registration Statement of which
this prospectus is a part.
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Following the consummation of the exchange offer, holders of the old notes
who were eligible to participate in the exchange offer but who did not tender
their old notes will not have any further registration rights and such old
notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such old notes could be adversely
affected.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, we will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on ,
1999. We will issue $1,000 principal amount of new notes in exchange for each
$1,000 principal amount of outstanding old notes accepted in the Exchange
Offer. Holders may tender some or all of their old notes pursuant to the
Exchange Offer. However, old notes may be tendered only in integral multiples
of $1,000.
The form and terms of the new notes are substantially the same as the form
and terms of the old notes except that:
. the new notes bear a new designation and a different CUSIP number from
the old notes;
. the new notes have been registered under the federal securities laws and
hence will not bear legends restricting the transfer thereof as the old
notes do; and
. the holders of the new notes will generally not be entitled to certain
rights under the Exchange Offer Registration Rights Agreement, which
rights generally will be satisfied when the Exchange Offer is
consummated. The new notes will evidence the same debt as the tendered
old notes and will be entitled to the benefits of the indenture under
which the old notes were issued. As of the date of this prospectus,
$98,000,000 aggregate principal amount of old notes were outstanding.
Holders of old notes do not have any appraisal or dissenters' rights under
the Business Corporation Law of Pennsylvania, the Pennsylvania Limited
Liability Company Act or the indentures relating to such notes in connection
with the exchange offer. We intend to conduct the exchange offer in accordance
with the applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
We shall be deemed to have accepted validly tendered old notes when, as and
if we have given oral or written notice thereof, such notice if given orally,
to be confirmed in writing, to the exchange agent. The exchange agent will act
as agent for the tendering holders for the purpose of receiving the new notes
from the company.
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted old notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. We will pay all charges and expenses, other
than transfer taxes in certain circumstances, in connection with the Exchange
Offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The expiration date is 5:00 p.m., New York City time, on , 1999, unless
we extend the exchange offer, in which case the expiration date will be the
latest date and time to which the exchange offer is extended.
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In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice, such notice if given orally, to be
confirmed in writing, and will issue a press release or other public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
We reserve the right:
. to delay accepting any old notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "conditions" shall not have been satisfied, by giving oral or
written notice, such notice if given orally, to be confirmed in writing,
of such delay, extension or termination to the exchange agent, or
. to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
Interest on the New Notes
The new notes will bear interest from their date of issuance. Holders of old
notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the Exchange Notes. Such
interest will be paid with the first interest payment on the new notes on
November 15, 1999 to persons who are registered holders of the new notes on
November 1, 1999. Interest on the old notes accepted for exchange will cease to
accrue upon issuance of the new notes.
Interest on the new notes is payable semi-annually on each May 15 and
November 15, commencing on November 15, 1999.
Procedures for Tendering
Only a registered holder of old notes may tender such notes in the exchange
offer. To tender in the exchange offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the old
notes and any other required documents, or cause The Depository Trust Company
to transmit an agent's message in connection with a book-entry transfer, to the
exchange agent prior to 5:00 p.m., New York City time, on the expiration date.
To be tendered effectively, the old notes, the Letter of Transmittal or agent's
message and other required documents must be completed and received by the
exchange agent at the address set forth below under "--Exchange Agent" prior to
5:00 p.m., New York City time, on the expiration date. Delivery of the old
notes may be made by book entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the exchange agent prior to the expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the old notes that such participant has
received and agrees:
. to participate in the Automated Tender Option Program ("ATOP");
. to be bound by the terms of the Letter of Transmittal; and
. that we may enforce such agreement against such participant.
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By executing the Letter of Transmittal or agent's message, each holder will
make to us the representations that:
. the new notes are to be acquired by the holder or the person receiving
such new notes, whether or not such person is the holder, in the
ordinary course of business;
. the holder or any such other person, other than a broker-dealer referred
to in the next sentence, is not engaging and does not intend to engage,
in distribution of the new notes;
. the holder or any such other person has no arrangement or understanding
with any person to participate in the distribution of the new notes;
. neither the holder nor any such other person is an "affiliate" of ours
within the meaning of Rule 405 under the Securities Act; and
. the holder of any such other person acknowledges that if such holder or
any other person participates in the exchange offer for the purpose of
distributing the new notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection
with any resale of the new notes and cannot rely on existing SEC
interpretation thus the new notes will be freely tradeable after the
exchange offer without further registration under the Securities Act.
The tender by a holder and the acceptance thereof by us will constitute
agreement between such holder and the company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal or
agent's message.
The method of delivery of old notes and the Letter of Transmittal or agent's
message and all other required documents to the exchange agent is at the
election and sole risk of the holder. As an alternative to delivery by mail,
holders may wish to consider overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the exchange agent
before the expiration date. No Letter of Transmittal or old notes should be
sent to the company. Holders may request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the above transactions
for such holders.
Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an eligible institution (as defined below) unless
the notes tendered pursuant thereto are tendered by a registered holder who has
not completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal, or for the account of an
eligible institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be by a member firm of the Medallion System (an "eligible
institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any old notes listed therein, such notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such notes with the
signature thereon guaranteed by an eligible institution.
If the Letter of Transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence to our satisfaction of
their authority to so act must be submitted with the Letter of Transmittal.
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We understand that the exchange agent will make a request promptly after the
date of this prospectus to establish accounts with respect to the old notes at
the book-entry transfer facility, The Depository Trust Company (the "book-entry
transfer facility"), for the purpose of facilitating the exchange offer, and
subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of old notes by causing such book-entry transfer facility to transfer
such old notes into the exchange agent's account with respect to the old notes
in accordance with the book-entry transfer facility's procedures for such
transfer. Although delivery of the old notes may be effected through book-entry
transfer into the exchange agent's account at the book-entry transfer facility,
unless an agent's message is transmitted to and received by the exchange agent
in compliance with ATOP on or prior to the expiration date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures, the tender of such notes will not
be valid. Delivery of documents to the book-entry transfer facility does not
constitute delivery to the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by us, in our sole discretion, which determination will be
final and binding. We reserve the absolute right to reject any and all old
notes not properly tendered or any old notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular old notes. We
may not waive any condition to the exchange offer unless such condition is
legally waiveable. In the event such a waiver by us gives rise to the legal
requirement to do so, we will hold the exchange offer open for at least five
business days thereafter. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the Letter of Transmittal, will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes must be cured within
such time as the we shall determine. Although we intend to notify holders of
defects or irregularities with respect to tenders of old notes, neither the
issuers, the exchange agent nor any other person shall incur any liability for
failure to give such notification. Tender of old notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any old notes received by the exchange agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
expiration date.
Guaranteed Delivery Procedures
Holders who wish to tender their old notes and whose old notes are not
immediately available, who cannot deliver their old notes, the Letter of
Transmittal or any other required documents to the exchange agent, or who
cannot complete the procedures for book-entry transfer, prior to the expiration
date, may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives by facsimile
transmission, mail or hand delivery from such eligible institution a
properly completed and duly executed Notice of Guaranteed Delivery,
setting forth the name and address of the holder, the certificate
number(s) of such old notes and the principal amount of old notes
tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the Letter of Transmittal, or facsimile
thereof, or, in the case of a book-entry transfer, an agent's message,
together with the certificate(s) representing the old notes, or a
confirmation of book-entry transfer of such notes into the exchange
agent's account at the Book-Entry Transfer Facility, and any other
documents required by the Letter of Transmittal will be deposited by
the eligible institution with the exchange agent; and
(c) the certificate(s) representing all tendered old notes in proper form
for transfer, or a confirmation of a book-entry transfer of such old
notes into the exchange agent's account at the book entry transfer
facility, together with a Letter of Transmittal, of facsimile thereof,
properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an agent's
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message, are received by the exchange agent within three New York Stock
Exchange trading days after the expiration date of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of old notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the expiration date of
the exchange offer.
To withdraw a tender of old notes in the exchange offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
exchange agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the expiration date of the exchange offer. Any such notice of
withdrawal must:
. specify the name of the person having deposited notes to be withdrawn
(the "Depositor");
. identify the notes to be withdrawn, including the certificate number(s)
and principal amount of such notes, or, in the case of old notes
transferred by book-entry transfer, the name and number of the account
at the book entry transfer facility to be credited;
. be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such notes were tendered, including
any required signature guarantees, or be accompanied by documents of
transfer sufficient to have the trustee with respect to the old notes
register the transfer of such notes into the name of the person
withdrawing the tender; and
. specify the name in which any such old notes are to be registered, if
different from that of the Depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by us and shall be final and
binding on all parties. Any old notes so withdrawn will be deemed not to have
been validly tendered for purposes of the exchange offer and no new notes will
be issued with respect thereto unless the old notes so withdrawn are validly
retendered. Any old notes which have been tendered but which are not accepted
for exchange will be returned to the holder thereof without cost to such
holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or exchange new notes for, any old notes, and
may terminate or amend the exchange offer as provided herein before the
acceptance of such old notes, if:
. any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer, or any material adverse development has
occurred in any existing action or proceeding with respect to our
Company or any of our subsidiaries; or
. any law, statute, rule, regulation or interpretation by the staff of the
SEC is proposed, adopted or enacted, which, in our sole judgment, might
materially impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange offer; or
. any governmental approval has not been obtained, which approval we
shall, in our sole discretion, deem necessary for the consummation of
the exchange offer as contemplated hereby.
If we determine, in our sole discretion, that any of the conditions are not
satisfied, we may:
. refuse to accept any old notes and return all tendered old notes to the
tendering holders;
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. extend the exchange offer and retain all old notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such old notes as described in "--Withdrawal of
Tenders" above;
. waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered old notes which have not been withdrawn.
Exchange Agent
Chase Manhattan Trust Company, National Association has been appointed as
exchange agent for the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed
to the exchange agent addressed as follows:
By Mail: Overnight Courier:
Chase Manhattan Trust Company, Chase Manhattan Trust Company
National Association National Association
One Liberty Place One Liberty Place
1650 Market Street 1650 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Attention: Stephen Schaaf Attention: Stephen Schaaf
Facsimile Transmission: Confirm by Telephone:
(215) 568-1449 (215) 988-1320
Delivery to an address other than set forth above will not constitute a
valid delivery.
Fees and Expenses
The expenses of soliciting tenders will be borne by us. The principal
solicitation is being made by mail however, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular
employees of our Company and our affiliates.
We have not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers, or others soliciting
acceptances of the Exchange Offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
We will pay the cash expenses to be incurred in connection with the Exchange
Offer. Such expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The new notes will be recorded at the same carrying value as the new notes,
which is face value, as reflected in our company's accounting records on the
date of exchange. Accordingly, we will recognize no gain or loss for accounting
purposes. The expenses of the exchange offer will be expensed over the term of
the new notes.
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Consequences of Failure to Exchange
The old notes that are not exchanged for new notes pursuant to the exchange
offer will remain restricted securities. Accordingly, such old notes may be
resold only:
. to our company, upon redemption thereof or otherwise;
. so long as the old notes are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person inside the United States whom the
seller reasonably believes is a qualified institutional buyer within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A, in accordance with Rule 144 under the Securities Act, or pursuant
to another exemption from the registration requirements of the
Securities Act, and based upon an opinion of counsel reasonably
acceptable to our company;
. outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
. pursuant to an effective registration statement under the Securities
Act, in each case in accordance with any applicable securities laws of
any state of the United States.
Resale of the New Notes
With respect to resales of new notes, based on interpretations by the staff
of the SEC set forth in no-action letters issued to third parties, we believe
that a holder or other person who receives new notes, whether or not such
person is the holder, other than a person that is an "affiliate" of our Company
within the meaning of Rule 405 under the Securities Act, in exchange for old
notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the new notes, will be allowed to resell
the new notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the new notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires new notes in the exchange offer for the purpose of distributing
or participating in a distribution of the new notes, such holder cannot rely on
the position of the staff of the SEC enunciated in such no-action letters or
any similar interpretive letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Further, each participating broker-dealer that receives new notes
for its own account in exchange for old notes, where such old notes were
acquired by such participating broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such new notes.
As contemplated by these no-action letters and the Exchange Offer
Registration Rights Agreement, each holder accepting the exchange offer is
required to represent to our Company in the Letter of Transmittal that:
. the new notes are to be acquired by the holder or the person receiving
such new notes, whether or not such person is the holder, in the
ordinary course of business;
. the holder or any such other person, other than a broker-dealer referred
to in the next sentence, is not engaging and does not intend to engage,
in the distribution of the new notes;
. the holder or any such other person has no arrangement or understanding
with any person to participate in the distribution of the new notes;
. neither the holder nor any such other person is an "affiliate" of our
company within the meaning of Rule 405 under the Securities Act; and
. the holder or any such other person acknowledges that if such holder or
other person participates in the exchange offer for the purpose of
distributing the new notes it must comply with the
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registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the new notes and cannot rely on those
no-action letters.
As indicated above, each participating broker-dealer that receives new
notes for its own account in exchange for old notes must acknowledge that it
will deliver a prospectus in connection with any resale of such new notes. For
a description of the procedures for such resales by participating broker-
dealers, see "Plan of Distribution."
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material United States
federal income tax consequences of the exchange of the old notes for the new
notes, and the ownership and disposition of the new notes for holders who
acquired the new notes in exchange for old notes. This discussion is limited to
holders who hold both the existing notes and the new notes as capital assets,
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended.
This discussion does not address all aspects of United States federal income
taxation that may be applicable to investors in light of their particular
circumstances, or to investors subject to special treatment under United States
federal income tax law (including, without limitation, certain financial
institutions, insurance companies, tax-exempt entities, dealers in securities,
persons who have acquired notes as part of a straddle, hedge, conversion
transaction or other integrated investment or constructive sale or persons
whose functional currency is not the United States dollar).
This discussion is based on provisions of the Code, Treasury regulations
promulgated thereunder, and administrative and judicial interpretations
thereof, all as in effect on the date hereof and all of which are subject to
change, possibly with retroactive effect.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR
GIFT TAX LAWS, ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE
TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
As used in this section, the term "U.S. holder" means a beneficial owner of
a note that is, for United States federal income tax purposes,
. citizen or resident of the United States,
. a corporation or partnership created or organized under the laws of the
United States or of any political subdivision thereof,
. an estate the income of which is subject to United States federal income
taxation regardless of its source, or
. a trust, if a United States court is able to exercise primary
supervision over the administration of such trust and one or more United
States persons have the authority to control all substantial decisions
of such trust.
The term "non-U.S. holder" means a beneficial owner of a note other than a
U.S. Holder.
U.S. Taxation of U.S. Holders
Payments of Interest. Stated interest payable on the new notes generally
will be included in the gross income of a U.S. holder as ordinary interest
income at the time accrued or received, in accordance with such U.S. holder's
method of accounting for United States federal income tax purposes.
We may be required to pay additional interest (or redemption premiums) to
U.S. holders of the new notes. Although the matter is not free from doubt, we
intend to take the position that a U.S. holder of a new note should be required
to report the additional interest (or redemption premiums) as ordinary income
for United States federal income tax purposes when they accrue or are received,
in accordance with the holder's method of accounting. It is possible, however,
that the Internal Revenue Service may take a different position, in which case
the timing and amount of income may be different.
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Disposition of the Notes. The exchange of the old notes for the new notes
will not be a taxable event for U.S. federal income tax purposes. The holding
period of the new note will include the U.S. holder's holding period of the old
note, and the basis of the new note will be the same as the basis in the old
note immediately before the exchange.
On the sale, exchange, redemption, retirement at maturity or other
disposition of a new note, a U.S. holder generally will recognize capital gain
or loss (except as noted in the next paragraph) equal to the difference between
the amount realized and the U.S. holder's adjusted tax basis in the new note.
The capital gain or loss will be long-term capital gain or loss if the holding
period for the new note (that includes the holding period for the initial note)
exceeds one year at the time of the disposition. Generally, the maximum tax
rate for individuals on long-term capital gains is 20%.
To the extent a portion of the amount realized on the disposition of the new
note is attributable to interest, it will be taxed as ordinary income and not
capital gain. A portion of the amount realized will be attributable to interest
if there is accrued but unpaid interest at the time of the disposition, or if
the U.S. holder purchased the initial notes (other than at original issuance)
at a market discount, as defined in the Internal Revenue Code of 1986, as
amended. If a U.S. holder bought an old note for an amount less than the stated
redemption price at maturity, he or she should consult with his or her tax
advisor to determine if there is market discount in the new note, and the
impact of the market discount on the taxation of the holding and disposition of
the new note.
Bond Premium. If a U.S. holder purchased an old note for an amount in excess
of the amount payable at the maturity date, the U.S. holder may deduct the
excess as amortizable bond premium over the aggregate terms of the old notes
and the new notes under a yield to maturity formula. The deduction is available
only if an election is made by the U.S. holder, and the election will apply to
all obligations owned or acquired by the U.S. holder. The U.S. holder's
adjusted basis in the old notes and the new notes will be reduced to the extent
of the amortizable bond premium.
U.S. Taxation of Non-U.S. Holders
Payments of Interest. In general, under current U.S. tax law, payments of
interest received by a non-U.S. holder will not be subject to United States
withholding tax, provided that the non-U.S. holder
. does not actually or constructively own 10% or more of the total
combined voting power of all of our classes of stock entitled to vote,
. is not a controlled foreign corporation that is related to us actually
or constructively through stock ownership, and
. either
. the beneficial owner of the new note provides us or our paying agent
with a properly executed certification on IRS Form W-8 (or suitable
substitute form), signed under penalties of perjury, that the
beneficial owner is not a "U.S. person" for U.S. federal income tax
purposes and that provides the beneficial owner's name and address,
or
. a securities clearing organization, bank or other financial
institution that holds customer's securities in the ordinary course
of its business holds the new note and certifies to us or our agent
under penalties of perjury that the IRS Form W-8 (or a suitable
substitute form) has been received from the beneficial owner of the
new note or a qualifying intermediary and furnishes the payor a copy
thereof.
Payments of interest not exempt from U.S. federal withholding tax as
described above, or not exempt because of a change of law effective after the
date of the original issuance of the old note, will be subject to such
withholding tax at the rate of 30%, unless reduced or eliminated under an
applicable income tax treaty,
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and unless the beneficial owner of the new note provides us or our paying
agent, as the case may be, with a properly executed
. IRS Form 1001 (or successor form) claiming an exemption from withholding
under the benefit of a tax treaty or
. IRS Form 4224 (or successor form) stating that interest paid on the new
note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in
the United States.
It is unclear whether the payment of additional interest (or redemption
premium) to a non-U.S. holder will be subject to withholding of U.S. federal
income tax, and we may withhold 30% from any such payments made to non-U.S.
holders.
Treasury regulations that are to be effective with respect to payments made
after December 31, 2000 provide alternative methods for satisfying the
certification requirements described in the preceding paragraph. Those
regulations also will require, in the case of new notes held by a foreign
partnership, that the certification described above be provided by each
partner.
Disposition of the New Notes. The exchange of an old note for a new note
will not be a taxable event for a non-U.S. holder--
A non-U.S. holder generally will not be subject to U.S. federal income tax
(and no tax will be withheld) with respect to gain realized on the sale,
exchange or other disposition of a new note, unless
. the gain is effectively connected with a U.S. trade or business
conducted by the non-U.S. holder or
. the non-U.S. holder is an individual who is present in the United States
for 183 or more days during the taxable year of the disposition and
certain other conditions are met.
Effectively Connected Income. If interest and other payments received by a
non-U.S. holder with respect to the new notes, including proceeds from the sale
or exchange of the new notes, are effectively connected with the conduct by the
non-U.S. holder of a trade or business within the United States (or the non-
U.S. holder is otherwise subject to U.S. federal income taxation on a net basis
with respect to such holder's ownership of the notes), the non-U.S. holder will
generally be subject to the rules described above under "U.S. Taxation of U.S.
Holders" (subject to any modification provided under an applicable income tax
treaty). The non-U.S. holder may also be subject to the U.S. "branch profits
tax" if the holder is a corporation.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to certain
payments of principal, interest and liquidated damages paid on new notes and to
the proceeds of sale of a new note made to U.S. holders other than certain
exempt recipients (such as corporations). U.S. holders also may be subject to
backup withholding at a rate of 31% on payments of principal, liquidated
damages and interest on, and the proceeds of the sale or exchange of, the new
notes. In general, backup withholding will apply to the payments if the U.S.
holder
. fails to furnish a taxpayer identification number ("TIN") which, for an
individual, would be his or her Social Security number,
. furnishes an incorrect TIN, or
. fails to report in full payments of interest or dividends.
Information reporting and backup withholding generally will not apply to
payments made to a non-U.S. holder who provides the certification described
under "U.S. Taxation of Non-U.S. holders--Payments of Interest" or otherwise
establishes an exemption from backup withholding, provided that neither we or
the paying agent have actual knowledge that the holder is a U.S. person.
118
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
Expiration Date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , all dealers effecting transactions in the new notes may
be required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by broker-
dealers. New notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time:
. in one or more transactions in the over-the-counter market,
. in negotiated transactions,
. through the writing of options on the new notes, or
. a combination of such methods of resale.
The new notes may be sold:
. at market prices prevailing at the time of resale,
. at prices related to such prevailing market prices, or
. at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any new notes.
Any broker-dealer that resells new notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on any such
resale of new notes and any commissions or concessions received by any of them
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, we will promptly send
additional copies of the prospectus and any amendment or supplement to the
prospectus to any broker-dealer that requests these copies in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the old notes, but not
including commissions or concessions of any brokers or dealers. We have also
agreed to indemnify the holders of the notes, including any broker-dealers,
against various liabilities, including liabilities under the Securities Act.
Following consummation of the exchange offer, we may, in our sole
discretion, commence one or more additional exchange offers to holders of old
notes who did not exchange their old notes for new notes in the exchange offer
on terms which may differ from those contained in the registration rights
agreement. We
119
<PAGE>
may use this prospectus, as it may be amended or supplemented from time to
time, in connection with any such additional exchange offers.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for us by Pepper
Hamilton LLP.
EXPERTS
The consolidated financial statements and schedule of Integrated Circuit
Systems, Inc. and subsidiaries as of July 3, 1999 and June 27, 1998, and for
each of the fiscal years in the three-year period ended July 3, 1999 have been
included herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On August 10, 1999, we decided to discontinue our engagement of KPMG LLP as
our independent accountants upon the completion of the audit of the Company's
consolidated financial statements as of and for the year ended July 3, 1999 and
the issuance of their report thereon. KPMG LLP's reports on our consolidated
financial statements for the past two fiscal years contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to change independent
accountants was approved by our board of directors. In connection with the
audits by KPMG LLP of our financial statements as of and for the year ended
July 3, 1999 and June 27, 1998, there were no disagreements with KPMG LLP on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of KPMG LLP, would have caused them to make reference to
the matter in their reports.
On August 10, 1999, we engaged PricewaterhouseCoopers LLP ("PwC") as our
independent accountants, commencing upon the completion of the audit of the
Company's consolidated financial statements as of and for the year ended July
3, 1999 and the issuance of KPMG LLP's report thereon. Prior to such
engagement, we had not consulted with PwC on issues relating to accounting
principles or the type of audit opinion to be issued with respect to our
financial statements. We selected PwC based primarily on the fact that PwC
typically serves as independent accountants for the portfolio companies of
certain of our shareholders.
AVAILABLE INFORMATION
Although we used to be subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, we stopped
being subject to those requirements at the time of the recapitalization. We
have agreed that, whether or not we are required to do so by the rules and
regulations of the Securities Exchange Commission, for so long as any of the
notes remain outstanding, we will furnish to the holders of the notes and file
with the Securities Exchange Commission, unless the Securities Exchange
Commission will not accept such a filing:
(a) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K
if we were required to file such forms, including a Management's
Discussion and Analysis of Financial Condition and Results of
Operations;
(b) with respect to the annual information only, a report thereon by our
certified independent accountants; and
(c) all reports that would be required to be filed with the Commission on
Form 8-K if we were required to file such reports.
120
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statements:
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets as of July 3, 1999 and June 27, 1998........ F-3
Consolidated Statements of Operations for the years ended July 3, 1999,
June 27, 1998 and June 28, 1997........................................ F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended July 3, 1999, June 27, 1998, June 28, 1997 and June 29, 1996..... F-5
Consolidated Statements of Cash Flows for the years ended July 3, 1999,
June 27, 1998 and June 28, 1997........................................ F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Integrated Circuit Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Integrated
Circuit Systems, Inc. and subsidiaries as of July 3, 1999 and June 27, 1998,
and the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
July 3, 1999. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Integrated
Circuit Systems, Inc. and subsidiaries as of July 3, 1999 and June 27, 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended July 3, 1999, in conformity with generally
accepted accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
August 4, 1999
F-2
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
July 3, June 27,
1999 1998
--------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 9,285 $ 25,340
Marketable securities................................... 288 16,480
Accounts receivable, net................................ 18,120 20,335
Inventory, net.......................................... 8,736 12,839
Deferred income taxes................................... 8,644 2,069
Prepaid income taxes.................................... -- 1,067
Prepaid assets.......................................... 797 590
Other assets............................................ 523 2,043
Current portion of deposit on purchase contracts........ 3,973 --
--------- --------
Total current assets.................................. 50,366 80,763
Property and equipment, net............................... 12,127 17,884
Deferred financing costs, net............................. 12,767 --
Deposits on purchase contracts............................ 11,348 7,864
Other assets.............................................. 1,187 1,498
--------- --------
Total assets.......................................... $ 87,795 $108,009
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term debt....................... $ 1,030 $ 143
Accounts payable........................................ 10,258 11,047
Accrued salaries and bonuses............................ 2,056 1,788
Accrued expenses and other current liabilities.......... 5,639 2,672
Income taxes payable.................................... 4,473 --
--------- --------
Total current liabilities............................. 23,456 15,650
Long-term debt, less current portion...................... 169,000 1,380
Deferred income taxes..................................... 789 1,211
Other liabilities......................................... 1,462 --
--------- --------
Total liabilities..................................... 194,707 18,241
--------- --------
Commitments and contingencies (See Notes 4, 5, 11 and 20)
Shareholders' Equity (Deficit):
Preferred stock, authorized 5,000 shares, none issued... -- --
Common stock, no par value, authorized 50,000: issued
13,099 shares as June 27, 1998......................... -- 56,604
Class A common stock, $0.01 par, authorized 27,000;
issued and outstanding 15,613 shares 156 --
Class B common stock, $0.01 par, authorized 70,000;
issued and outstanding 5,653 shares.................... 57 --
Class L common stock, $0.01 par, authorized 3,000;
issued and outstanding 2,363 shares.................... 24 --
Additional paid in capital.............................. 34,719 --
Less treasury stock, at cost (774 shares at June 27,
1998).................................................. -- (16,742)
(Accumulated deficit)/retained earnings................. (141,413) 49,906
Notes receivable (see Note 18).......................... (455) --
--------- --------
Total shareholders' equity (deficit).................. (106,912) 89,768
--------- --------
Total liabilities and shareholders' equity (deficit).. $ 87,795 $108,009
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Consolidated Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------------
July 3, June 27, June 28,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue.......................................... $139,063 $160,634 $104,359
Cost and expenses:
Cost of sales.................................. 64,496 88,859 59,137
Research and development....................... 21,316 19,797 13,521
Selling, general and administrative............ 19,560 19,444 15,118
Special charges:
Compensation costs (see Note 15)............. 15,051 -- --
Write-off of in-process research and
development costs........................... -- -- 11,196
Goodwill amortization.......................... 234 234 536
-------- -------- --------
Operating income............................. 18,406 32,300 4,851
Gain on sale of assets (see Note 3).............. (10,734) -- --
Interest and other income........................ (2,178) (1,984) (1,800)
Interest expense................................. 2,955 64 63
Impairment in equity investment.................. -- -- 7,072
Minority interest................................ -- -- (154)
Equity loss of investee.......................... -- -- 866
-------- -------- --------
Income (loss) before income taxes from
continuing operations......................... 28,363 34,220 (1,196)
Income tax expense............................... 5,320 12,845 6,314
-------- -------- --------
Income (loss) from continuing operations....... 23,043 21,375 (7,510)
-------- -------- --------
Discontinued operations:
Loss from operations........................... -- -- (1,773)
Gain on disposal............................... -- -- 864
-------- -------- --------
Loss from discontinued operations................ -- -- (909)
-------- -------- --------
Net income (loss)................................ $ 23,043 $ 21,375 $ (8,419)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Consolidated Statements of Shareholders' Equity (Deficit)
(in thousands)
<TABLE>
<CAPTION>
Notes
Receivable
Common Common Class From Additional
Stock Stock Class A A Class B Class B Class L Class L Certain Paid-In Treasury Treasury
Shares Amount Shares Amounts Shares Amounts Shares Amounts Management Capital Stock Shares
------- -------- ------- ------- ------- ------- ------- ------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June
29, 1996......... 11,389 $ 32,674 -- $ -- -- $ -- -- $ -- $ -- $ -- $ (460) (35)
Shares issued
upon
exercise of
stock
options......... 1,056 10,807 -- -- -- -- -- -- -- -- -- --
Tax benefits
related to
stock options... -- 2,039 -- -- -- -- -- -- -- -- -- --
Purchase of
common
stock........... -- -- -- -- -- -- -- -- -- -- (10,466) (792)
Acquisition of
MicroClock,
Inc............. -- 34 -- -- -- -- -- -- -- -- 7,966 609
Sale of Galaxy
Power........... -- -- -- -- -- -- -- -- -- -- (789) (68)
Subsidiaries
equity
transactions.... -- (188) -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- -- --
------- -------- ------ ----- ----- ----- ----- ----- ----- ------- ------- -----
Balance at June
28, 1997......... 12,445 45,366 -- -- -- -- -- -- -- -- (3,749) (286)
Shares issued
upon
exercise of
stock
options......... 654 7,014 -- -- -- -- -- -- -- -- -- --
Tax benefits
related to
stock options... -- 4,224 -- -- -- -- -- -- -- -- -- --
Purchase of
common
stock........... -- -- -- -- -- -- -- -- -- -- (12,993) (488)
Net income...... -- -- -- -- -- -- -- -- -- -- -- --
------- -------- ------ ----- ----- ----- ----- ----- ----- ------- ------- -----
Balance at June
27, 1998......... 13,099 56,604 -- -- -- -- -- -- -- -- (16,742) (774)
Shares issued
upon
exercise of
stock
options......... 94 1,105 -- -- -- -- -- -- -- -- -- --
Tax benefits
related to stock
options......... -- 234 -- -- -- -- -- -- -- -- -- --
Purchase of
common
stock........... -- -- -- -- -- -- -- -- -- -- (3,016) (229)
Recapitalization... (13,193) (57,943) 15,613 156 5,653 57 2,363 24 (455) 34,719 19,758 1,003
Net income...... -- -- -- -- -- -- -- -- -- -- -- --
------- -------- ------ ----- ----- ----- ----- ----- ----- ------- ------- -----
Balance at July
3, 1999.......... -- $ -- 15,613 $ 156 5,653 $ 57 2,363 $ 24 $(455) $34,719 $ -- --
======= ======== ====== ===== ===== ===== ===== ===== ===== ======= ======= =====
<CAPTION>
(Accumulated Total
Deficit/) Shareholders'
Retained Equity
Earnings (Deficit)
------------ -------------
<S> <C> <C>
Balance at June
29, 1996......... $ 36,950 $ 69,164
Shares issued
upon
exercise of
stock
options......... -- 10,807
Tax benefits
related to
stock options... -- 2,039
Purchase of
common
stock........... -- (10,466)
Acquisition of
MicroClock,
Inc............. -- 8,000
Sale of Galaxy
Power........... -- (789)
Subsidiaries
equity
transactions.... -- (188)
Net loss........ (8,419) (8,419)
------------ -------------
Balance at June
28, 1997......... 28,531 70,148
Shares issued
upon
exercise of
stock
options......... -- 7,014
Tax benefits
related to
stock options... -- 4,224
Purchase of
common
stock........... -- (12,993)
Net income...... 21,375 21,375
------------ -------------
Balance at June
27, 1998......... 49,906 89,768
Shares issued
upon
exercise of
stock
options......... -- 1,105
Tax benefits
related to stock
options......... -- 234
Purchase of
common
stock........... -- (3,016)
Recapitalization... (214,362) (218,046)
Net income...... 23,043 23,043
------------ -------------
Balance at July
3, 1999.......... $(141,413) $(106,912)
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year Ended
-----------------------------
July 3, June 27, June 28,
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 23,043 $ 21,375 $ (8,419)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization.................. 4,965 4,579 3,744
Amortization of deferred finance charge........ 203 -- --
Amortization of bond premiums.................. (78) (2) (85)
Minority interest and charges related to
equity investment............................. -- -- 7,492
(Gain) loss on sale of assets.................. (10,374) 633 (356)
Purchase of trading securities................. (23,313) (12,930) (834)
Sale of trading securities..................... 23,669 11,911 845
Loss from discontinued operations.............. -- -- 909
Deferred income taxes.......................... (6,995) (712) 1,541
Write-off of in-process research & development
costs......................................... -- -- 11,196
Stock compensation............................. -- -- 84
Accounts receivable............................ 2,215 355 (8,808)
Inventory...................................... 4,103 703 2
Other assets, net.............................. 794 (235) (686)
Accounts payable, accrued expenses and other
liabilities................................... 678 81 3,480
Income taxes payable........................... 5,540 (3,413) 292
--------- -------- --------
Net cash provided by operating activities.... 24,450 22,345 10,397
--------- -------- --------
Cash flows from investing activities:
Capital expenditures........................... (7,694) (8,139) (3,358)
Proceeds from sale of fixed assets............. 200 10 107
Proceeds from sale of Datacom.................. 16,000 -- --
Proceeds from sale of building................. 3,801 -- --
Proceeds from sales of marketable securities... 18,450 1,358 --
Proceeds from sale of discontinued operations.. -- -- 1,925
Proceeds from maturities of marketable
securities.................................... 29,347 21,069 10,499
Purchases of marketable securities............. (31,973) (30,499) (18,371)
Deposits on purchase contracts, net............ (12,000) (2,000) (6,000)
Refunds on purchase contracts.................. 4,544 4,711 1,998
Investment in subsidiary, net of cash
acquired...................................... -- -- (6,074)
--------- -------- --------
Net cash provided by (used in) investing
activities.................................. 20,675 (13,490) (19,274)
--------- -------- --------
Cash flows from financing activities:
Net borrowings (repayments) under line of
credit agreement.............................. -- -- (2,315)
Repayments of long-term debt................... (114) (186) (138)
Proceeds from exercise of stock options........ 1,105 7,015 10,807
Tax benefit of stock option exercise........... 234 4,224 2,038
Proceeds from long-term debt................... 170,030 -- --
Recapitalization............................... (247,104) -- --
Investment from equity investors............... 30,655 -- --
Deferred financing charges..................... (12,970) -- --
Purchase of treasury stock..................... (3,016) (12,993) (10,466)
--------- -------- --------
Net cash used in financing activities........ (61,180) (1,940) (74)
--------- -------- --------
Net increase (decrease) in cash................. (16,055) 6,915 (8,951)
Cash and cash equivalents:
Beginning of year.............................. 25,340 18,425 27,376
--------- -------- --------
End of year.................................... $ 9,285 $ 25,340 $ 18,425
========= ======== ========
Supplemental disclosures of cash information:
Cash payments during the period for:
Interest....................................... $ 151 $ 65 $ 58
========= ======== ========
Income taxes................................... $ 6,408 $ 11,840 $ 2,336
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Consolidation Policy
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, after elimination of all
significant intercompany accounts and transactions.
Reporting Periods
In fiscal year 1996 the Company changed its fiscal year to a 52/53 week
operating cycle that ends on the Saturday nearest June 30. Fiscal year 1999
represents a 53-week operating cycle. Fiscal years 1998 and 1997 represent a
52-week operating cycles.
Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and
cash equivalents at July 3, 1999 consist of cash, overnight retail repurchase
agreements (collateralized by U.S. Treasury obligations), money market funds
and commercial paper.
Marketable Securities
Marketable securities at July 3, 1999 consist of debt securities. Under
Statement No. 115, the Company classifies all of its debt securities as held
to maturity, which are recorded at amortized cost. In prior years, the
Company's equity securities were classified as trading securities and
unrealized holding gains and losses are included in earnings. Trading
Securities were carried at the present market value, with realized gains or
losses recorded in interest income on the statement of operations. As a result
of the restrictions imposed by the senior credit facility (see Note 10), the
Company no longer invests in equity securities.
Inventory
Inventory is stated at the lower of standard cost, which approximates
actual cost (FIFO basis) or market.
Property, Plant and Equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Machinery & equipment.......... 3 to 10 years
Furniture and fixtures......... 5 to 10 years
</TABLE>
Leasehold improvements are amortized over the shorter of the lease term or
the estimated useful life.
Deferred Financing Costs
Costs incurred in connection with the issuance of the senior credit
facility and the senior subordinated notes (see Note 10), which are amortized
over the average term of the related debt instruments, approximately 8 years
at July 3, 1999. Accumulated amortization was $0.2 million as of July 3, 1999.
Goodwill
The purchase price in excess of the fair value of net assets acquired is
amortized on a straight-line basis over 7 years. Accumulated amortization was
$0.5 million and $0.3 million as of July 3, 1999 and June 27, 1998,
respectively. Goodwill is recorded in other assets on the consolidated balance
sheet.
F-7
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Carrying Value of Long-Term Assets
In accordance with SFAS 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be disposed of," the Company periodically
evaluates the carrying value of long-term assets when events and circumstances
warrant such review. The carrying value of a long lived asset is considered
impaired when the anticipated undiscounted cash flows from such asset is
separately identifiable and is less than the carrying value. In that event a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined by
reference to quoted market prices, if available, or the utilization of certain
valuation techniques such as using the anticipated cash flows discounted at a
rate commensurate with the risk involved. See Note 3 for a discussion of an
impairment charge recognized on the Voyetra Technologies Inc. ("Voyetra")
investment, which was recorded in the fourth quarter of fiscal year 1997.
Revenue Recognition
Product sales are recognized as revenue upon shipment to the customer. The
Company offers a right of return to certain customers. Allowances are
established to provide for estimated returns at the time of sale. The Company
recognizes sales to these customers, in accordance with the criteria of FASB
No. 48, at the time of the sale based on the following: the selling price is
fixed at the date of sale, the buyer is obligated to pay the Company, title of
the property transfers at the Company's loading dock, the buyer has economic
substance apart from the Company, the Company does not have further obligations
to assist the buyer in the resale of the product and the returns can be
reasonably estimated at the time of sale.
Concentration of Credit Risk
The Company sells its products primarily to original equipment manufacturers
and distributors in North America, Europe and the Pacific Rim. The Company
performs ongoing credit evaluations of its customers and maintains reserves for
potential credit losses. Concentrations of credit risk with respect to trade
accounts receivable from specific customers is limited due to the large number
of customers and their dispersion across many geographic areas, however, there
is a substantial concentration in the personal computer industry. Refer to Note
17 for geographic information.
Income Taxes
Income taxes are computed in accordance with Statement of Financial
Accounting Standards No. 109. The Company files a consolidated federal tax
return with its 80% or more owned subsidiaries, which included Turtle Beach for
the first five months of fiscal year 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities, revenues and expense, and the disclosure of contingent
assets and liabilities at the date of the financial statements. In addition,
they affect the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates and assumptions.
Accounting for Stock-based Compensation
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), and continues to apply APB 25 and related interpretation in accounting
for its stock options to employees and directors. Refer to Note 15 for pro
forma disclosures.
F-8
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reclassification of Accounts
Certain reclassifications have been made to conform prior year's balances
to the current year presentation.
Other Comprehensive Income
The Company's reported net income (loss) for all periods presented is the
same as it's comprehensive income or loss since there were no items of other
comprehensive income or loss for any of the periods covered by these financial
statements.
New Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities," which
defers effective date of SFAS No. 133 to fiscal years beginning after June 15,
2000. The Company will adopt the requirements of this statement in fiscal
2001.
(2) Acquisitions/Mergers
On May 11, 1999, the Company merged with ICS Merger Corp., a transitory
merger company formed and wholly owned by the affiliates of Bain Capital Inc.
and Bear, Stearns and Company Inc. (the "Equity Investors"). The following
events, which collectively are referred to as our recapitalization, provided
the consideration for the redemption and purchase of the Company's outstanding
shares of common stock and vested options, together with the redemption and
purchase of our outstanding shares of common stock and vested options,
together with the payment of fees and expenses, totaling $294.4 million that
took place on May 11, 1999:
--An equity investment of $30.6 million made by the Equity Investors and
certain other investors in ICS Merger Corp.;
--Direct purchases by Bain Capital of our common stock from certain
existing shareholders for $9.6 million;
--A rollover and new equity investment by certain members of our senior
management team of $9.8 million, consisting primarily of:
--Certain existing common stock ($6.6 million) that was converted into
our new common stock after the merger; and
--Certain existing stock options that were converted into new stock
options after the merger ($2.2 million) and deferred compensation
agreements ($0.5 million);
--Purchases of new common stock ($0.5 million) in exchange for promissory
notes;
--Borrowing of $70.0 million in term loans and $3.9 million under a $25.0
million revolving line of credit;
--The offering of $100.0 million in senior subordinated notes (the
"Notes"); and
--The use of cash on-hand of $70.5 million.
F-9
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The merger was approved by the Company's previous board of directors and the
board of directors of ICS Merger Corp., and was also approved by the previous
shareholders at a meeting held on May 10, 1999.
Since the recapitalization, the Company's common stock is no longer traded
on the Nasdaq National Market or any exchange, price quotations are no longer
available and the registration of the Company's common stock under the
Securities Exchange Act of 1934 has been terminated. Until the Company's
registration statement filed in connection with the Exchange offer for the
Notes has been declared effective, the Company will no longer file periodic
reports with the Securities and Exchange Commission.
On February 28, 1997, the Company acquired all the capital stock of
MicroClock, Inc. ("MicroClock"), a producer of clock synthesizer integrated
circuits for multimedia applications, for approximately $16.4 million,
consisting of $6.4 million in cash and 608,504 shares of ICS common stock. The
Company's shares exchanged in the transaction were restricted from sale for one
year, therefore, the shares were valued at a 20% discount from the closing
price on the date of issuance based on an independent valuation. The
acquisition was accounted for under the purchase method of accounting and
resulted in a charge of $11.2 million related to the write-off of in-process
research and development costs and the recording of goodwill of $1.7 million,
which is being amortized over 7 years. In determining the write-off of in-
process research and development expenses, MicroClock was valued as a whole,
and then the portion of the value attributable to technology, which had not
reached technical and/or commercial feasibility, was identified. This was
determined to be in-process research and development, and the residual portion
of the purchase consideration after assigning values to the net tangible assets
and in-process research and development was recorded as goodwill. The method
used in making the determination was the discounted probable future cash flows
on a product by product basis. The assumptions used in the appraisal were:
three-year net cash flow on a product with no material changes from historical
pricing, margins and expense levels. The amount attributable to goodwill was
included as an amortizable item on the Company's balance sheet, and the amount
attributable to in-process research and development was written off as not
being sufficiently evolved to be commercialized or to readily ascertain the
future commercial value of the same as of the date of acquisition. Revenues and
results of operations of MicroClock were not significant to the Company's
consolidated statement of operations for the year ended June 28, 1997, and
accordingly, pro forma information as if the transaction had occurred on June
29, 1996, has not been presented.
The in-process research and development projects included applications such
as communications, desktop, notebook, set top boxes and oscillators. These
projects enabled the Company to reach a customer base in which it had not been
able to reach, break into a new market with the consumer electronics
applications and offered additional future returns. The risks associated with
their timely completion included technical issues relating to the projects,
ability to retain its employee base after the merger and ability to obtain
project materials from third party vendors. Management assigned approximately
87% of MicroClock's total product value to the in-process research and
development projects at the time of acquisition. The Company has spent an
additional $885,000 on these projects and had taken six months to complete
these projects. The Company used its working capital to fund the completion of
these projects.
On November 29, 1996 the Company signed an Agreement and Plan of Merger,
(the "Merger Agreement") to sell its approximately 87% interest in Turtle Beach
Systems, Inc. ("Turtle Beach") to Voyetra in exchange for an approximately 35%
equity interest in Voyetra. Voyetra is a supplier of music and audio software.
No gain or loss was initially recorded on this transaction. The Company's
proportionate share of underlying equity in Voyetra was approximately $3.5
million. The excess of the Company's carrying value over their proportionate
share of underlying equity was approximately $4.3 million. Subsequent to the
transaction, the Company accounted for its investment in Voyetra under the
equity method of accounting. In connection with the merger, the Company also
entered into a Revolving Credit Agreement and Note Arrangement (the "Revolving
Credit Agreement") with Voyetra, pursuant to which the Company agreed to
F-10
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
make loans to Voyetra up to an aggregate of $3.5 million, subject to certain
covenants. The Company recorded an impairment loss on this investment in the
fourth quarter of fiscal year 1997. (See Dispositions/Impairment Note 3).
(3) Dispositions/Impairment
In the third quarter of fiscal year 1999, the Company sold intellectual
property and engineering hardware and software related to its data
communications product line to 3Com Corporation for approximately $16.0 million
in cash, resulting in a gain of approximately $10.7 million. Under the
agreement, the Company will have certain licensing and technical support
rights, and will continue to sell and support its existing and prospective fast
ethernet transceiver product family to current and new customers.
During the fourth quarter of fiscal year 1997, the Company determined that
significant events and changes in circumstances had occurred subsequent to the
Voyetra transaction that indicated it was probable that its investment in
Voyetra would not be recoverable. In the opinion of the Company's management,
Voyetra was experiencing an adverse shift in the fundamentals of its business,
which resulted in deteriorating gross profit margins and a substantial increase
in operating losses. In addition, during the fourth quarter of fiscal year
1997, the Company notified Voyetra that they had violated certain covenants and
were in default under the Revolving Credit Agreement. As such, the Company
concluded that it was under no obligation to provide financing under the
Revolving Credit Agreement. As a result of these significant events in the
fourth quarter of fiscal year 1997, management of the Company estimated that
the undiscounted cash flows anticipated for Voyetra would not be sufficient to
recover the carrying value of the Company's investment and a write-down to fair
value was required. Consequently, in the fourth quarter of fiscal year 1997,
the Company recorded an impairment loss of $7.1 million on its investment in
Voyetra, which is included in the Statement of Operations as Impairment in
equity investment. In the second quarter of fiscal year 1998, Voyetra filed a
complaint in the Supreme Court of the State of New York against the Company. At
the end of the second quarter, the Company and Voyetra reached a settlement.
Voyetra would release the Company from all claims and all obligations with
respect to the Voyetra/Turtle Beach merger agreement in exchange for assumption
of certain liabilities of Turtle Beach, a $200,000 cash payment and return of
Voyetra stock held by the Company. During fiscal year 1998, the Company settled
these obligations and returned the Voyetra stock.
During the third quarter of fiscal year 1997, the Company implemented a
plan, with approval by the Board of Directors, to dispose of its majority
interest in its subsidiary, ARK Logic, within a 12-month period. Accordingly,
the Company presented ARK Logic as a discontinued operations. In connection
with these events, the Company recorded a charge of $1.5 million in the third
quarter fiscal year 1997, including severance and facility termination costs.
Subsequently, the Company sold approximately 80% of its holdings in ARK Logic
to Vision 2000 Ventures, Ltd. ("Vision 2000") for which a gain of $0.9 million,
including the reversal of severance and facility termination accruals, was
recorded. The sale and purchase agreement required 20% of the sales price to be
held in escrow for two years. The Company received the escrow amount plus
interest $0.5 million in June 1999. The amounts from discontinued operations
are not tax effected, as ARK Logic was not consolidated for tax purposes and
ARK Logic has net operating loss carryforwards, for which no tax benefits had
been recorded by the Company. Revenues from ARK Logic for fiscal years 1997 and
1996 were $1.8 million and $10.2 million, respectively.
In the first quarter of fiscal year 1997, the Company sold its Galaxy Power,
Inc. subsidiary, which owned the assets related to the battery charge
controller product line, for $0.8 million to Edward H. Arnold, former Chairman
and CEO of the Company. The purchase consideration was satisfied by
reacquisition of 68,387 shares of the Company's stock held by Arnold and was
based on a valuation made by an independent appraiser.
F-11
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Purchase Commitments
During fiscal year 1998, under an existing wafer supply contract with
Chartered Semiconductor PTE ("CSM"), the Company advanced the final $2.0
million installment of its deposit with CSM whereby CSM would supply an agreed
minimum quarterly quantity of wafers April 1996 through June 2002 at specified
prices. This non-interest bearing deposit is recorded as a long-term asset
under the caption "Deposits on purchase contract" and will be progressively
repaid from January 1, 1998, as wafers are purchased. On October 7, 1998, the
Company assumed a third party's wafer purchase contract with CSM. The
agreement required the Company to advance $12.0 million as part of a mutual
commitment for CSM to supply and the company to purchase an agreed upon
minimum quarterly quantity of wafers over a twenty-seven month period from
October 1, 1998 to December 31, 2000. The agreement requires CSM to refund the
deposit to the Company in progressive quarterly installments based upon the
volume of purchases made by the Company, and it is contractually required for
all of the deposit to be returned. On October 21, 1998, the Company funded the
$12.0 million required by this agreement. As of July 3, 1999, CSM has repaid
$6.7 million of the Company's deposit. As of July 3, 1999 and June 27, 1998
amounts due from CSM were $15.3 million and $7.9 million respectively. The
Company had previously entered into a similar agreement with American
Microsystems, Inc., ("AMI") by which it placed a $5.5 million deposit, which
has been progressively repaid as wafer purchases were made. The Company
received $2.6 million from AMI in fiscal 1998 extinguishing the balance of any
outstanding deposit at AMI.
The following table summarizes activity relating to the purchase commitment
from CSM (in thousands):
<TABLE>
<S> <C>
Balance 6/28/97.................................................. $ 8,000
Deposits made.................................................. 2,000
Payments received.............................................. (2,136)
-------
Balance 6/27/98.................................................. $ 7,864
Deposits made.................................................. 12,000
Payments received.............................................. (4,543)
-------
Balance 7/03/99.................................................. $15,321
Less: current portion.......................................... 3,973
-------
Long term portion of deposit................................... $11,348
=======
</TABLE>
(5) Other Agreements
In fiscal year 1998, the Company entered into a non-transferable and non-
exclusive license with Philips Electronics to the Company to use their
technical information for data transmission systems. In consideration of the
licenses and rights granted, the Company, during fiscal year 1999 and fiscal
year 1998, has expensed and paid approximately $0.5 million in royalty fees
and expects to continue to make ongoing payments. The expense is included in
the Company's cost of sales amount on the Statement of Operations.
In fiscal year 1999, the Company entered into a non-exclusive and non-
revocable license with PhaseLink Laboratories to use of their technical data.
In return, in July 1999, the Company paid a one-time fee of $200,000, which
will be amortized over the useful life of the technology or 5 years.
(6) Marketable Securities
The Company invests in debt securities, which are classified as held to
maturity. The estimated fair value of each investment approximates the cost,
and therefore, there were no unrealized gains or losses as of July 3, 1999 and
June 27, 1998. Historically, the Company invested in equity securities, which
were classified as trading securities and recorded at market value. The
Company recorded unrealized losses of approximately
F-12
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
$0.1 million in the statement of operations for fiscal year 1998 and $0 for
fiscal year 1999. Proceeds from the sale or maturity of the investments were
$71.5 million and $34.3 million in fiscal year 1999 and fiscal year 1998,
respectively. All investments are due within 90 days and therefore, are
classified as current assets at July 3, 1999. As a result of the restrictions
imposed by the senior credit facility (see Note 10), the Company no longer
invests in equity securities.
(7) Accounts Receivable
The components of accounts receivable are as follows (in thousands):
<TABLE>
<CAPTION>
July 3, June 27,
1999 1998
-------- --------
<S> <C> <C>
Accounts receivable...................................... $ 20,270 $ 22,128
Less: reserves for returns and doubtful accounts......... (2,150) (1,793)
-------- --------
$ 18,120 $ 20,335
======== ========
(8) Inventory
The components of inventories are as follows (in thousands):
<CAPTION>
July 3, June 27,
1999 1998
-------- --------
<S> <C> <C>
Work-in-process.......................................... $ 8,211 $ 6,370
Finished parts........................................... 5,665 9,829
Less: obsolescence reserve............................... (5,140) (3,360)
-------- --------
Inventory, net........................................... $ 8,736 $ 12,839
======== ========
(9) Property and Equipment
Property and equipment consists of the following (in thousands):
<CAPTION>
July 3, June 27,
1999 1998
-------- --------
<S> <C> <C>
Land and building........................................ $ -- $ 5,562
Machinery and equipment.................................. 17,377 25,918
Furniture and fixtures................................... 2,036 1,630
Leasehold improvements................................... 3,735 308
-------- --------
23,148 33,418
Less: accumulated depreciation and amortization.......... (11,021) (15,534)
-------- --------
Property and equipment, net.............................. $ 12,127 $ 17,884
======== ========
</TABLE>
Depreciation and amortization expense related to property and equipment was
$4.7 million, $4.3 million and $3.3 million in 1999, 1998 and 1997,
respectively.
(10) Debt
On May 10, 1999, the shareholders of the Company voted to approve the
management-led buyout, which was completed on May 11, 1999. In connection with
the buyout, the Company obtained financing consisting of: $100.0 million of
senior subordinated notes (the "Notes"), term A loans for $30.0 million and the
term B
F-13
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
loans for $40.0 million and $3.9 million from a revolving credit facility. The
term loans and revolving credit facility combined make up the Senior Credit
Facility.
The term A loan is payable over varying quarterly installments beginning
September 30, 1999 through May 11, 2004. The term B loan is payable over
varying quarterly installments beginning September 30, 1999 through May 11,
2006. The revolving loans can be borrowed and repaid without paying a premium
or penalty, other than payment of breakage costs and reimbursement of the
lenders' actual re-employment costs under certain circumstances through May 30,
2004. The revolving credit facility permits total availability of $25.0
million. At the Company's option, the interest rates under the senior credit
facility will be either (1) the base rate, which is the higher of the prime
lending rate or 0.5% in excess of the Federal funds effective rate, plus a
margin or (2) adjusted LIBOR plus a margin. The margins of the different loans
under the senior credit facility will initially be set and then will vary
according to a pricing grid based upon the consolidated leverage ratio as
follows: the initial margin on the term A loan and revolving loans will be 2.0%
over the base rate or 3.0% over adjusted LIBOR, and then on each of the term A
and revolving loans the margins will range from 1.75%-0.75% for base rate or
from 2.75%-1.75% for adjusted LIBOR; and the initial margin on the term B loan
will be 2.5% over the base rate or 3.5% over adjusted LIBOR, and then on the
term B loans the margins will range from 2.25%-2.00% for base rate or from
3.25%-3.00% for adjusted LIBOR.
The $100.0 million of senior subordinated notes are due May 15, 2009.
Interest on the notes will accrue at the rate of 11.5% per annum and will be
payable semi-annually on May 15 and November 15 of each year, commencing on
November 15, 1999, to holders of record on the immediately preceding May 1 and
November 1. Except in the case of certain equity offerings by the Company and
certain kinds of changes of control, the Company can not choose to redeem the
Notes until May 15, 2004. At anytime before May 15, 2002, the Company can
choose to redeem up to 35% of the outstanding Notes with money that the Company
raises in one or more equity offerings, as long as the Company's pays 111.5% of
the principal amount of the Notes plus accrued interest and at least $65.0
million of the Notes originally issued remain outstanding afterwards. All of
the Company's domestic subsidiaries guarantee the Notes with unconditional
guarantees of payment that will rank below their senior indebtedness, but will
rank equal to their other senior subordinated indebtedness in right of payment.
The Notes contain covenants that limit what the Company may do, such as paying
dividends, incurring additional indebtedness, transfer or sell assets and
consolidate, merge or sell all or substantially all of the Company's assets of
subsidiaries.
Certain of the Company's loan agreements require the maintenance of
specified financial ratios and impose financial limitations. At July 3, 1999,
the Company was in compliance with its senior credit facility covenants. The
debt is secured by substantially all assets from the Company and its domestic
subsidiaries.
On April 13, 1999, the Company sold the land and building at the Company's
Norristown location to BET Investments III, L.P., a Pennsylvania limited
partnership. The purchase price for the property was $3.9 million and included
the buyer's assumption of the Company's PIDA loan. BET Investments III, L.P.
assigned its right to purchase the building to BET Investments IV, L.P., a
Pennsylvania limited Partnership on January 29, 1999. The Company signed a
lease with BET Investments IV L.P., to lease back the Norristown property for a
term of eight years, which went into effect upon closing of the sale of the
property by the Company. The Company leased back the entire building with
monthly rent beginning at approximately $51,000 for the first year and
progressively increasing each year to approximately $63,000 in the eighth year.
The Company also has a renewal option of three more years subsequent to the
initial eight-year term. The Company recorded a $0.9 million deferred gain from
this transaction. The Company will recognize the gain over the original term of
the lease. In fiscal year 1999, the Company received $0.2 million in sublease
income from this property.
F-14
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Senior debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
July 3, June 27,
1999 1998
-------- --------
<S> <C> <C>
Term A loans payable in varying installments through 2004 at
LIBOR plus 3 (8.295% at July 3, 1999)...................... $ 27,500 $ --
Term A loans payable in varying installments through 2004 at
LIBOR plus 3 (8.1% at July 3, 1999)........................ 2,500 --
Term B loans payable in varying installments through 2006 at
LIBOR plus 3.5 (8.795% at July 3, 1999).................... 37,500 --
Term B loans payable in varying installments through 2006 at
LIBOR plus 3.5 (8.6% at July 3, 1999)...................... 2,500 --
11.5% exchangeable subordinated debentures due 2009......... 100,000 --
PIDA second mortgage, payable in monthly installments, in-
terest at 2%............................................... -- 1,503
Lease obligations and other................................. 30 20
-------- ------
$170,030 $1,523
Less current portion........................................ 1,030 143
-------- ------
Long-term debt, less current portion........................ $169,000 $1,380
======== ======
</TABLE>
Aggregate annual maturities of long-term debt as of July 3, 1999 (in
thousands):
<TABLE>
<S> <C>
2000................................ $ 1,030
2001................................ 4,600
2002................................ 6,400
2003................................ 8,800
2004................................ 11,200
2005 and beyond..................... 138,000
--------
$170,030
========
</TABLE>
(11) Lease Obligations
The Company leases certain of its facilities under operating lease
agreements, some of which have renewal options.
Rental expense under operating lease agreements, net of sublease income, was
$0.9 million, $0.6 million and $0.3 million in 1999, 1998 and 1997,
respectively.
Future minimum lease commitments under the Company's operating leases are as
follows as of July 3, 1999 (in thousands):
<TABLE>
<S> <C>
2000................................. $ 2,277
2001................................. 2,048
2002................................. 2,002
2003................................. 2,004
2004 and after....................... 10,770
-------
$19,101
=======
</TABLE>
F-15
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(12) Fair Value of Financial Instruments
Estimated fair value of financial instruments is provided in accordance with
the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments". The estimated fair value amounts have been determined by the
Company using available market information and appropriate methodologies.
However, considerable judgment is necessarily required in interpreting market
data to develop the estimates of fair value.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, accounts receivable and accounts payable-- The
carrying amounts of these items approximate their fair values at July 3, 1999
due to the short-term maturities of these instruments.
Marketable securities-- The estimated fair value of each held to maturity
investment approximates the amortized cost and as such no unrealized gain or
loss has been recorded.
Long-term debt-- Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues for which quoted market prices are not
available. The carrying value of this item is not materially different from its
fair value on July 3, 1999.
(13) Income Taxes
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended
---------------------------
July 3, June 27, June 28,
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Current tax expense:
Federal........................................ $10,549 $11,685 $4,248
State.......................................... 1,571 1,837 525
Foreign........................................ 195 35 --
------- ------- ------
Total current................................ $12,315 $13,557 $4,773
------- ------- ------
Deferred tax expense (benefit):
Federal........................................ $(6,907) $ (627) $1,299
State.......................................... (88) (85) 242
------- ------- ------
Total deferred............................... (6,995) (712) 1,541
------- ------- ------
Total income tax expense..................... $ 5,320 $12,845 $6,314
======= ======= ======
</TABLE>
F-16
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended
-------------------------
July 3, June 27, June 28,
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable allowances.................. $ 759 $ 664 $ 171
Inventory valuation............................. 1,843 1,208 744
Disqualified disposition exercises of options... 6,141 -- --
Net operating loss carry forward................ 195 195 195
Capital loss carry forward...................... 1,894 2,137 2,136
Basis in equity investment...................... -- 692 692
Accrued expenses and other...................... 529 318 291
------- ------ ------
Gross deferred tax assets..................... 11,361 5,214 4,229
Less: valuation allowance..................... 2,717 3,145 3,090
------- ------ ------
Deferred tax asset.............................. 8,644 2,069 1,139
Deferred tax liabilities:
Depreciation.................................... 501 1,018 899
Other........................................... 288 193 94
------- ------ ------
Deferred tax liabilities...................... 789 1,211 993
------- ------ ------
Net deferred tax asset............................ $ 7,855 $ 858 $ 146
======= ====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which temporary differences representing net future deductible amounts become
deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, potential limitations with respect to the
utilization of loss carry forwards, and tax planning strategies in making this
assessment. Based upon the projections for future taxable income over the
periods which deferred tax assets are deductible and the potential limitations
of loss and credit carry forwards, management believes it is more likely than
not the Company will realize these deductible differences, net of existing
valuation allowances (both federal and state) at July 3, 1999. The Company
periodically reassesses and re-evaluates the status of its recorded deferred
tax assets.
F-17
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The actual tax expense differs from the "expected" tax expense computed by
applying the statutory Federal corporate income tax rate of 35% in all fiscal
years to income before income taxes as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
---------------------------
July 3, June 27, June 28,
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Computed expected tax expense (benefit)........ $9,927 $11,977 $ (736)
State taxes (net of federal income tax
benefit)...................................... 964 1,248 228
Effect of lower foreign tax rates.............. (3,086) (1,012) --
Capital contribution........................... -- 346 --
Tax-exempt interest and dividends.............. -- (13) (29)
In-process research and development write-off.. -- -- 3,904
Loss in equity investments..................... -- -- 2,778
Loss from discontinued operations.............. -- -- 318
Gain from sale of Galaxy Power................. -- -- (174)
Utilization of capital loss carryforwards...... (3,233) -- --
Intangible amortization........................ 185 82 --
Other.......................................... 563 217 25
------ ------- ------
$5,320 $12,845 $6,314
====== ======= ======
</TABLE>
As of July 3, 1999, the Company has state operating loss carry forwards of
approximately $3.0 million expiring through 2008. The Company also has a
capital loss carry forward of approximately $4.9 million expiring in 2003. The
Company does not currently calculate deferred taxes on its investment in its
Singapore operations, as all undistributed earnings are permanently reinvested
back into the Singapore facility. If the Company were to record deferred taxes
on its investment, the amount would be a $4.3 million liability.
(14)Employee Benefit Plans
The Company has a bonus plan, which covers permanent full-time employees
with at least six months of service. Bonuses under this plan are based on the
Company achieving specified revenue and profit objectives and on individuals
meeting specified performance objectives. Amounts charged to expense for the
plan were $3.9 million, $3.6 million and $1.9 million in fiscal years 1999,
1998 and 1997, respectively.
The Company has a 401(k) employee savings plan, which provides for
contributions to be held in trust by corporate fiduciaries. Employees are
permitted to contribute up to 12 percent of their annual compensation. Under
the plan, the Company makes matching contributions equal to 150% of the first
1% contributed, 125% of the second 1% contributed, 100% of the third 1%
contributed, 75% of the fourth 1% contributed and 50% of the next 2% up to a
maximum of 6 percent of annual compensation, subject to IRS limits. The amounts
contributed by the Company and charged to expense were $0.5 in fiscal year
1999, $0.5 million in fiscal year 1998, and $0.3 million in fiscal year 1997.
(15)Stock Option Plans
Non-qualified stock options are granted at prices not less than the fair
market value at the date of grant, as determined by directors of the Company's,
and become exercisable as determined by the Company's stock option committee,
generally over five years. Options can be granted for terms of up to ten years.
Incentive stock options have also previously been granted at fair market value.
F-18
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pre-Recapitalization
The Company had various stock option plans (the "Plans") under which key
employees and non-employee directors and consultants were granted incentive
stock options and non-qualified options.
The Company's 1997 Equity Compensation Plan ("the 1997 Plan") was approved,
ratified and adopted by shareholders at the Shareholders' Meeting on October
23, 1997.
Stock option transactions pre-recapitalization during fiscal years 1999,
1998 and 1997 are summarized as follows (in thousands, except price per
share):
<TABLE>
<CAPTION>
Options Available
For Grant Under Options Weighted Average
Plans The Plans Outstanding Exercise Price
----- ----------------- ------------ ----------------
<S> <C> <C> <C>
Balance June 29, 1996...... 305 2,468 $10.63
Shares reserved.......... 300 -- --
Granted.................. (967) 967 12.22
Exercised................ -- (1,053) 10.23
Terminated............... 401 (401) 11.08
------ ------ ------
Balance June 28, 1997...... 39 1,981 $11.58
Additional shares
reserved................ 2,000 -- --
Granted.................. (422) 422 23.59
Exercised................ -- (641) 10.72
Terminated............... 403 (402) 14.22
------ ------ ------
Balance June 27, 1998...... 2,020 1,360 $14.80
Additional shares
reserved................ -- -- --
Granted.................. (688) 688 13.40
Exercised................ -- (1,719) 12.80
Cancelled................ (1,661) -- 16.87
Terminated............... 329 (329) 22.31
------ ------ ------
Balance July 3, 1999....... 0 0 $ 0
====== ====== ======
</TABLE>
During fiscal years 1998 and 1997, 0.6 million stock options were granted
to employees outside the plans described above at weighted exercise price of
$17.16, the fair market value at grant date, for terms of five years. Such
options are non-qualified and are not included in the above table but are
included in SFAS No. 123 pro forma disclosure that follows (in thousands,
except life and price per share):
Post-Recapitalization
The above plans were replaced on May 11, 1999. The 1999 Stock Option Plan
("the 1999 Plan") was approved, ratified and adopted at this time. These
options vest over five years and expire in May 11, 2009.
Stock option transactions post-recapitalization during fiscal years 1999
are summarized as follows (in thousands, except price per share):
<TABLE>
<CAPTION>
Options Available
For Grant Under Options Weighted Average
1999 Plans The Plans Outstanding Exercise Price
---------- ----------------- ------------ ----------------
Common A Share:
---------------
<S> <C> <C> <C>
Balance June 27, 1998........ -- -- $ --
Shares reserved............ 6,534 -- --
Granted.................... (6,096) 6,096 0.92
Terminated................. 28 (28) 1.14
------ ----- -----
Balance July 3, 1999......... 466 6,068 $0.92
====== ===== =====
<CAPTION>
Common L Share:
---------------
<S> <C> <C> <C>
Balance June 27, 1998........ -- -- $ --
Shares reserved............ 137 -- --
Granted.................... (137) 137 3.60
Terminated................. -- -- --
------ ----- -----
Balance July 3, 1999......... -- 137 $3.60
====== ===== =====
</TABLE>
F-19
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of July 3, 1999, options for 1.4 million shares were exercisable at
weighted average exercise prices ranging from $0.044 to $3.60 at an aggregate
exercise price of $0.5 million. Income tax benefits attributable to non-
qualified stock options exercised and disqualifying dispositions of incentive
stock options are credited to equity when realized.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------- ----------------------------
Outstanding Weighted Average Exercisable
Range of as of Remaining Weighted Average as of Weighted Average
Exercise Price 07/3/1999 Contractual Life Exercise Price 07/3/1999 Exercise Price
- -------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.08--$0.36............ 4,457 9.9 $0.17 1,234 $0.04
$2.88--$3.24............ 1,611 9.9 $2.97 -- $ --
$3.24--$3.60............ 137 9.9 $3.60 137 $3.60
----- --- ----- ----- -----
6,205 9.9 $0.97 1,371 $0.40
===== === ===== ===== =====
</TABLE>
The Company applies APB 25 and related interpretations in accounting for
stock option plans. In connection with the recapitalization, the Company
recorded a compensation charge of $15.1 million relating to the change in the
acceleration of the vesting period of employee outstanding stock options under
the Company's previous option plans.
Had compensation cost been recognized consistent with SFAS No. 123, the
Company's consolidated net earnings (loss) and earnings (loss) per share would
have been as follows (in thousands except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<C> <S> <C> <C> <C>
Net income (loss) As reported...................... $23,043 $21,375 $(8,419)
Pro forma........................ 19,449 16,868 (10,405)
</TABLE>
The per share weighted-average fair value of stock options issued by the
Company was $2.21, $14.77, and $6.57 for fiscal years 1999, 1998 and 1997
respectively.
The following assumptions were used by the Company to determine the fair
value of stock options granted using the Black-Scholes option-pricing model:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
Dividend yield................... 0% 0% 0%
Expected volatility.............. Minimal value 60-81% 60-65%
Average expected option life..... 5 years 4 years 4 years
Risk-free interest rate.......... 6.0% 5.34% to 6.4% 5.34% to 6.71%
</TABLE>
Pro forma net income (loss) reflects only options granted in fiscal years
1999, 1998 and 1997. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No.123 is not reflected in the pro forma net
income (loss) amounts presented above because compensation cost is reflected
over an option's vesting period, and compensation cost for options granted
prior to July 1, 1995 is not considered.
F-20
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(16)Stockholders' Equity
The shares of Class A common stock entitle the holder to one vote per share
on all matters to be voted upon by shareholders. The Class B common stock and
Class L common stock are non-voting. The Class L common stock is identical to
the Class A common stock and Class B common stock except that the Class L
common stock will be entitled preference over the Class A common stock and the
Class B common stock, with respect to any distribution to holders of our
capital common stock, equal to the original cost of such share ($18.00) plus an
amount which accrues at a rate of 9% per annum, compounded quarterly. The Class
L common stock is convertible into Class A common stock upon an initial public
offering. Class A common stock is convertible into Class B common stock at any
time, and Class B common stock is convertible into Class A common stock at any
time so long as after giving effect to the conversion the converting Class B
common stock holders and their affiliates do not own more than 49.9% of the
outstanding shares of Class A common stock.
(17)Business Segment and Geographic Information
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which became effective for fiscal year
1999. The Company adopted the requirements of this statement in fiscal year
1999.
Revenue and long-lived assets by the Company's geographic locations are as
follows:
<TABLE>
<CAPTION>
Revenues by Geographic Location
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
North America......................... $ 46,702 $ 71,473 $ 48,100
Asia Pacific.......................... 35,228 37,619 20,149
Europe................................ 5,636 9,311 11,132
Taiwan................................ 51,497 42,231 24,978
---------- ---------- ----------
$ 139,063 $ 160,634 $ 104,359
========== ========== ==========
<CAPTION>
Long-Lived Assets
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
United States......................... $ 9,099 $ 15,742 $ 13,692
Singapore............................. 3,944 2,846 412
Elimination of Intercompany........... (916) (704) --
---------- ---------- ----------
$ 12,127 $ 17,884 $ 14,104
========== ========== ==========
</TABLE>
The Company has two reportable segments, Clock products and Non-clock
products. The Clock segment represents parts that synchronize the timing
signals in electronic devices. The Non-clock products included data
communication transceivers and custom components.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see Note 1). The Company
evaluates the performance of these two segments based on their contribution to
operating income, excluding non-recurring gains or losses.
The Company's reportable segments are strategic product lines that differ in
nature and have different end uses, as such these product lines are managed and
reported to the chief operating decision maker separately.
Clocks are standard application specific products that are sold into a
variety of applications. The ASP's tend to be stable, gross margins are higher
than commodity products, and the volumes higher than the Non-clock segment. Two
types of products characterize the Non-clock segment. Data communications are
F-21
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
transceivers used in network applications. The custom parts are for different
applications using varied technologies. Each component in the custom product
line is developed specifically for one customer for their specific application.
Revenue, operating profit, depreciation and amortization and capital
expenditures by business segment were as follows:
<TABLE>
<CAPTION>
Business Segment Net Revenue
----------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Clock...................... $ 107,710 $ 90,622 $ 63,280
Non-Clock.................. 31,353 70,012 41,079
-------------- -------------- --------------
Total net revenues....... $ 139,063 $ 160,634 $ 104,359
============== ============== ==============
<CAPTION>
Business Segment Profit (Loss)
----------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Clock...................... $ 22,783 $ 11,733 $ (1,835)
Non-Clock.................. 10,674 20,567 6,686
Special charge............. (15,051) -- --
-------------- -------------- --------------
Total operating profit .. 18,406 32,300 4,851
Reconciliation to state-
ments of operations:
Gain on sale of Datacom.... 10,734 -- --
Interest & other income.... 2,178 1,984 1,800
Interest expense........... (2,955) (64) (63)
Impairment on equity in-
vestment.................. -- -- (7,072)
Minority interest.......... -- -- 154
Equity loss of investee.... -- -- (866)
-------------- -------------- --------------
Net income (loss) before
income taxes............ $ 28,363 $ 34,220 $ (1,196)
============== ============== ==============
The Company does not allocate items below operating income to specific
segments. The Clock and Non-Clock profit is calculated as revenues less cost of
sales, research and development and selling, general and administrative
expenses for that segment. In addition, the Company does not allocate many of
its assets to specific segments, with the exception of certain property and
equipment, and accordingly has not presented a breakdown of assets by segments.
<CAPTION>
Business Segment Depreciation/Amortization
----------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Clock...................... $ 1,595 $ 1,494 $ 1,269
Non-Clock.................. 326 529 478
Corporate and other........ 3,044 2,556 1,997
-------------- -------------- --------------
Total consolidated
depreciation and
amortization............ $ 4,965 $ 4,579 $ 3,744
============== ============== ==============
<CAPTION>
Business Segment Capital Expenditures
----------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Clock...................... $ 1,029 $ 1,509 $ 418
Non-Clock.................. 279 760 299
Corporate and other........ 6,386 5,870 2,641
-------------- -------------- --------------
Total consolidated
capital expenditures.... $ 7,694 $ 8,139 $ 3,358
============== ============== ==============
</TABLE>
F-22
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(18) Related Party Transactions
On May 11, 1999, the Company entered into an advisory agreement with Bain
Capital Inc., a shareholder, for consulting services. The agreement provides
for the Company to pay Bain Capital Inc. $750,000 per year plus any reasonable
out of pocket expenses on a quarterly basis. The term of this agreement ends
May 11, 2009. In connection with the merger and recapitalization, the Company
paid $3.4 million to Bain Capital.
On May 11, 1999, the Company entered into an advisory agreement with Bear,
Stearns & Co. Inc., a shareholder, for consulting services. The agreement
provides for the Company to pay Bear, Stearns & Co. Inc. $250,000 per year plus
any reasonable out of pocket expenses on a quarterly basis. The term of this
agreement ends May 11, 2009. In connection with the merger and
recapitalization, the Company paid $4.9 million to Bear, Stearns & Co.
On May 11, 1999, certain members of our senior management team entered into
deferred compensation agreements with the Company. The agreement expires on May
11, 2009 upon which time the Company will pay the executives the entire
deferred compensation regardless of their employment status at the Company. If
a sale of the Company is consummated prior to expiration of the agreements, the
executives will receive full benefit amount at that date. If there is a
consummation of a Qualified Initial Public Offering ("QIPO date") prior to
expiration the executive will receive 50% of the benefit on that date and the
remaining 50% is payable on the date one year after the QIPO date. The amount
of deferred compensation as of July 3, 1999 was $0.5 million.
On May 11, 1999, the Company entered into an employment agreement with Hock
E. Tan, as CEO and President with a base salary of $250,000 per year. In
addition to his salary, Mr. Tan is eligible to earn an annual bonus of up to
120% of his base salary based upon the Company attaining certain performance
targets established annually by the board of directors.
On May 11, 1999, certain members of the management team entered into stock
purchase agreements. In exchange for the purchase of Class A common shares and
Class L common shares the executives delivered to the Company a promissory
note. The notes accrue interest at 8% per annum and mature on May 11, 2006. The
executives may prepay the notes at any time, in whole or increments of $1,000.
If the executives receive a bonus from the Company, the executives have the
obligation to pay the Company an amount equal to 50% of the amount of such
bonus, net of the amount of any customary withholding taxes and such amount
paid to the Company shall first reduce accrued interest and any remaining
amount paid to the Company shall reduce the principal amount. The outstanding
amounts as of July 3, 1999 was $0.5 million.
On May 11, 1999, the Company entered into a consulting agreement with Henry
Boreen, a board member, for consulting services. The agreement provides for the
Company to pay Mr. Boreen $350,000 per year in monthly installments. The term
of the consulting agreement ends on May 11, 2002.
The Company previously entered into an employment agreement with Henry
Boreen on May 6, 1998 to serve as the Company's interim CEO until September 11,
1998. Mr. Boreen's base compensation was $10,000 per month, plus a grant of
50,000 stock options at an exercise price at fair market price at date of
grant, which immediately vested. On September 14, 1998, the Company made an
amendment to this agreement to extend the term to December 31, 1998. The
amendment also increased Mr. Boreen's base compensation to $12,000 per month
plus a grant of 30,000 stock options at an exercise price of fair value at the
date of grant. Those options vested immediately. Also, in the first quarter of
fiscal year 1997, the Company and Henry I. Boreen, Chairman of the Board,
entered into an employment agreement as Interim Chief Executive Officer. For
his services in this capacity, Mr. Boreen received a grant of 75,000 stock
options at an exercise price of $10.38 per share which was equal to the closing
price on the date of grant, and which option has a term of ten years and became
exercisable in monthly installments over the six month period following the
date of grant.
F-23
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On January 11, 1999, the Company entered into an employment agreement with
Rudolf Gassner as the Company's Chairman of the Board. The employment period
was for one year commencing on January 1, 1999. Mr. Gassner's responsibilities
included finding a suitable candidate to serve as the Company's Chief Executive
Officer, and management of day-to-day operations of the Company until a
suitable Chief Executive Officer is secured. The agreement provided for the
Company to pay Mr. Gassner a salary at a monthly rate of $12,000 during the
employment term. Mr. Gassner was also entitled to participate in the Company's
incentive compensation plan. This agreement terminated May 11, 1999.
On November 3, 1998, the Company granted Mr. Gassner an option to purchase
112,000 shares of the Company's common stock at $13.875 per share, equal to
fair market value on the grant date. The options vest and become exercisable on
a cumulative basis at a rate of 8,000 shares per month commencing on November
30, 1998, with vesting on December 31, 1999. On November 3, 1998 the Company
granted Mr. Gassner an option to purchase an additional 100,000 shares of the
Company's common stock at $13.875, the fair market value on the grant date.
These options vest and become exercisable on a cumulative basis at the rate of
20,000 shares per year commencing on the first anniversary of the grant date,
with full vesting an November 3, 2003, and earlier vesting in full in the event
the price of the Company's common stock exceeds $20 for 10 consecutive trading
days. This agreement terminated May 11, 1999.
In the third quarter of fiscal 1998, the Company entered into a severance
agreement with Stavro Prodromou, the former President and Chief Executive
Officer. Dr. Prodromou received $135,000 in cash severance and health benefits
at the time of his departure, and was granted up to a one-year period to
exercise 125,000 of his stock options. His remaining options were canceled.
On May 11, 1998, each non-employee director entered into a consulting
agreement with the Company for management consulting services. The term of each
of the consulting agreement ended on December 31, 1998, and to the extent
service (not to exceed ten days per month) of any such director were to be
retained, he would receive cash compensation of $2,000 per day. There were no
expenses incurred under this agreement in fiscal year 1999.
In the first quarter of fiscal year 1997, the Company and David Sear, the
former President and Chief Executive Officer, entered into a severance
agreement. The Company recorded a charge of $0.3 million in connection with
this agreement.
(19) Financial Information for Guarantor Subsidiaries and Non-Guarantor
Subsidiaries
The Company conducts substantially all of its business through its domestic
and foreign subsidiaries. On May 11, 1999, the Company issued $100.0 million
principal amount of Notes bearing interest at a rate of 11.5%. The proceeds
from the issuance of the Notes together with borrowings under a senior credit
facility were used to pay transaction costs associated with the
recapitalization of the Company and fund a portion of the cash consideration
payable in connection with the merger.
Presented below is condensed consolidating financial information for
Integrated Circuit Systems, Inc., which includes the activities of the
guarantor subsidiaries and the wholly owned foreign subsidiary (the "Non-
Guarantor Subsidiary") as of July 3, 1999 and June 27, 1998 and for the fiscal
years ended July 3, 1999, June 27, 1998 and June 28, 1997. The condensed
consolidating financial information has been presented to show the nature of
the assets held, results of operations and cash flows of the Parent Company,
Guarantor subsidiaries and the Non-Guarantor subsidiary assuming the guarantee
structure of the Notes was in effect as the beginning of the periods presented.
Separate financial statements for Guarantor Subsidiaries are not presented
based on management's determination that they would not provide additional
information that is material to investors.
The condensed consolidating financial information reflects the investments
of the Parent Company in the Guarantor and Non-Guarantor Subsidiaries using the
equity method of accounting. In addition, corporate interest has not been
allocated to the subsidiaries.
F-24
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
July 3, 1999
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Cash and cash equiva-
lents.................. $ 3,034 $ 2,661 $ 3,590 $ -- $ 9,285
Accounts receivable,
net.................... 12,730 -- 5,390 -- 18,120
Inventory............... 3,033 3,419 2,284 -- 8,736
Other current assets.... 10,858 2,938 429 -- 14,225
Property and equipment,
net.................... 1,261 7,838 3,944 (916) 12,127
Deferred financing
charges................ 12,767 -- -- -- 12,767
Investment in subsidiar-
ies.................... 58,828 -- -- (58,828) --
Intercompany receiv-
ables.................. 5,920 45,238 -- (51,158) --
Other assets............ 6,433 1,152 4,950 -- 12,535
--------- ------- ------- --------- ---------
Total assets.......... $ 114,864 $63,246 $20,587 $(110,902) $ 87,795
========= ======= ======= ========= =========
Liabilities and share-
holders' equity (defi-
cit):
Current liabilities, ex-
clusive of debt........ 5,715 14,811 1,900 -- 22,426
Current portion of long-
term debt.............. 1,000 30 -- -- 1,030
Long-term debt less cur-
rent................... 169,000 -- -- -- 169,000
Other non-current lia-
bilities............... 1,648 603 -- -- 2,251
Intercompany payable.... 44,413 968 5,777 (51,158) --
Shareholders' equity
(deficit).............. (106,912) 46,834 12,910 (59,744) (106,912)
--------- ------- ------- --------- ---------
Total liabilities and
shareholders' equity
(deficit)............ $ 114,864 $63,246 $20,587 $(110,902) $ 87,795
========= ======= ======= ========= =========
</TABLE>
F-25
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
June 27, 1998
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Cash and cash equiva-
lents.................. $ 4,573 $ 16,413 $ 4,354 $ -- $ 25,340
Accounts receivable,
net.................... 17,242 -- 3,093 -- 20,335
Inventory............... 4,320 5,741 2,778 -- 12,839
Other current assets.... 2,237 18,814 131 1,067 22,249
Property and equipment,
net.................... 11,804 3,938 2,846 (704) 17,884
Investment in subsidiar-
ies.................... 90,591 -- -- (90,591) --
Intercompany receiv-
ables.................. 16,057 3,677 -- (19,734) --
Other assets............ 7,975 1,387 -- -- 9,362
-------- -------- ------- --------- --------
Total assets.......... $154,799 $ 49,970 $13,202 $(109,962) $108,009
======== ======== ======= ========= ========
Liabilities and share-
holders' equity (defi-
cit):
Current liabilities, ex-
clusive of debt........ (1,016) 13,525 2,830 168 15,507
Current portion of long-
term debt.............. 123 20 -- -- 143
Other non-current lia-
bilities............... 2,138 453 -- -- 2,591
Intercompany payable.... 63,786 (51,717) 6,775 (18,844) --
Shareholders' equity
(deficit).............. 89,768 87,689 3,597 (91,286) 89,768
-------- -------- ------- --------- --------
Total liabilities and
shareholders' equity
(deficit)............ $154,799 $ 49,970 $13,202 $(109,962) $108,009
======== ======== ======= ========= ========
</TABLE>
F-26
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Year Ended July 3, 1999
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues................ $29,653 $89,936 $36,771 $(17,297) $139,063
Cost of sales........... 11,188 47,240 20,129 (14,061) 64,496
Research and
development............ 4,588 11,934 2,813 1,981 21,316
Selling, general and
administrative......... 12,950 7,513 4,675 (5,344) 19,794
Compensation Costs...... 15,051 -- -- -- 15,051
------- ------- ------- -------- --------
Operating income
(loss)................. (14,124) 23,249 9,154 127 18,406
Sale of Datacom......... (7,734) (3,000) -- -- (10,734)
Other (income) expense.. 1,224 (3,381) (232) 211 (2,178)
Interest expense........ 2,934 3 18 -- 2,955
------- ------- ------- -------- --------
Income (loss) income
taxes.................. (10,548) 29,627 9,368 (84) 28,363
Income tax expense
(benefit).............. (6,032) 11,159 56 137 5,320
------- ------- ------- -------- --------
Net income (loss)..... $(4,516) $18,468 $ 9,312 $ (221) $ 23,043
======= ======= ======= ======== ========
</TABLE>
F-27
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Year Ended June 27, 1998
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues................ $52,977 $105,397 $15,753 $(13,493) $160,634
Cost of sales........... 28,948 58,913 9,002 (8,004) 88,859
Research and
development............ 5,829 10,852 1,328 1,788 19,797
Selling, general and
administrative......... 14,579 9,905 2,485 (7,291) 19,678
------- -------- ------- -------- --------
Operating income........ 3,621 25,727 2,938 14 32,300
Other (income) expense.. (117) (2,577) 6 704 (1,984)
Interest expense........ 63 1 -- -- 64
------- -------- ------- -------- --------
Income (loss) before
income taxes........... 3,675 28,303 2,932 (690) 34,220
Income tax expense...... 1,779 11,051 10 5 12,845
------- -------- ------- -------- --------
Net income (loss)..... $ 1,896 $ 17,252 $ 2,922 $ (695) $ 21,375
======= ======== ======= ======== ========
</TABLE>
F-28
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Year Ended June 28, 1997
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues................ $32,917 $67,179 $ 6,801 $(2,538) $104,359
Cost of sales........... 16,224 36,590 6,196 127 59,137
Research and
development............ 4,108 8,196 287 930 13,521
Selling, general and
administrative......... 11,166 7,145 1,558 (4,215) 15,654
Write-off of in process
research and
development............ -- 11,196 -- -- 11,196
------- ------- ------- ------- --------
Operating income
(loss)................. 1,419 4,052 (1,240) 620 4,851
Interest expense........ 61 2 -- -- 63
Other (income) expense.. 7,249 (1,148) 37 (154) 5,984
------- ------- ------- ------- --------
Income (loss) before
income taxes........... (5,891) 5,198 (1,277) 774 (1,196)
Income tax expense
(benefit).............. 152 6,607 (445) -- 6,314
------- ------- ------- ------- --------
Income (loss) from
continuing operations.. (6,043) (1,409) (832) 774 (7,510)
Loss from discontinued
operations............. (909) -- -- -- (909)
------- ------- ------- ------- --------
Net income (loss)..... $(6,952) $(1,409) $ (832) $ 774 $ (8,419)
======= ======= ======= ======= ========
</TABLE>
F-29
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Supplement Condensed Statement of Cash Flows
July 3, 1999
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net income (loss)....... $ (4,516) $18,468 $9,312 $ (221) $ 23,043
Depreciation and
amortization......... 2,001 2,156 903 (95) 4,965
Other non-cash items.. (13,388) (3,856) -- -- (17,244)
Working capital
changes.............. (1,081) 18,497 (3,740) 10 13,686
-------- ------- ------ ------ --------
Net cash flows from
operating activities... (16,984) 35,265 6,475 (306) 24,450
Capital expenditures.. (912) (6,301) (2,009) 1,528 (7,694)
Sales, maturities &
purchases of
investments.......... -- 16,112 (288) -- 15,824
Other investing
activities........... 18,225 484 (4,942) (1,222) 12,545
-------- ------- ------ ------ --------
Net cash flows from
investing activities... 17,313 10,295 (7,239) 306 20,675
Proceeds from long-
term debt............ 170,000 30 -- -- 170,030
Recapitalization...... (187,782) (59,322) -- -- (247,104)
Investments from
equity investors..... 30,655 -- -- -- 30,655
Payments of long term
debt................. (93) (21) -- -- (114)
Purchase of treasury
stock................ (3,016) -- -- -- (3,016)
Other financing
activities........... (11,631) -- -- -- (11,631)
-------- ------- ------ ------ --------
Net cash flows from
financing activities... (1,867) (59,313) -- -- (61,180)
-------- ------- ------ ------ --------
Change in cash.......... (1,538) (13,753) (764) -- (16,055)
Beginning balance....... 4,572 16,414 4,354 -- 25,340
-------- ------- ------ ------ --------
Ending balance........ $ 3,034 $ 2,661 $3,590 $ -- $ 9,285
======== ======= ====== ====== ========
</TABLE>
F-30
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Supplement Condensed Statement of Cash Flows
June 27, 1998
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net income (loss)....... $ 1,221 $17,927 $2,922 $(695) $21,375
Depreciation and
amortization......... 2,437 1,762 467 (87) 4,579
Other non-cash items.. (162) 81 -- -- (81)
Working capital
changes.............. 1,106 (8,347) 3,723 (10) (3,528)
------- ------- ------ ----- -------
Net cash flows from
operating activities... 4,602 11,423 7,112 (792) 22,345
Capital expenditures.. (3,945) (2,225) (2,905) 936 (8,139)
Sales, maturities &
purchases of
investments.......... -- (8,072) -- -- (8,072)
Other investing
activities........... 2,833 29 3 (144) 2,721
------- ------- ------ ----- -------
Net cash flows from
investing activities... (1,112) (10,268) (2,902) 792 (13,490)
Payments of long term
debt................. (141) (45) -- -- (186)
Purchase of treasury
stock................ (12,993) -- -- -- (12,993)
Exercise of stock
options.............. 7,015 -- -- -- 7,015
Other financing
activities........... 4,224 -- -- -- 4,224
------- ------- ------ ----- -------
Net cash flows from
financing activities... (1,895) (45) -- -- (1,940)
------- ------- ------ ----- -------
Change in cash.......... 1,595 1,110 4,210 -- 6,915
Beginning balance....... 2,977 15,304 144 -- 18,425
------- ------- ------ ----- -------
Ending balance.......... $ 4,572 $16,414 $4,354 $ -- $25,340
======= ======= ====== ===== =======
</TABLE>
F-31
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Supplement Condensed Statement of Cash Flows
June 28, 1997
(In thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor Eliminating
Company Subsidiaries Subsidiaries Entries Consolidated
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net income (loss)....... $ (6,932) $ (259) $(846) $(382) $ (8,419)
Depreciation and
amortization......... 2,491 1,172 81 -- 3,744
Other non-cash items.. 9,706 11,300 83 (308) 20,781
Working capital
changes.............. 8,339 (14,749) 11 690 (5,709)
-------- -------- ----- ----- --------
Net cash flows from
operating activities... 13,604 (2,536) (671) -- 10,397
Capital expenditures.. (1,680) (1,261) (417) -- (3,358)
Sales, maturities &
purchases of
investments.......... -- (7,872) -- -- (7,872)
Other investing
activities........... (8,583) 37 502 -- (8,044)
-------- -------- ----- ----- --------
Net cash flows from
investing activities... (10,263) (9,096) 85 -- (19,274)
Payments of long term
debt................. (136) (2) -- -- (138)
Purchase of treasury
stock................ (10,466) -- -- -- (10,466)
Exercise of stock
options.............. 10,807 -- -- -- 10,807
Other financing
activities........... (277) -- -- -- (277)
-------- -------- ----- ----- --------
Net cash flows from
financing activities... (72) (2) -- -- (74)
-------- -------- ----- ----- --------
Change in cash.......... 3,269 (11,634) (586) -- (8,951)
Beginning balance....... (292) 26,938 730 -- 27,376
-------- -------- ----- ----- --------
Ending balance.......... $ 2,977 $ 15,304 $ 144 $ -- $ 18,425
======== ======== ===== ===== ========
</TABLE>
F-32
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(20) Litigation
On January 27, 1999, Harbor Finance Partners and John P. McCarthy Money
Purchase Plan filed a complaint on behalf of a purported class of our
shareholders in the Court of Common Pleas of Montgomery County, Pennsylvania
against the Company and Mr. Henry I. Boreen in the capacity as our interim
Chief Executive Officer alleging that the consideration to be paid in the
merger is inadequate and seeking to enjoin the merger as well as unspecified
compensatory damages. In March 1999, the plaintiffs amended their complaint to
add Mr. Hock E. Tan as a defendant in his capacity as our Senior Vice
President, Chief Financial Officer and Secretary. In September 1999, the
plaintiffs dismissed their complaints without requiring any payments or other
consideration from the Company or any of the other defendants.
On July 31, 1998, Lemelson Medical, Education & Research Foundation, L.P.
("Lemelson") filed a patent infringement action in the U.S. District Court for
the District of Arizona against over 20 companies, including the Company. This
litigation involves 16 patents, all derived from an original 1954 filing.
Lemelson claims that the patents cover a number of aspects of semiconductor
chip manufacturing, in particular optical imaging using alignment marks on the
semiconductor chips, on assembly of the chips into packages, as well as bar-
coding for inventory control. The liability of the Company is alleged under the
U.S. Process Patent Act, which makes a seller of goods liable for a process
abroad that would infringe a U.S. patent if made here. A few of ICS' foundries
are already licensed under the patents, thus reducing the potential liability
of the Company. Some of the defendants have settled with Lemelson, and the
Company is currently in settlement discussions with Lemelson.
On July 2, 1999, Motorola, Inc. filed an action against the Company and four
former employees of Motorola in the Superior Court of Arizona, Maricopa County,
for unfair competition, breach of contract, misappropriation of trade secrets
and intentional interference with contractual relations. The four former
employees left Motorola and began employment with the Company in May 1999.
Motorola is seeking an injunction to prevent the Company from employing the
former Motorola employees for a reasonable period of time and to enjoin the
Company from using Motorola's trade secrets. Motorola is also suing to recover
its attorneys' fees, unspecified damages and other relief in this matter.
In addition to the foregoing, from time to time, various inquiries,
potential claims and charges and litigation (collectively "claims") are made,
asserted or commenced by or against the Company, principally arising from or
related to contractual relations and possible patent infringement. The Company
believes that any such claims currently pending, and the other litigation
matters discussed above, individually and in the aggregate, have been
adequately reserved and will not have any material adverse effect on the
Company's consolidated financial position or results of operations, although no
assurance can be made in this regard.
(21) Major Customers
During fiscal year 1999, Maxtek Technology represented 12% of the Company's
revenues. During fiscal years 1998 and 1997, no customer represented 10% or
more of the Company's revenue.
F-33
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(22) Quarterly Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations
for the years ended July 3, 1999 and June 27, 1998 (in thousands):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------------
September 26 December 26 March 27 July 3 September 27 December 27 March 28 June 27
1998 1998 1999 1999 1997 1997 1998 1998
------------ ----------- -------- ------- ------------ ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $32,200 $35,815 $34,980 $36,068 $38,585 $43,045 $43,545 $35,459
Cost of sales........... 17,259 18,334 14,582 14,321 21,052 23,457 23,977 20,373
Research and
development............ 4,760 5,434 6,241 4,881 4,236 5,321 5,540 4,700
Operating income
(loss)................. 5,582 6,157 9,493 (2,826) 8,143 9,137 9,070 5,950
Net income (loss)....... $ 4,149 $ 4,512 $16,510 $(2,128) $ 5,042 $ 6,021 $ 6,208 $ 4,104
</TABLE>
F-34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any in-
formation or represent anything to you other than the information contained in
this prospectus. You must not rely on unauthorized information or representa-
tions.
Dealer Prospectus Delivery Obligation. Until , all dealers that effect
transactions in the notes, whether or not participating in this offering, may
be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
For any time after the cover date of this prospectus, we do not represent that
our affairs are the same as described or that the information in this prospec-
tus is correct nor do we imply those things by delivering this prospectus or
selling securities to you.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-Looking Statements............................................... ii
Prospectus Summary....................................................... 1
Summary Unaudited Adjusted Pro Forma Consolidated Financial Data......... 12
Risk Factors............................................................. 14
The Transactions......................................................... 22
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Unaudited Pro Forma Consolidated Statement of Operations................. 26
Selected Historical Consolidated Financial Data.......................... 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Industry Overview........................................................ 44
Business................................................................. 47
Management............................................................... 56
Principal Shareholders................................................... 62
Certain Relationships and Related Transactions........................... 63
Description of Senior Credit Facility.................................... 64
Description of New Notes................................................. 67
Exchange Offer........................................................... 105
Federal Income Tax Considerations........................................ 116
Plan of Distribution..................................................... 119
Legal Matters............................................................ 120
Experts.................................................................. 120
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.............................................................. 120
Available Information.................................................... 120
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Integrated Circuit Systems, Inc.
[Integrated Circuit Systems, Inc. Logo]
$98,000,000
Offer to Exchange
11 1/2% Senior Subordinated
Notes Due 2009
for any and all outstanding
11 1/2% Senior Subordinated
Notes Due 2009
-----------------------------
PROSPECTUS
-----------------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company and its subsidiary ICST, Inc. are incorporated under the laws of
the Commonwealth of Pennsylvania. Sections 1741 through 1750 of Chapter 17,
Subchapter D, of the Pennsylvania Business Corporation Law of 1988, as amended
(the "BCL") contain provisions for mandatory and discretionary indemnification
of a corporation's directors, officers and other personnel, and related
matters.
Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify directors and officers under certain prescribed
circumstances against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with an action or proceeding, whether civil, criminal, administrative or
investigative, to which any of them is a party by reason of his being a
representative, director or officer of the corporation or serving at the
request of the corporation as a representative of another corporation,
partnership, joint venture, trust or other enterprise, if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. Under Section
1743, indemnification of expenses actually and reasonably incurred is mandatory
to the extent that the officer or director has been successful on the merits or
otherwise in defense of any action or proceeding.
Section 1742 provides for indemnification in derivative actions except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 1744 provides that, unless ordered by a court, any indemnification
under Section 1741 or 1742 shall be made by the corporation only as authorized
in the specific case upon a determination that the representative met the
applicable standard of conduct, and such determination will be made by the
board of directors (i) by a majority vote of a quorum of directors not parties
to the action or proceeding; (ii) if a quorum is not obtainable, or if
obtainable and a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel; or (iii) by the shareholders.
Section 1745 provides that expenses incurred by an officer, director,
employee or agent in defending a civil or criminal action or proceeding may be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation.
Section 1746 provides generally that, except in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of the
BCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders of disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding that office.
Section 1747 also grants to a corporation the power to purchase and maintain
insurance on behalf of any director or officer against any liability incurred
by him or her in his or her capacity as officer or director, whether or not the
corporation would have the power to indemnify him or her against the liability
under Subchapter 17D of the BCL.
Section 1748 and 1749 extend the indemnification and advancement of expenses
provisions contained in Subchapter 17D of the BCL to successor corporations in
fundamental changes and to representatives serving as fiduciaries of employee
benefit plans.
II-1
<PAGE>
Section 1750 provides that the indemnification and advancement of expenses
provided by, or granted pursuant to, Subchapter 17D of the BCL, shall, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs and personal representative of such person.
For information regarding provisions under which a director or officer of
the Company may be insured or indemnified in any manner against any liability
which he or she may incur in his or her capacity as such, reference is made to
Article 23 of the Company's Bylaws, which provides in general that the Company
shall indemnify its officers and directors to the fullest extent permitted by
Pennsylvania law. Article 23 further provides that no director of the Company
shall be personally liable, as such, for monetary damages for any action taken
unless the director has breached or failed to perform the duties of his or her
office, and the breach or failure to perform constitutes self-dealing, wilful
misconduct or recklessness, except with respect to the responsibility or
liability of a director pursuant to any criminal statute, or to the liability
of a director for the payment of taxes.
It is the policy of the Company that indemnification of, and advancement of
expenses to, directors and officers of the Company shall be made to the
fullest extent permitted by law.
The Company shall pay expenses incurred by an officer or director, and may
pay expenses incurred by any other employee or agent, in defending a
proceeding, in advance of the final disposition of such action or proceeding.
The Company has the authority to create a fund of any nature, which may,
but need not be, under the control of a trustee, or otherwise secure or insure
in any manner, its indemnification obligations, whether arising under the
Company's Bylaws or otherwise.
The Company has the authority to enter into a separate indemnification
agreement with any officer, director, employee or agent of the Company or any
subsidiary providing for such indemnification of such person as the Board of
Directors shall determine up to the fullest extent permitted by law.
The Company has the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Company, whether or not the Company would have the power to indemnify him
against such liability under the provisions of the Bylaws or under any
provision of the BCL or other applicable law.
The Company currently provides insurance coverage to its directors and
officers for up to $[20] million.
In connection with the recapitalization, Bain Capital Fund VI, L.P. and
Bear Stearns Merchant Fund Corp., equity investors in the Company after the
recapitalization, have agreed to severally and not jointly, indemnify and hold
harmless Rudolf S. Gassner, John L. Pickitt and Edward M. Esber, Jr.,
directors of the Company who will not continue to be directors after the
recapitalization, and their respective heirs, personal representatives and
administrators, from and against any and all liabilities that any of them may
incur solely to the extent incurred directly as a result of their approval of
(i) the Confidential Information Memorandum ("Memorandum") dated February 1999
relating to proposed $145 million credit facilities ("Facilities"), (ii) a
letter from the Company to Credit Suisse First Boston relating to the
Memorandum, a copy of which is included in the Memorandum, (iii) the Rule 144A
Offering Circular of the Company relating to an offering of $100,000,000 of
Senior Subordinated Notes Due 2009 ("Notes"), (iv) the incurrence of any
indebtedness under the Facilities or the Notes, and (v) the engagement of
Murray, Devine & Co., Inc. to provide a solvency opinion in connection with
the recapitalization.
For information regarding provisions under which a director or officer of
ICST, Inc. may be insured or indemnified in any manner against any liability
which he or she may incur in his or her capacity as such, reference is made to
Article 23 of ICST's bylaws, which provides in general that ICST shall
indemnify its officers and directors to the fullest extent permitted by
Pennsylvania law.
II-2
<PAGE>
The Company's subsidiaries, ICS Technologies, Inc. and MicroClock, Inc., are
incorporated under the laws of the State of Delaware. Section 145 of the
General Corporation Law of the State of Delaware, inter alia ("Section 145")
provides that a Delaware corporation may indemnify any persons who were, are or
are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses, such as attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided such person acted in good faith and in a manner he or she reasonably
believed to be or not opposed to the corporation's best interests and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was illegal. A Delaware corporation may
indemnify any persons who are, were or are threatened to be made, party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reasons of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnify may include expenses, including
attorneys' fees, actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such officer or director has
actually and reasonably incurred.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against any liability asserted against him and incurred by him or
her in any such capacity, arising out of his or her status as such, whether or
not the corporation would otherwise have the power to indemnify him or her
under Section145.
For information regarding provisions under which a director or officer of
ICS Technologies, Inc. may be insured or indemnified in any manner against any
liability which he or she may incur in his or her capacity as such, reference
is made to Article VI of ICS Technologies' bylaws, which provides in general
that ICS Technologies shall indemnify its officers and directors to the fullest
extent permitted by and under Section 145.
For information regarding provisions under which a director or officer of
MicroClock, Inc. may be insured or indemnified in any manner against any
liability which he or she may incur in his or her capacity as such, reference
is made to Article VII of MicroClock's bylaws, which provides in general that
MicroClock shall indemnify its officers and directors and authorized
representatives who was or is a party, or is threatened to be made a party to
any third party proceeding or any corporate proceeding by reason of the fact
that such person is or was an authorized representative of the MicroClock
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred bu such person in connection with such proceeding if such
person acted in good faith and in a manner such person reasonably believed to
be in the best interests of MicroClock.
Item 21. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
3.1 Amended and Restated Articles of Incorporation of the Company dated
May 12, 1999.
3.2 Amended and Restated By-laws of the Company.
3.3 Amended and Restated Articles of Incorporation of ICST, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
3.4 By-laws of ICST, Inc.
3.5 Certificate of Incorporation of ICS Technologies, Inc.
3.6 By-laws of ICS Technologies, Inc.
3.7 Restated Certificate of Incorporation of MicroClock, Inc.
3.8 By-laws of MicroClock, Inc.
4.1 Indenture, dated as of May 11, 1999, between the Company and Chase
Manhattan Trust Company, National Association, as Trustee with respect
to the 11 1/2% Senior Subordinated Notes due 2009 (including the form
of 11 1/2% Senior Subordinated Notes).
5.1 Opinion of Pepper Hamilton LLP.
10.1 Purchase Agreement, dated as of May 5, 1999, among the Company, Bear
Stearns & Co. Inc. and Credit Suisse First Boston Corporation.
10.2 Registration Rights Agreement, dated as of May 11, 1999, among the
Company, each of the three Guarantor Subsidiaries, Bear, Stearns &
Co., Inc. and Credit Suisse First Boston Corporation.
10.3 Consulting Agreement, dated as of May 11, 1999, between the Company
and Henry I. Boreen.
10.4 Integrated Circuit Systems, Inc. 1999 Stock Option Plan.
10.5 Credit Agreement, dated as of May 11, 1999, among the Company, Credit
Suisse First Boston as Administrative Agent, Sole Lead Arranger and
Collateral Agent, and the various lending institutions party thereto.
10.6 Lease, dated as of January 29, 1999 between BET Investments IV and the
Company.
10.7 Agreement and Plan of Merger as of January 20, 1999, between the
Company and ICS Merger Corp. (the "Recapitalization Agreement").
10.8 Amendment No.1 to the Recapitalization Agreement, dated as of February
16, 1999.
10.9 Executive Stock and Option Agreement, dated as of May 11, 1999,
between the Company and Hock E. Tan (an identical Executive Stock and
Option Agreement, except as to the grantee and the number of options
granted, was entered into with Lewis C. Eggebrecht (135,000 of Class A
Common, 15,000 of Class L Common)).
10.10 Deferred Compensation Agreement, dated as of May 11, 1999, between the
Company and Hock E. Tan (an identical Deferred Compensation Agreement,
except as to the beneficiary and the benefit amount, was entered into
with Lewis C. Eggebrecht ($59,940)).
10.11 Stockholders Agreement, dated as of May 11, 1999, among the Company,
Bain Capital Fund VI, L.P., BCIP Associates II, BCIP Trust Associates
II, BCIP Associates II-B, BCIP Trust Associates II-B, BCIP Associates
II-C, PEP Investments PTY Ltd., Randolph Street Partners II, Randolph
Street Partners 1998 DIF, L.L.C., ICST Acquisition Corp. and
Integrated Circuit Systems Equity Investors, L.L.C.
10.12 Employment, Confidential Information and Invention Assignment
Agreement between the company and Hock E. Tan.
10.13 Consultant Stock Agreement, dated as of May 11, 1999, between the
Company and Henry I. Boreen.
10.14 Registration Agreement, dated as of May 11, 1999, among the Company,
Bain Capital Fund VI, L.P., BCIP Trust Associates II, BCIP Trust
Associates II-B, BCIP Associates II, BCIP Associates II-B, BCIP
Associates II-C, PEP Investments PTY Ltd., Randolph Street Partners
II, Randolph Street Partners 1998 DIF, L.L.C., ICST Acquisition Corp.,
Hock E. Tan, Lewis C. Eggebrecht and Integrated Circuit Systems Equity
Investors, L.L.C.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
10.15 Executive Stock Purchase Agreement, dated as of May 11, 1999, between
the Company and Hock E. Tan.
10.16 Promissory Note, dated as of May 11, 1999, executed by Hock E. Tan.
10.17 Pledge Agreement, dated as of May 11, 1999, between the Company and
Hock E. Tan.
10.18 Voting Agreement, dated as of May 11, 1999, among the Company, Bain
Capital Fund VI, L.P., BCIP Associates II, BCIP Trust Associates II,
BCIP Associates II-B, BCIP Trust Associates II-B, BCIP Associates II-
C, PEP Investments PTY Ltd., Randolph Street Partners II, Randolph
Street Partners 1998 DIF, L.L.C., ICST Acquisition Corp., Henry I.
Boreen, Christopher J. Bland and Barry E. Olsen.
10.19 Employment Agreement, dated as of May 11, 1999, between the Company
and Hock E. Tan.
10.20 Non-Compete Agreement, dated as of May 11, 1999, between the Company
and Hock E. Tan.
10.21 Advisory Agreement, dated as of May 11, 1999, between the Company and
Bain Capital Partners VI, L.P.
10.22 Advisory Agreement, dated as of May 11, 1999, between the Company and
ICST Acquisition Corp.
*10.23 Lease Agreement, dated June 13, 1988, between VLSI Design Associates
and The Sobrato Group (Exhibit 10.27 to the Registrant's registration
statement, No. 33-54142, on Form S-4, filed November 3, 1992).
*10.24 Lease between Turtle Beach Systems, Inc. and Winship Land Associates
III, dated May 28, 1993 (Exhibit 10.27 to the Registrant's 1993 Annual
Report on Form 10-K [the "1993 Form 10-K"]).
*10.25 First Amendment to lease, dated as of May 13, 1993, between the
registrant and The Sobrato Group (Exhibit 10.28 to the 1993 Form 10-
K).
*10.26 Wafer purchase contract, dated as of October 12, 1994, between the
Company and American Microsystems, Inc. (Exhibit 10 to the
Registrant's Form 10-Q for the quarter ended September 30, 1994).
*10.27 Agreement, dated as of November 21, 1994, between the Company and
Edward H. Arnold (Exhibit 10.1 to the Registrant's Form 10-Q for the
quarter ended December 31, 1994).
*10.28 Wafer purchase contract, dated as of November 8, 1995, between the
Company and Chartered Semiconductor Manufacturing Pte. Ltd. (Exhibits
10(a) and 10(b) to the Registrant's Form
10-Q for the quarter ended December 30, 1995).
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
16.1 Letter from KPMG LLP re: Change in Certifying Accountant.
23.1 Consent of KPMG LLP.
23.2 Consent of Pepper Hamilton LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included in Part II of the Registration
Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agreement, dated , 1999 between the Company and
Chase Manhattan Trust Company, National Association, as Trustee.
</TABLE>
- --------
*Incorporated by reference.
II-5
<PAGE>
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuers undertake that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(5) The registrant undertakes that every prospectus (a) that is filed
pursuant to paragraph (1) immediately preceding, or (b) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers
and controlling persons of the registrant pursuant to the provisions
described under Item 20 or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
(6) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
Class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(9) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SCHEDULE II
INTEGRATED CIRCUIT SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years ended July 3, 1999, June 27, 1998 and June 28, 1997
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Charged
Beginning of to Costs and Balance at
Description Period Expenses Deductions End of Period
- ------------------------ ------------ ----------------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended July 3, 1999:
Valuation reserves:
Doubtful Accounts..... $ 627 $ 430 $ 116 $ 941
Returns and
Allowances........... 1,166 43 -- 1,209
Inventory............. 3,360 2,380 600 5,140
Deferred tax
valuation............ 3,145 -- 428 2,717
Year ended June 27,
1998:
Valuation reserves:
Doubtful Accounts..... $ 212 $ 543 $ 128 $ 627
Returns and
Allowances........... 231 935 -- 1,166
Inventory............. 2,373 2,687 1,700(1) 3,360
Deferred tax
valuation............ 3,090 55 -- 3,145
Year ended June 28,
1997:
Valuation reserves:
Doubtful Accounts..... $ 230 $ 172 $ 190 $ 212
Returns and
Allowances........... 1,849 -- 1,618(1) 231
Inventory............. 2,001 372 -- 2,373
Deferred tax
valuation............ 911 2,179 -- 3,090
</TABLE>
- --------
(1) Reflects the de-consolidation of Turtle Beach.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Integrated Circuit Systems, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in City
of Norristown, Commonwealth of Pennsylvania, on the 6th day of October, 1999.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
By: _________________________________
Name: Hock E. Tan
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Hock E. Tan his or her true and lawful
attorneys-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their, his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
* * *
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 6th day of October, 1999.
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
/s/ Hock E. Tan (Principal Executive Officer) President,
______________________________________ Chief Executive Officer and Director of
Hock E. Tan ICS
/s/ Lewis C. Eggebrecht (Principal Executive Officer) Vice
______________________________________ President and Chief Scientist
Lewis C. Eggebrecht
/s/ Henry I. Boreen Director of ICS
______________________________________
Henry I. Boreen
/s/ David Dominik Director of ICS
______________________________________
David Dominik
/s/ Michael A. Krupka Director of ICS
______________________________________
Michael A. Krupka
/s/ Prescott Ashe Director of ICS
______________________________________
Prescott Ashe
/s/ John Howard Director of ICS
______________________________________
John Howard
</TABLE>
II-9
<PAGE>
EXHIBIT TABLE
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
3.1 Amended and Restated Articles of Incorporation of the Company dated
May 12, 1999.
3.2 Amended and Restated By-laws of the Company.
3.3 Amended and Restated Articles of Incorporation of ICST, Inc.
3.4 By-laws of ICST, Inc.
3.5 Certificate of Incorporation of ICS Technologies, Inc.
3.6 By-laws of ICS Technologies, Inc.
3.7 Restated Certificate of Incorporation of MicroClock, Inc.
3.8 By-laws of MicroClock, Inc.
4.1 Indenture, dated as of May 11, 1999, between the Company and Chase
Manhattan Trust Company, National Association, as Trustee with respect
to the 11 1/2% Senior Subordinated Notes due 2009 (including the form
of 11 1/2% Senior Subordinated Notes).
5.1 Opinion of Pepper Hamilton LLP.
10.1 Purchase Agreement, dated as of May 5, 1999, among the Company, Bear
Stearns & Co. Inc. and Credit Suisse First Boston Corporation.
10.2 Registration Rights Agreement, dated as of May 11, 1999, among the
Company, each of the three Guarantor Subsidiaries, Bear, Stearns &
Co., Inc. and Credit Suisse First Boston Corporation.
10.3 Consulting Agreement, dated as of May 11, 1999, between the Company
and Henry Boreen.
10.4 Integrated Circuit Systems, Inc. 1999 Stock Option Plan.
10.5 Credit Agreement, dated as of May 11, 1999, among the Company, Credit
Suisse First Boston as Administrative Agent, Sole Lead Arranger and
Collateral Agent, and the various lending institutions party thereto.
10.6 Lease, dated as of January 29, 1999 between BET Investments IV and the
Company.
10.7 Agreement and Plan of Merger as of January 20, 1999, between the
Company and ICS Merger Corp. (the "Recapitalization Agreement").
10.8 Amendment No. 1 to the Recapitalization Agreement, dated as of
February 16, 1999.
10.9 Executive Stock and Option Agreement, dated as of May 11, 1999,
between the Company and Hock E. Tan (an identical Executive Stock and
Option Agreement, except as to the grantee and the number of options
granted, was entered into with Lewis C. Eggebrecht (135,000 of Class A
Common, 15,000 of Class L Common)).
10.10 Deferred Compensation Agreement, dated as of May 11, 1999, between the
Company and Hock E. Tan (an identical Deferred Compensation Agreement,
except as to the beneficiary and the benefit amount, was entered into
with Lewis C. Eggebrecht ($59,940)).
10.11 Stockholders Agreement, dated as of May 11, 1999, among the Company,
Bain Capital Fund VI, L.P., BCIP Associates II, BCIP Trust Associates
II, BCIP Associates II-B, BCIP Trust Associates II-B, BCIP Associates
II-C, PEP Investments PTY Ltd., Randolph Street Partners II, Randolph
Street Partners 1998 DIF, L.L.C., ICST Acquisition Corp. and
Integrated Circuit Systems Equity Investors, L.L.C.
10.12 Employment, Confidential Information and Invention Assignment
Agreement between the company and Hock E. Tan.
10.13 Consultant Stock Agreement, dated as of May 11, 1999, between the
Company and Henry I. Boreen.
10.14 Registration Agreement, dated as of May 11, 1999, among the Company,
Bain Capital Fund VI, L.P., BCIP Trust Associates II, BCIP Trust
Associates II-B, BCIP Associates II, BCIP Associates II-B, BCIP
Associates II-C, PEP Investments PTY Ltd., Randolph Street Partners
II, Randolph Street Partners 1998 DIF, L.L.C., ICST Acquisition Corp.,
Hock E. Tan, Lewis C. Eggebrecht and Integrated Circuit Systems Equity
Investors, L.L.C.
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
10.15 Executive Stock Purchase Agreement, dated as of May 11, 1999, between
the Company and Hock E. Tan.
10.16 Promissory Note, dated as of May 11, 1999, executed by Hock E. Tan.
10.17 Pledge Agreement, dated as of May 11, 1999, between the Company and
Hock E. Tan.
10.18 Voting Agreement, dated as of May 11, 1999, among the Company, Bain
Capital Fund VI, L.P., BCIP Associates II, BCIP Trust Associates II,
BCIP Associates II-B, BCIP Trust Associates II-B, BCIP Associates II-
C, PEP Investments PTY Ltd., Randolph Street Partners II, Randolph
Street Partners 1998 DIF, L.L.C., ICST Acquisition Corp., Henry I.
Boreen, Christopher J. Bland and Barry E. Olsen.
10.19 Employment Agreement, dated as of May 11, 1999, between the Company
and Hock E. Tan.
10.20 Non-Compete Agreement, dated as of May 11, 1999, between the Company
and Hock E. Tan.
10.21 Advisory Agreement, dated as of May 11, 1999, between the Company and
Bain Capital Partners VI, L.P.
10.22 Advisory Agreement, dated as of May 11, 1999, between the Company and
ICST Acquisition Corp.
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
16.1 Letter from KPMG LLP re: change in certifying accountant.
23.1 Consent of KPMG LLP.
24.1 Powers of Attorney (included in Part II of the Registration
Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agreement, dated 1999 between the Company and
Chase Manhattan Trust Company, National Association, as Trustee.
</TABLE>
II-11
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INTEGRATED CIRCUIT SYSTEMS, INC.
ARTICLE ONE
-----------
The name of the corporation is Integrated Circuit Systems, Inc.
ARTICLE TWO
-----------
The address of the corporation's registered office in the State of
Pennsylvania is 2435 Boulevard of the Generals, City of Valley Forge, County of
Montgomery, State of Pennsylvania; and its registered agent at such address is
Hock E. Tan.
ARTICLE THREE
-------------
The corporation is incorporated under the Business Corporation Law approved
the 5th day of May, 1933, P.L. 364. The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or activity for which
corporations may be organized under the Pennsylvania Business Corporation Law of
1988, as amended.
ARTICLE FOUR
------------
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 36,500,000 shares, consisting of:
(i) 27,000,000 shares of Class A Common Stock, par value $0.01 per share
("Class A Common");
--------------
(i) 7,000,000 shares of Class B Common Stock, par value $0.01 per share
("Class B Common"); and
--------------
<PAGE>
(ii) 3,000,000 shares of Class L Common Stock, par value $0.01 per share
("Class L Common").
--------------
The Class A Common, Class B Common and Class L Common, and any other common
stock issued hereafter, are referred to collectively as the "Common Shares."
-------------
The Common Shares shall have the rights, preferences and limitations set forth
below. Capitalized terms used but not otherwise defined in Part A or Part B of
this Article IV are defined in Part C.
B. COMMON SHARES
-------------
Except as otherwise provided in this Part B or as otherwise required by
applicable law, all Common Shares shall be identical in all respects and shall
entitle the holders thereof to the same rights and privileges, subject to the
same qualifications, limitations and restrictions.
Section 1. Voting Rights. Except as otherwise required by applicable
-------------
law, all holders of Class A Common shall be entitled to one vote per share on
all matters to be voted on by the Corporation's stockholders; provided that,
-------- ----
except as otherwise required by applicable law, the holders of Class A Common
shall not in any respect have cumulative voting rights. Except as otherwise
required by applicable law, all holders of Class B Common and Class L Common
shall have no right to vote on any matters to be voted on by the Corporation's
stockholders.
Section 2. Distributions. At the time of each Distribution, such
-------------
Distribution shall be made to the holders of Common Shares in the following
priority:
2A. The holders of Class L Common, as a separate class, shall be entitled
to receive all or a portion of such Distribution (ratably among such holders
based upon the aggregate Unpaid Yield on Class L Common held by each such holder
as of the time of such Distribution) equal to the aggregate Unpaid Yield on the
outstanding shares of Class L Common as of the time of such Distribution, and no
Distribution or any portion thereof shall be made under paragraph 2B or 2C below
until the entire amount of the Unpaid Yield on the outstanding shares of Class L
Common as of the time of such Distribution has been paid in full. The
Distributions made pursuant to this paragraph 2A to holders of Class L Common
shall constitute a payment of Yield on Class L Common.
2B. After the required amount of a Distribution has been made in full
pursuant to paragraph 2A above, the holders of Class L Common, as a separate
class, shall be entitled to receive all or a portion of such Distribution
(ratably among such holders based upon the aggregate Unreturned Cost of shares
of Class L Common held by each such holder as of the time of such Distribution)
equal to the aggregate Unreturned Cost of the outstanding shares of Class L
Common as of the time of such Distribution, and no Distribution or any portion
thereof shall be made under paragraph 2C below until the entire amount of the
Unreturned Cost of the outstanding shares of Class L Common as of the time of
such Distribution has been paid in full. The Distributions made pursuant to this
paragraph 2B to holders of Class L Common shall constitute a payment of Cost of
Class L Common.
<PAGE>
2C. After the required amount of a Distribution has been made pursuant to
paragraphs 2A and 2B above, holders of Common Shares, as a group, shall be
entitled to receive the remaining portion of such Distribution (ratably among
such holders based upon the number of Common Shares held by each such holder as
of the time of such Distribution).
Section 3. Stock Splits and Stock Dividends. The Corporation shall not
--------------------------------
in any manner subdivide (by stock split, stock dividend or otherwise) or combine
(by stock split, stock dividend or otherwise) the outstanding Common Shares of
one class unless the outstanding Common Shares of all the other classes shall be
proportionately subdivided or combined, respectively. All such subdivisions and
combinations shall be payable only in Class L Common to the holders of Class L
Common, in Class B Common to the holders of Class B Common and in Class A Common
to the holders of Class A Common. In no event shall a stock split or stock
dividend constitute a payment of Yield or a return of Cost.
Section 4. Conversion of Class A Common and Class B Common.
-----------------------------------------------
4A. Each holder of an outstanding share of Class A Common may convert such
share of Class A Common into a share of Class B Common at any time. Each holder
of an outstanding share of Class B Common may convert such share of Class B
Common into a share of Class A Common at any time so long as after giving effect
to the conversion such holder and such holder's Affiliates, collectively, do not
directly or indirectly own more than 49.9% of the outstanding shares of Class A
Common.
4B. If a conversion of Class A Common or Class B Common is to be made in
connection with an Initial Public Offering or other transaction, the conversion
may, at the election of the holder thereof, be conditioned upon the consummation
of such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
4C. As soon as possible after a conversion has been effected, the
Corporation shall deliver to the converting holder a certificate or certificates
representing the number of shares of Class A Common issuable by reason of such
conversion in such name or names and such denomination or denominations as the
converting holder has specified.
4D. The issuance of certificates for shares of Class A Common or Class B
Common upon conversion of Class A Common or Class B Common, as the case may be,
shall be made without charge to the holders of such Common Stock for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of shares of Common
Stock. Upon conversion of each share of Common Stock, the Corporation shall
take all such actions as are necessary in order to insure that the Class A
Common or Class B Common issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable, free and clear of all taxes,
liens, charges and encumbrances with respect to the issuance thereof.
3
<PAGE>
4E. The Corporation shall not close its books against the transfer of
Class A Common or of Class B Common issued or issuable upon conversion in any
manner which interferes with the timely conversion of such Common Stock. The
Corporation shall assist and cooperate with any holder of shares required to
make any governmental filings or obtain any governmental approval prior to or in
connection with any conversion of shares hereunder (including, without
limitation, making any filings required to be made by the Corporation).
4F. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common and Class B Common, solely
for the purpose of issuance upon the conversion of the Class A Common or Class B
Common, such number of shares of Class A Common or Class B Common, issuable upon
the conversion of all outstanding Class A Common or Class B Common, as the case
may be. All shares of Class A Common and Class B Common which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Class A Common and
Class B Common may be so issued without violations of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Class A Common or Class B Common may be listed (except for
official notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance). The Corporation shall not take any action
which would cause the number of authorized but unissued shares of Class A Common
or Class B Common to be less than the number of such shares required to be
reserved hereunder for issuance upon conversion of the Class A Common or Class B
Common, as the case may be.
Section 5. Conversion of Class L Common upon Initial Public Offering.
---------------------------------------------------------
5A. Upon the consummation of the Corporation's Initial Public Offering,
each outstanding share of Class L Common shall, without any action by the holder
thereof, automatically convert into a number of shares of Class A Common equal
to the sum of (x) one and (y) the result of (A) the Unreturned Cost plus Unpaid
Yield of such share of Class L Common divided by (B) the price per share of the
Class A Common in the Initial Public Offering (in each case before giving effect
to any stock split declared in connection with such Initial Public Offering).
5B. As soon as possible after a conversion has been effected, the
Corporation shall deliver to the converting holder a certificate or certificates
representing the number of shares of Class A Common issuable by reason of such
conversion in such name or names and such denomination or denominations as the
converting holder has specified.
5C. The issuance of certificates for shares of Class A Common upon
conversion of Class L Common shall be made without charge to the holders of such
Class L Common for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
shares of Class A Common. Upon conversion of each
4
<PAGE>
share of Class L Common, the Corporation shall take all such actions as are
necessary in order to insure that the Class A Common issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
5D. The Corporation shall not close its books against the transfer of
Class L Common or of Class A Common issued or issuable upon conversion of Class
L Common in any manner which interferes with the timely conversion of Class L
Common. The Corporation shall assist and cooperate with any holder of shares
required to make any governmental filings or obtain any governmental approval
prior to or in connection with any conversion of shares hereunder (including,
without limitation, making any filings required to be made by the Corporation).
5E. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common, solely for the purpose of
issuance upon the conversion of the Class L Common, such number of shares of
Class A Common issuable upon the conversion of all outstanding Class L Common.
All shares of Class A Common which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Class A Common may be so issued without
violations of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Class A Common may be
listed (except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance). The Corporation shall not
take any action which would cause the number of authorized but unissued shares
of Class A Common to be less than the number of such shares required to be
reserved hereunder for issuance upon conversion of the Class L Common.
Section 6. Registration or Transfer. The Corporation shall keep at its
------------------------
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of Common Shares. Upon the surrender of any
certificate representing shares of any class of Common Shares at such place, the
Corporation shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall cancel such
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of such class as is requested by
the holder of the surrendered certificate and shall be substantially identical
in form to the surrendered certificate. The issuance of new certificates shall
be made without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.
Section 7. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more shares of any class of Common Shares, and
in the case of any such loss, theft or destruction, upon receipt of
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indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor, its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
Section 8. Notices. All notices referred to herein shall be in
-------
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
Section 9. Fractional Shares. In no event will holders of fractional
-----------------
shares be required to accept any consideration in exchange for such shares other
than consideration which all holders of Common Stock are required to accept.
Section 10. Amendment and Waiver. No amendment or waiver of any
--------------------
provision of this Article IV shall be effective without the prior written
consent of the holders of a majority of the then outstanding Common Shares
voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class of Common Shares that adversely
affects the powers, preferences or special rights of such class of Common Shares
shall be effective without the prior consent of the holders of a majority of the
then outstanding shares of such affected class of Common Shares, voting as a
single class.
C. DEFINITIONS
-----------
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). With respect to any Person who is an individual, "Affiliates" shall
also include, without limitation, any member of such individual's Family Group.
"Business Corporation Law of 1988" means the Business Corporation Law of
--------------------------------
1988 of the State of Pennsylvania, as amended from time to time.
"Common Stock" means, collectively, the Corporation's Class A Common Stock,
------------
Class B Common Stock and Class L Common Stock and any other class of capital
stock of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or
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stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Cost" of each share of Class L Common shall be equal to $18.00 per share
----
(as proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting the Class L Common).
"Distribution" means each distribution made by the Corporation to holders
------------
of Common Shares, whether in cash, property, or securities of the Corporation
and whether by dividend, liquidating distributions or otherwise; provided that
neither of the following shall be a Distribution: (a) any redemption or
repurchase by the Corporation of any Common Shares for any reason or (b) any
recapitalization or exchange of any Common Shares, or any subdivision (by stock
split, stock dividend or otherwise) or any combination (by stock split, stock
dividend or otherwise) of any outstanding Common Shares.
"Family Group" means a Person's spouse and descendants (whether natural or
------------
adopted) and any trust solely for the benefit of such Person and/or such
Person's spouse and/or descendants (natural or adopted) of a Person and any
corporation, limited liability company, partnership or other entity, the entity
holders of which solely include such Person, his or her spouse or descendants
(natural or adopted) or any trust for the benefit of such Person, his or her
spouse or descendants (natural or adopted).
"Initial Public Offering" means the initial offering by the Corporation of
-----------------------
its capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect, or
any comparable statement under any similar federal statute then in force;
provided that an Initial Public Offering shall not include an offering made in
- -------- ----
connection with a business acquisition or a combination of an employee benefit
plan.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Unpaid Yield" of any share of Class L Common means an amount equal to the
------------
excess, if any, of (a) the aggregate Yield accrued on such share, over (b) the
aggregate amount of Distributions made by the Corporation that constitute
payment of Yield on such share.
"Unreturned Cost" of any share of Class L Common means an amount equal to
---------------
the excess, if any, of (a) the Cost of such share, over (b) the aggregate amount
of Distributions made by the Corporation that constitute a return of the Cost of
such share.
"Yield" means, with respect to each outstanding share of Class L Common for
-----
each calendar quarter, the amount accruing on such share each day during such
quarter at the rate of
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9% per annum of the sum of (a) such share's Unreturned Cost, plus (b) Unpaid
Yield thereon for all prior quarters. In calculating the amount of any
Distribution to be made to the Class L Common during a calendar quarter, the
portion of a Class L Common share's Yield for such portion of such quarter
elapsing before such Distribution is made shall be taken into account.
ARTICLE FIVE
------------
The corporation is to have perpetual existence.
ARTICLE SIX
-----------
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the corporation is expressly authorized to make, alter
or repeal the by-laws of the corporation.
ARTICLE SEVEN
-------------
Meetings of stockholders may be held within or without the State of
Pennsylvania, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Pennsylvania at such place or
places as may be designated from time to time by the board of directors or in
the by-laws of the corporation. Election of directors need not be by written
ballot unless the by-laws of the corporation so provide.
ARTICLE EIGHT
-------------
To the fullest extent permitted by the Business Corporation Law of the State of
Pennsylvania as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHT shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
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ARTICLE NINE
------------
The corporation expressly elects not to be governed by Section 2538 (Adoption
of Transactions with Interested Shareholders) and the provisions contained in
Subchapters E (Control Transactions), G (Control-Share Acquisitions), H
(Disgorgement by Certain Controlling Shareholders for Employees Terminated
Following Attempts to Acquire Control), I (Severance Compensation for Employees
Terminated Following Certain Control-Share Acquisitions) and J (Business
Combination Transactions - Labor Contracts) of Chapter 25 of the Business
Corporation Law of the State of Pennsylvania.
ARTICLE TEN
-----------
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Pennsylvania, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
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Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
INTEGRATED CIRCUIT SYSTEMS, INC.
A Pennsylvania Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Pennsylvania shall be located at 2435 Boulevard of the Generals, in
the City of Valley Forge, County of Montgomery. The name of the corporation's
registered agent at such address shall be Hock E. Tan. The registered office
and/or registered agent of the corporation may be changed from time to time by
action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Pennsylvania, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the board of directors or the holders of shares entitled to cast
not less than fifty percent of the votes at the meeting.
Section 2. Special Meetings. Special meetings of stockholders may be called
for any purpose and may be held at such time and place, within or without the
State of Pennsylvania, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Except as otherwise provided in the charter,
such meetings may be called at any time by the board of directors and shall be
called by the board of directors upon the written request of holders of shares
entitled to cast not less than fifty percent of the votes at the meeting. Such
written request shall state the purpose or purposes of the meeting and shall be
delivered to the board of directors. On such written request, the board of
directors shall fix a date and time for such meeting within two days of the date
requested for such meeting in such written request.
<PAGE>
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Pennsylvania, as the place of
meeting for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting no fewer
than ten (10) days nor more than two (2) months prior to the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors or the Secretary, and if mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, postage
prepaid, addressed to the stockholder at his, her or its address as the same
appears on the records of the corporation. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened.
Section 5. Stockholders List. The officer having charge of the stock ledger
of the corporation shall make no later than two (2) business days after notice
of the meeting is given, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours at the place where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 6. Quorum. The holders of at least a majority of the outstanding
shares of each class of capital stock entitled to vote (which would include the
holders of a majority of each class of common stock entitled to vote, if more
than one class of common stock is outstanding, even if all classes of common
stock vote together as a single class), present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by statute or by the charter. If a quorum is not present, the
holders of a majority of the shares of capital stock present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place. When a quorum is once present
to commence a meeting of stockholders, it is not broken by the subsequent
withdrawal of any stockholders or their proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at
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the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the stockholders,
unless the question is one upon which by express provisions of an applicable law
or of the charter a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the Pennsylvania
Business Corporation Law of 1988, as amended, or by the charter of the
corporation or any amendments thereto and subject to Section 3 of Article VI
hereof, every stockholder shall at every meeting of the stockholders be entitled
to one vote in person or by proxy for each share of Class A Common Stock held by
such stockholder and no votes for any other class or series of capital stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after eleven (11)
months from its date, unless the proxy provides for a longer period.
Section 11. Action by Written Consent. Unless otherwise provided in the
charter, any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken and bearing the dates of signature of the stockholders
who signed the consent or consents, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
corporation by delivery to its registered office in the state of Pennsylvania,
or the corporation's principal place of business, or an officer or agent of the
corporation having custody of the book or books in which proceedings of meetings
of the stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. All consents properly delivered in accordance with this section shall
be deemed to be recorded when so delivered. No written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the earliest dated consent delivered to the corporation as required by
this section, written consents signed by the holders of a sufficient number of
shares to take such corporate action are so recorded. Prompt notice of the
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taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
and who, if the action had been taken at a meeting, would have been entitled to
notice of the meeting if the record date for such meeting had been the date that
written consents signed by a sufficient number of holders to take the action
were delivered to the corporation. Any action taken pursuant to such written
consent or consents of the stockholders shall have the same force and effect as
if taken by the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the first board after the adoption of these bylaws shall
be no more than six. Thereafter, the number of directors shall be established
from time to time by resolution of the board. The directors shall be elected by
a plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote in the election of directors. The directors
shall be elected in this manner at the annual meeting of the stockholders,
except as provided in Section 4 of this Article III. Each director elected shall
hold office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided. The provisions
contained in this Article III shall be subject to the terms and conditions of
any voting agreement then in effect by and among the corporation and certain of
its stockholders, including affiliates of Bain Capital, Inc. (the "Voting
Agreement"), and the Articles of Incorporation.
Section 3. Removal and Resignation. Subject to the provisions of the Voting
Agreement, any director or the entire board of directors may be removed at any
time, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. Whenever the holders of any class
or series are entitled to elect one or more directors by the provisions of the
Corporation's Articles of Incorporation or the Voting Agreement, the provisions
of this section shall apply, in respect to the removal without cause of a
director or directors so elected, to the vote of the holders of the outstanding
shares of that class or series and not to the vote of the outstanding shares as
a whole. Any director may resign at any time upon 10 days written notice to the
corporation.
Section 4. Vacancies. Subject to the provisions of the Voting Agreement,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the shares then
entitled to vote at an election of directors and in
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accordance with the Voting Agreement. Each director so chosen shall hold office
until a successor is duly elected and qualified or until his or her earlier
death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the Chief Executive Officer on at least twenty-four (24) hours notice
to each director, either personally, by telephone, by mail, or by facsimile; in
like manner and on like notice the Chief Executive Officer must call a special
meeting on the written request of at least two of the directors.
Section 7. Quorum, Required Vote and Adjournment. Each director shall be
entitled to one vote except as otherwise provided in the Articles of
Incorporation. Directors then in office (and specifically excluding any
vacancies) and holding a majority of the votes of all directors (or such greater
number required by applicable law) shall constitute a quorum for the transaction
of business. The vote of directors holding a majority of votes present at a
meeting at which a quorum is present shall be the act of the board of directors
only if, in the case where the Voting Agreement is in effect, the quorum
includes all of the directors designated by Bain Capital Fund VI, L.P. and its
affiliates pursuant to the Voting Agreement, and if such directors are not
present, no such act by the board of directors shall be effective. If a quorum
shall not be present at any meeting of the board of directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 8. Committees. Subject to the provisions of the Voting Agreement,
the board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, each committee to consist of one or
more of the directors of the corporation, which to the extent provided in such
resolution or these by-laws shall have and may exercise the powers of the board
of directors in the management and affairs of the corporation except as
otherwise limited by law. The board of directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
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Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Consent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have consented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
charter, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee hereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
board of directors. The officers shall consist of at least a chief executive
officer and secretary and may consist of a president, any number of vice
presidents, a chief financial officer, any number of assistant secretaries and
such other officers and assistant officers as may be deemed necessary or
desirable by the board of directors. Any number of officers may be held by the
same person except the offices of president and secretary. In its discretion,
the board of directors may choose not to fill any office for any period as it
may deem advisable except the offices of president and secretary.
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Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
alter each annual meeting of stockholders or as soon thereafter as conveniently
may be. Each officer shall hold office until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the
board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chief Executive Officer. The Chief Executive Officer shall,
subject to the powers of the board of directors, be in the general and active
charge of the entire business and affairs of the corporation, and shall be its
chief policy making officer. He or she shall preside at all meetings of the
board of directors and stockholders and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or provided in
these bylaws. Whenever the President is unable to serve, by reason of sickness,
absence or otherwise, the Chief Executive Officer shall perform all the duties
and responsibilities and exercise all the powers of the President.
Section 7. President. The President of the corporation, subject to the
powers of the board of directors and the Chief Executive Officer, shall have
general charge of the business affairs and property of the corporation, and
control over its officers, agents and employees, and shall see that all orders
and resolutions of the board of directors are carried into effect. The President
shall execute bonds, mortgages and other contracts which the board of directors
have authorized to be executed, except where required or permitted by law to be
otherwise signed and executed or except where the signing and execution thereof
shall be expressly delegated by the board of directors to some other officer or
agent of the corporation. The President shall have such other powers and perform
such other duties as may be prescribed by the Chief Executive Officer, the board
of directors or as may be provided in these By-laws.
Section 8. Chief Financial Officer. The Chief Financial Officer of the
corporation shall, under the direction of the Chief Executive Officer, be
responsible for all financial and accounting matters of the corporation. The
Chief Financial Officer shall have such other powers and
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perform such other duties as may be prescribed by the Chief Executive Officer,
the President or the board of directors or as may be provided in these By-laws.
Section 9. Vice-Presidents. The Vice-President, or if there shall be more
than one, the Vice-Presidents in the order determined by the board of directors,
shall, in the absence or disability of the President, act with all of the powers
and be subject to all the restrictions of the President. The Vice-Presidents
shall also perform such other duties and have such other powers as the board of
directors, the Chief Executive Officer, the President or these By-laws may, from
time to time, prescribe.
Section 10. The Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the Chief
Executive Officer's supervision, the Secretary shall give, or cause to be
given, all notices required to be given by these by-laws or by law; shall have
such powers and perform such duties as the board of directors, the Chief
Executive Officer, the President or these by-laws may, from time to time,
prescribe; and shall have custody of the corporate seal of the corporation. The
Secretary, or an Assistant Secretary, shall have authority to affix any
corporate seal to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such Assistant
Secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the board of directors, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the board of directors, the Chief Executive Officer, the
President or the Secretary may, from time to time, prescribe.
Section 11. The Treasurer and Assistant Treasurer. The Treasurer shall have
the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the Chief Executive Officer, the President and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the corporation; shall have such powers and perform such duties as
the board of directors, the Chief Executive Officer, the President or these
by-laws may, from time to time, prescribe. If required by the board of
directors, the Treasurer shall give the corporation a bond (which shall be
rendered every six (6) years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of the office of Treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers,
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money, and other property of whatever kind in the possession or under the
control of the Treasurer belonging to the corporation. The Assistant Treasurer,
or if there shall be more than one, the Assistant Treasurers in the order
determined by the board of directors, shall in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer. The
Assistant Treasurers shall perform such other duties and have such other powers
as the board of directors, the Chief Executive Officer, the President or
Treasurer may, from time to time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION
Section 1. Indemnity for Third Party Actions. To the full extent permitted
by applicable law, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, member, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
("collectively, Losses") actually and reasonably incurred by such person in
connection with such action, suit or proceeding except that such person shall be
liable for such Losses incurred by reason of such person's material breach of an
agreement by such person with the corporation. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
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Section 2. Indemnity for Action by or in right of Corporation. To the full
extent permitted by applicable law, the corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director or officer of the corporation, or is or was serving at the request of
the corporation as a director, officer or member of another corporation,
partnership, joint venture, trust or other enterprise, against Losses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit except that such person shall be liable for
such Losses incurred by reason of such person's material breach of an agreement
by such person with the corporation, and except that no such indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Common Pleas of Pennsylvania or the court in which such
suit or action was brought shall be determined upon application that, despite
the adjudication of liability but in consideration of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
Section 3. Employees. The corporation may, to the extent deemed advisable
by the Board of Directors, indemnify any person who is or was an employee or
agent (other than a director or officer) of the corporation if such person would
be entitled to such indemnity under the provisions of Section 1 or 2 if such
person had been a director or officer of the corporation.
Section 4. Procedure for Indemnity. Any indemnification to be provided
under Section 1, 2 or 3 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, member, employee or agent is proper in
the circumstances because such person has met the applicable standard of conduct
set forth in Sections 1 and 2. Such determination shall be made (1) by a
majority vote of directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 5. Expenses. Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding unless
otherwise determined by the Board of Directors in the specific case, upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this Article V.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
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Section 6. Article Not Exclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article V shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, and shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
member, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
Section 7. Insurance. The corporation shall have the power to purchase and
maintain insurance on behalf of any person who was or is a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such liability
under the provisions of this Article V or of the Pennsylvania Business
Corporation Law of 1988, as amended.
Section 8. References to "the Corporation". For the purposes of this
Article V, references to "the corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger and the corporation which,
if its separate existence had continued, would have had power and authority to
(or in fact did) indemnify its directors, officers, employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, all stand in
the same position under the provisions of this Article with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation separate existence had continued.
ARTICLE VI
CERTIFICATES OF STOCK; RECORD DATE
Section 1. Form. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the Chief
Executive Officer, the President, the Chief Financial Officer or a
Vice-President and the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by such holder in the corporation. If such
a certificate is countersigned (1) by a transfer agent or an assistant transfer
agent other than the corporation or its employee or (2) by a registrar, other
than the corporation
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<PAGE>
or its employee, the signature of any such Chief Executive Officer, President,
Chief Financial Officer, Vice-President, Secretary, or Assistant Secretary may
be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used thereon had not ceased to be such officer or
officers of the corporation. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the books of the corporation. Shares of stock of the
corporation shall only be transferred on the books of the corporation by the
holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders
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<PAGE>
shall be the close of business on the next day preceding the day on which notice
is given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Pennsylvania, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by statute, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or
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<PAGE>
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. In case of default in the payment of any installment or call
when such payment is due, the corporation may proceed to collect the amount due
in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the charter, if any, may be declared by the board
of directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the charter. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
any other purpose and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including,
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<PAGE>
without limitation, a pledge of shares of stock of the corporation. Nothing in
this section contained shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Voting Securities Owned By Corporation. Voting securities in any
other corporation held by the corporation shall be voted by the Chief Executive
Officer or Secretary, unless the board of directors specifically confers
authority to vote with respect thereto, which authority may be general or
confined to specific instances, upon some other person or officer. Any person
authorized to vote securities shall have the power to appoint proxies, with
general power of substitution.
Section 7. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Pennsylvania or at its principal place of business.
Section 8. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 9. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the charter, the
Business Corporation Act of the State of Pennsylvania, the Voting Agreement or
any other applicable law, the provision of these bylaws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect. Each Reference to the Voting Agreement shall be given effect
only at such times as a Voting Agreement is then in effect.
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<PAGE>
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same power.
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<PAGE>
EXHIBIT 3.3
ICST, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
In compliance with the requirements of the Pennsylvania Business
Corporation Law of 1988, as amended, the corporation hereby desires to amend and
restate its Articles of Incorporation in their entirety as follows:
1. Name. The name of the corporation is:
----
ICST, Inc.
2. Address. The address of the corporation's registered office in
-------
this Commonwealth is:
2435 Boulevard of the Generals
Valley Forge, PA 19482
Montgomery County
3. Incorporation. The corporation was incorporated on September 14,
-------------
1992 under the Pennsylvania Business Corporation Law of 1988, as amended.
4. Perpetual Existence. The corporation shall have perpetual
-------------------
existence.
5. Stock. The aggregate number of shares the corporation shall have
-----
the authority to issue is One Thousand (1,000) shares of common stock.
6. Election of Directors. The shareholders of the Corporation shall
---------------------
not be entitled to cumulative voting in the election of directors.
<PAGE>
Exhibit 3.4
================================================================================
BYLAWS
OF
ICST, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS PAGE
----------------- ----
Article I CORPORATION OFFICE................................ 1
Article II SHAREHOLDER MEETINGS.............................. 1
Article III QUORUM OF SHAREHOLDERS............................ 5
Article IV VOTING RIGHTS..................................... 6
Article V PROXIES........................................... 7
Article VI RECORD DATE....................................... 8
Article VII SHAREHOLDER LIST.................................. 9
Article VIII JUDGES OF ELECTION................................ 9
Article IX CONSENT OF SHAREHOLDERS IN LIEU OF
MEETING...........................................10
Article X BOARD OF DIRECTORS................................10
Article XI REMOVAL OF DIRECTORS..............................11
Article XII VACANCIES ON BOARD OF DIRECTORS...................12
Article XIII POWERS OF BOARD...................................12
Article XIV MEETINGS OF THE BOARD OF DIRECTORS................13
Article XV ACTION BY WRITTEN CONSENT.........................14
Article XVI COMPENSATION OF DIRECTORS.........................15
Article XVII OFFICERS..........................................15
Article XVIII THE PRESIDENT.....................................16
Article XIX THE SECRETARY.....................................17
Article XX THE TREASURER.....................................17
Article XXI THE CHAIRMAN OF THE BOARD.........................18
<PAGE>
TABLE OF CONTENTS PAGE
----------------- ----
(continued)
Article XXII OTHER OFFICERS....................................19
Article XXIII LIM1TATION OF DIRECTORS' LIABILITY AND
INDEMNIFICATION OF OFFICERS, DIRECTORS,
AND OTHER PERSONS.................................19
Article XXIV SHARES; SHARE CERTIFICATES........................24
Article XXV TRANSFER OF SHARES................................26
Article XXVI LOST CERTIFICATES.................................27
Article XXVII FINANCIAL REPORTS TO SHAREHOLDERS.................27
Article XXVIII FISCAL YEAR.......................................28
Article XXX AMENDMENTS........................................29
<PAGE>
BYLAWS
OF
ICST, INC.
Article I
CORPORATION OFFICE
Section 1.1. The Corporation shall have and continuously maintain in the
Commonwealth of Pennsylvania a registered office at an address to be designated
from time to time by the Board of Directors which may, but need not be the same
as its place of business.
Section 1.2. The Corporation may also have offices at such other places as
the Board of Directors may from time to time designate or the business of the
Corporation may require.
Article II
SHAREHOLDER MEETINGS
Section 2.1 All meetings of the shareholders shall be held at such time and
place, within or without the Commonwealth of Pennsylvania, as may be determined
from time to time by the Board of Directors and need not be held at the
registered office of the Corporation.
Section 2.2. An annual meeting of the shareholders for the election of
directors and the transaction of such other business as may properly be brought
before the meeting shall be held in each calendar year at such time and place as
may be determined by the Board of Directors.
<PAGE>
Section 2.3. Special meetings of the shareholders may be called at any time
by (i) the Chairman of the Board, if any, if such officer is serving as the
chief executive officer of the Corporation, and otherwise the President or (ii)
the Board of Directors. The request of any person who has called a special
meeting of shareholders shall be addressed to the Secretary of the Corporation,
shall be signed by the persons making the request and shall state the general
nature of the business to be transacted at the meeting. Upon receipt of any such
request it shall be the duty of the Secretary to fix the time and provide
written notice of the special meeting of shareholders, which, if called pursuant
to a statutory right, shall be held not more than 60 days after the receipt of
the request. If the Secretary shall neglect or refuse to fix the time or provide
written notice of the special meeting, the person or persons making the request
may fix the time and provide written notice of the special meeting.
Section 2.4. Written notice of each meeting other than an adjourned meeting
of shareholders, stating the place and time, and, (i) in the case of a special
meeting of shareholders, the general nature of the business to be transacted,
and, (ii) in the case of a meeting of shareholders called for the purpose, or
one of the purposes, of considering the amendment or repeal of the Bylaws,
written notice of such proposed action, shall be provided to each shareholder of
record entitled to vote at the meeting at such address as appears on the books
of the Corporation. Such notice shall be given, in accordance with the
provisions of Article XXX of these Bylaws, at least (i) ten days prior to the
day named for a meeting to consider a fundamental change under Chapter 19 of the
Pennsylvania Business Corporation Law of 1988 (the "BCL") or (ii) five days
prior to the day named for the meeting in any other case.
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<PAGE>
Section 2.5. (a) Whenever the Corporation has been unable to communicate
with a shareholder for more than 24 consecutive months because communications to
the shareholder are returned unclaimed or the shareholder has otherwise failed
to provide the Corporation with a current address, the giving of notice to such
shareholder pursuant to Section 2.4 of these Bylaws shall not be required. Any
action or meeting that is taken or held without notice or communication to that
shareholder shall have the same validity as if the notice or communication had
been duly given. Whenever a shareholder provides the Corporation with a current
address this Subsection 2.5(a) shall cease to be applicable to such shareholder.
(b) The Corporation shall not be required to give notice to any shareholder
pursuant to Section 2.4 hereof if and for so long as communication with such
shareholder is unlawful.
Section 2.6. The Board of Directors may provide by resolution with respect
to a specific meeting or with respect to a class of meetings that one or more
shareholders may participate in such meeting or meetings of shareholders by
means of conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear one another.
Participation in the meeting by such means shall constitute presence in person
at the meeting. Any notice otherwise required to be given in connection with any
meeting at which participation by conference telephone or other communications
equipment is permitted shall so specify.
Section 2.6. Except as otherwise provided by law (including but not limited
to Rule 14a-8 of the Securities and Exchange Act of 1934, as amended or any
successor provision
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<PAGE>
thereto), or in these Bylaws, or except as permitted by the presiding officer of
the meeting in the exercise of such officer's sole discretion in any specific
instance, the business which shall be conducted at any meeting of the
shareholders shall (a) have been specified in the written notice of the meeting
(or any supplement thereto) given by the Corporation, or (b) be brought before
the meeting at the direction of the Board of Directors or the presiding officer
of the meeting, or (c) have been specified in a written notice (a "Shareholder
Meeting Notice") given to the Corporation, in accordance with all of the
following requirements, by or on behalf of any shareholder who shall have been a
shareholder of record on the record date for such meeting and who shall continue
to be entitled to vote thereat. Each Shareholder Meeting Notice must be
delivered personally to, or be mailed to and received by, the Corporation,
addressed to the attention of the President at the principal executive offices
of the Corporation not less than 50 days nor more than 75 days prior to the
meeting; provided, however, that in the event that less than 65 days notice or
prior public disclosure (including but not limited to mailing of the meeting
notice) of the date of the meeting is given or made to shareholder, notice by
the shareholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such public disclosure was
made. Each Shareholder Meeting Notice shall set forth a general description of
each item of business proposed to be brought before the meeting, the name and
address of the shareholder proposing to bring such item of business before the
meeting and a representation that the shareholder intends to appear in person or
by proxy at the meeting. The presiding officer of the meeting may refuse to
consider any business that shall be
4
<PAGE>
brought before any meeting of shareholders of the Corporation otherwise than as
provided in this Section 2.7.
Article III
QUORUM OF SHAREHOLDERS
Section 3.1. Except as provided in Sections 3.3 and 3.5, a meeting of
shareholders duly called shall not be organized for the transaction of business
unless a quorum is present.
Section 3.2. The presence, in person or by proxy, of shareholders entitled
to cast at least a majority of the votes that all shareholders are entitled to
cast on a particular matter to be acted upon at the meeting shall constitute a
quorum for purposes of consideration and action on such matter.
Section 3.3. The shareholders present at a duly organized meeting can
continue to do business until adjournment notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 3.4. If a meeting of shareholders cannot be organized because a
quorum is not present, those present in person or by proxy, may, except as
otherwise provided by statute or unless the Board fixes a new record date for
the adjourned meeting, adjourn the meeting to such time and place as they may
determine, without notice other than an announcement at the meeting, until the
requisite number of shareholders for a quorum shall be present in person or by
proxy.
Section 3.5. Notwithstanding the provisions of Sections 3.1, 3.2, 3.3 and
3.4 of these Bylaws:
5
<PAGE>
(a) Any meeting, including one at which directors are to be elected, may be
adjourned for such period as the shareholders present and entitled to vote shall
direct.
(b) Those shareholders entitled to vote who attend a meeting called for
election of directors that has been previously adjourned for lack of a quorum,
although less than a quorum as fixed in these Bylaws, shall nevertheless
constitute a quorum for the purpose of electing directors.
(c) Those shareholders entitled to vote who attend a meeting that has been
previously adjourned for one or more periods aggregating at least 15 days
because of an absence of a quorum, although less than a quorum as fixed in these
Bylaws, shall nevertheless constitute a quorum for the purpose of acting upon
any matter set forth in the notice of the meeting if the notice states that
those shareholders who attend the adjourned meeting shall nevertheless
constitute a quorum for the purpose of acting upon the matter.
Article IV
VOTING RIGHTS
Section 4.1. Except as may be otherwise provided by the Corporation's
Articles of Incorporation, at every meeting of shareholders, every shareholder
entitled to vote thereat shall be entitled to one vote for every share having
voting power standing in his name on the books of the Corporation on the record
date fixed for the meeting.
Section 4.2. Except as otherwise provided by statute, the Articles of
Incorporation or these Bylaws, at any duly organized meeting of shareholders the
vote of the holders of a majority of the votes cast shall decide any question
brought before such meeting. Unless
6
<PAGE>
the Pennsylvania Business Corporation law of 1988 the ("BCL") permits otherwise,
this Section 4.2 may be modified only by a Bylaw amendment adopted by the
shareholders.
Section 4.3. Unless demand is made before the voting begins by a
shareholder entitled to vote at any election for directors, the election of such
directors need not be by ballot.
Article V
PROXIES
Section 5.1. Every shareholder entitled to vote at a meeting of
shareholders, or to express consent or dissent to corporate action in writing
without a meeting, may authorize another person or persons to act for him by
proxy. Every proxy shall be executed in writing by the shareholder or his duly
authorized attorney-in-fact and filed with the Secretary of the Corporation. A
proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until written
notice thereof has been given to the Secretary of the Corporation. An unrevoked
proxy shall not be valid after three years from the date of its execution unless
a longer time is expressly provided therein. A proxy shall not be revoked by the
death or incapacity of the maker, unless before the vote is counted or the
authority is exercised, written notice of such death or incapacity is given to
the Secretary of the Corporation.
7
<PAGE>
Article VI
RECORD DATE
Section 6.1. The Board of Directors may fix a time prior to the date of any
meeting of shareholders as a record date for the determination of the
shareholders entitled to notice of, or to vote at, the meeting, which time,
except in the case of an adjourned meeting, shall not be more than 90 days prior
to the date of the meeting of shareholders. Only shareholders of record on the
date so fixed shall be entitled to notice of, or to vote at, such meeting,
notwithstanding any transfer of shares on the books of the Corporation after any
record date fixed as aforesaid. The Board of Directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose, such as the payment of a distribution or a conversion or exchange of
shares.
Section 6.2. The Board of Directors may by resolution adopt a procedure
whereby a shareholder of the Corporation may certify in writing to the
Corporation that all or a portion of the shares registered in such shareholder's
name are held for the account of a specified person or persons. Such resolution
may set forth: (a) the classification of shareholder who may certify; (b) the
purpose or purposes for which the certification may be made; (c) the form of
certification and information to be contained therein; (d) if the certification
is with respect to a record date, the time after the record date within which
the certification must be received by the Corporation; and (e) such other
provisions with respect to the procedure as are deemed necessary or desirable.
Upon receipt by the Corporation of a certification complying with the procedure,
the persons specified in the certification shall
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be deemed, for the purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the shareholder making the
certification.
Article VII
SHAREHOLDER LIST
Section 7.1. The officer or agent having charge of the share transfer books
of the Corporation shall make a complete alphabetical list of the shareholders
entitled to vote at any meeting, with their addresses and the number of shares
held by each. The list shall be produced and kept open at the time and place of
the meeting for inspection by any shareholder during the entire meeting except
that if the Corporation has 5,000 or more shareholders, in lieu of the making of
the list the Corporation may make the information available at the meeting by
other means.
Section 7.2. Failure to comply with the provisions of Section 7.1 of these
Bylaws shall not affect the validity of any action taken at a meeting prior to a
demand at the meeting by any shareholder entitled to vote thereat to examine the
list.
Section 7.3. The original transfer books for shares of the Corporation, or
a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima
facie evidence as to who are the shareholders entitled to examine the list or
transfer books for shares or to vote at any meeting.
Article VIII
JUDGES OF ELECTION
Section 8.1. Prior to any meeting of shareholders, the Board of Directors
may appoint judges of election, who may but need not be shareholders and who
will have such
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duties as provided in the BCL, to act at such meeting or any adjournment
thereof. If judges of election are not so appointed, the presiding officer of
any such meeting may, and on the request of any shareholder or his proxy shall,
make such appointment at the meeting. The number of judges shall be one or
three. No person who is a candidate for an office to be filled at the meeting
shall act as a judge of election.
Section 8.2. In case any person appointed as a judge of election fails to
appear or fails or refuses to act, the vacancy so created may be filled by
appointment made by the Board of Directors in advance of the convening of the
meeting or at the meeting by the presiding officer thereof.
Section 8.3. Unless the BCL permits otherwise, this Article VIII may be
amended only by a Bylaw amendment.
Article IX
CONSENT OF SHAREHOLDERS IN LIEU OF MEETING
Section 9.1. Any action required or permitted to be taken at a meeting of
the shareholders may be taken without a meeting if, prior or subsequent to the
action, a written consent or consents thereto signed by all of the shareholders
who would be entitled to vote at a meeting for such purpose shall be filed with
the Secretary of the Corporation.
Article X
BOARD OF DIRECtORS
Section 10.1. The number of directors shall be at least one and not more
than 12, as shall from time to time (i) be determined by the Board of Directors
or (ii) be set forth in a notice of a meeting of shareholders called for the
election of the Board of Directors.
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Section 10.2. Each director shall be a natural person of full age and need
not be a resident of the Commonwealth of Pennsylvania or a shareholder of the
Corporation.
Section 10.3. Except as otherwise provided in Article XII of these Bylaws,
directors shall be elected by the shareholders. The candidates receiving the
highest number of votes from the shareholders or each class or group of classes,
if any, entitled to elect directors separately up to the number of directors to
be elected by the shareholders, or class or group of classes, if any, shall be
elected. Each director shall be elected for a term of one year and until his
successor has been elected and qualified or until his earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.
Section 10.4. Notwithstanding the provisions of Section 2.7 (dealing with
the business at shareholders meetings), nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors or by any shareholder of record entitled to vote in the
election of Directors generally at the record date of the meeting and also on
the date of the meeting at which directors are to be elected.
Article XI
REMOVAL OF DIRECTORS
Section 11.1. The entire board of directors, or any class of the board, or
any individual director may be removed from office without assigning any cause
by vote of the shareholders entitled to vote thereon. In case the board or a
class of the board or any one or more directors are so removed, new directors
may be elected at the same meeting.
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Section 11.2. The Board of Directors may declare vacant the office of a
director who has been judicially declared of unsound mind or who has been
convicted of an offense punishable by imprisonment for a term of more than one
year.
Article XII
VACANCIES ON BOARD OF DIRECTORS
Section 12.1. Vacancies on the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority vote of the remaining members of the Board of Directors, though less
than a quorum, or by a sole remaining director, and each person so selected
shall be a director to serve for the balance of the unexpired term.
Section 12.2. When one or more directors resign from the Board of Directors
effective at a future date, the directors then in office, including those who
have so resigned, shall have the power by a majority vote to fill the vacancies,
the vote thereon to take effect when the resignations become effective.
Article XIII
POWERS OF BOARD
Section 13.1. The business and affairs of the Corporation shall be managed
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are directed
or required to be exercised and done by statute, the Articles of Incorporation
or these Bylaws.
Section 13.2. The Board of Directors may, by resolution adopted by a
majority of the directors in office, establish one or more committees consisting
of one or more directors as
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may be deemed appropriate or desirable by the Board of Directors to serve at the
pleasure of the Board. Any committee, to the extent provided in the resolution
of the Board of Directors pursuant to which it was created, shall have and may
exercise all of the powers and authority of the Board of Directors, except that
no committee shall have any power or authority as to the following:
(a) The submission to shareholders of any action requiring approval of
shareholders;
(b) The creation or filling of vacancies in the Board of Directors;
(c) The adoption, amendment or repeal of these Bylaws;
(d) The amendment or repeal of any resolution of the Board of Directors
that by its terms is amendable or repealable only by the Board of Directors; and
(e) Action on matters committed by the Bylaws or resolution of the Board of
Directors to another committee of the Board of Directors.
Article XIV
MEETINGS OF THE BOARD OF DIRECTORS
Section 14.1. Meetings of the Board of Directors shall be held at such
times and places within or without the Commonwealth of Pennsylvania as the Board
of Directors may from time to time appoint or as may be designated in the notice
of the meeting. One or more directors may participate in any meeting of the
Board of Directors, or of any committee thereof, by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear one another, provided that the use of such
conference telephone or similar communications equipment
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shall be at the discretion of the Board of Directors. Participation in a meeting
by such means shall constitute presence in person at the meeting.
Section 14.2. A regular meeting of the Board of Directors shall be held
annually, immediately following the annual meeting of the shareholders, at the
place where such meeting of the shareholders is held or at such other place and
time as a majority of the directors in office after the annual meeting of
shareholders may designate. At such meeting, the Board of Directors shall elect
officers of the Corporation. In addition to such regular meeting, the Board of
Directors shall have the power to fix by resolution the place and time of other
regular meetings of the Board.
Section 14.3. Special meetings of the Board of Directors may be called by
the Chairman of the Board, if any, by the President, or by a majority of the
directors in office on one day's notice to each director, either by telephone,
or, if in writing, in accordance with the provisions of Article XXIX of these
Bylaws.
Section 14.4. At all meetings of the Board of Directors a majority of the
directors in office shall constitute a quorum for the transaction of business,
and the acts of a majority of the directors present and voting at a meeting at
which a quorum is present shall be the acts of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Articles of
Incorporation or by these Bylaws.
Article XV
ACTION BY WRITTEN CONSENT
Section 15.1. Any action required or permitted to be taken at a meeting of
the Board of Directors, or at any committee of the Board of Directors, may be
taken without a meeting
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if, prior or subsequent to the action, a consent or consents thereto signed by
all of the directors (or members of the committee with respect to committee
action) is filed with the Secretary of the Corporation.
Article XVI
COMPENSATION OF DIRECTORS
Section 16.1. Directors, as such, may receive a stated salary for their
services or a fixed sum and expenses for attendance at regular and special
meetings, or any combination of the foregoing as may be determined from time to
time by resolution of the Board of Directors, and nothing contained herein shall
be construed to preclude any director from receiving compensation for services
rendered to the Corporation in any other capacity.
Article XVII
OFFICERS
Section 17.1. The Corporation shall have a President, a Secretary and a
Treasurer, or persons who shall act as such, regardless of the name or title by
which they may be designated, elected or appointed and may have as additional
officers a Chairman of the Board, one or more Vice Chairman of the Board, one or
more Vice Presidents and such other officers and assistant officers as the Board
of Directors may authorize from time to time. The President and Secretary shall
be natural persons of full age. The Treasurer may be a corporation, but if a
natural person shall be of full age. It shall not be necessary for the officers
to be directors. Any number of offices may be held by the same person. Each
officer shall hold office at the pleasure of the Board of Directors and until
his successor has been selected and qualified or until his earlier death,
resignation or removal. Any officer
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may resign at any time upon written notice to the Corporation. The resignation
shall be effective upon receipt thereof by the Corporation or at such subsequent
time as may be specified in the notice of resignation. The Corporation may
secure the fidelity of any or all of the officers by bond or otherwise.
Section 17.2. Any officer or agent of the Corporation may be removed by the
Board of Directors with or without cause. The removal shall be without prejudice
to the contract rights, if any, of any person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors.
Article XVIII
THE PRESIDENT
Section 18.1. Unless otherwise determined by the Board of Directors, the
President shall have the usual duties of an executive officer with general
supervision over and direction of the affairs of the Corporation. The President
shall be the chief executive officer of the Corporation unless the Chairman of
the Board is serving as chief executive officer, in which event the President
shall be chief operating officer of the Corporation. In the exercise of these
duties and subject to the actions of the Board of Directors, the President may
appoint, suspend and discharge employees, agents and assistant officers, fix the
compensation of all officers and assistant officers, shall preside unless there
is a Chairman of the Board who is serving as Chief Executive Officer, at all
meetings of the shareholders at which the President shall be present and, unless
there is a Chairman of the Board, shall preside at all meetings
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of the Board of Directors. The President shall also do and perform such other
duties as from time to time may be assigned to the President by the Board of
Directors.
Unless otherwise determined by the Board of Directors, the President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote at any meeting of the shareholders of any corporation in which this
Corporation may hold stock and, at any such meeting, shall possess and may
exercise any and all the rights and powers incident to the ownership of such
stock and which, as the owner thereof, the Corporation might have possessed and
exercised. The President shall also have the right to delegate such power.
Article XIX
THE SECRETARY
Section 19.1. Unless otherwise determined by the Board of Directors, the
Secretary shall be responsible for the keeping of the minutes of all meetings of
the Board of Directors and the shareholders, in books provided for that purpose,
and for the giving and serving of all notices for the Corporation. The Secretary
shall perform all other duties ordinarily incident to the office of the
Secretary and shall have such other powers and perform such other duties as may
be assigned to the Secretary by the Board of Directors. The minute books of the
Corporation may be held by a person other than the Secretary.
Article XX
THE TREASURER
Section 20.1. Unless otherwise determined by the Board of Directors, the
Treasurer shall have charge of all the funds and securities of the Corporation
which may come into
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such officer's hands. When necessary or proper, unless otherwise determined by
the Board of Directors, the Treasurer shall endorse for collection on behalf of
the Corporation checks, notes and other obligations, and shall deposit the same
to the credit of the corporation to such banks or depositories as the Board of
Directors may designate and may sign all receipts and vouchers for payments made
to the Corporation. The Treasurer shall sign all checks made by the Corporation,
except when the Board of Directors shall otherwise direct. The Treasurer shall
be responsible for the regular entry in books of the Corporation to be kept for
such purpose of a full and accurate account of all funds and securities received
and paid by the Treasurer on account of the Corporation. Whenever required by
the Board of Directors, the Treasurer shall render a statement of the financial
condition of the Corporation. The Treasurer shall have such other powers and
shall perform the duties as may be assigned to such officer from time to time by
the Board .of Directors. The Treasurer shall give such bond, if any, for the
faithful performance of the duties of such office as shall be required by the
Board of Directors.
Article XXI
THE CHAIRMAN OF THE BOARD
Section 21.1. Unless otherwise determined by the Board of Directors, the
Chairman of the Board, if any, shall preside at all meetings of directors. The
Chairman of the Board shall have such other powers and perform such further
duties as may be assigned to such officer by the Board of Directors, including,
without limitation, acting as chief executive officer of the Corporation. To be
eligible to serve, the Chairman of the Board must be a director of the
Corporation.
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Article XXII
OTHER OFFICERS
Section 22.1. Unless otherwise determined by the Board of Directors, each
Vice Chairman, Vice President and each assistant officer shall have the powers
and perform the duties of his or her respective superior officer. Vice
Presidents and assistant officers shall have such rank as may be designate as
having responsibility for a specific area of the Corporation's affairs, in which
event such Vice President shall be superior to the other Vice Presidents in
relation to matters within his or her area. The President shall be the superior
officer of the Vice Presidents. The Chairman of the Board shall be the superior
officer of the Vice Chairman. The Treasurer and Secretary shall be the superior
officers of the Assistant Treasurers and Assistant Secretaries, respectively.
Article XXIII
LIMITATION OF DIRECTORS' LIABILiTY AND
INDEMNIFICATION OF OFFICERS, DIRECTORS, AND OTHER PERSONS
Section 23.1. No director of the Corporation shall be personally liable, as
such, for monetary damages for any action taken unless: (a) the director has
breached or failed to perform the duties of his or her office, and (b) the
breach or failure to perform constitutes self-dealing, wilful misconduct or
recklessness; provided, however, that the provisions of this Section 23.1 shall
not apply to the responsibility or liability of a director pursuant to any
criminal statute, or to the liability of a director for the payment of taxes
pursuant to local, Pennsylvania or federal law.
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Section 23.2. The Corporation shall indemnify and hold harmless to the
fullest extent permitted by Pennsylvania law any director or officer, and may
indemnify any other employee or agent, who was or is a party to, or is
threatened to be made a party to, or who is called as a witness in connection
with, any threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Corporation (collectively, for purposes of this Article XXIII,
"Proceeding"), by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise, against expenses, liability and loss including,
without limitation, attorneys' fees and disbursements, punitive and other
damages, judgments, fines, penalties, amounts paid or to be paid in settlement
and costs and expenses of any nature incurred by him in connection with such
Proceeding and any appeal therefrom; provided that such indemnification shall
not be made where the act or failure to act giving rise to the claim for
indemnification is determined by a court in a final binding adjudication to have
constituted wilful misconduct or recklessness.
Section 23.3. The indemnification and advancement of expenses provided by,
or wanted pursuant to, this Article XXIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any Bylaw, agreement, contract, vote of shareholders or
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. It is the policy of the
Corporation that indemnification of, and advancement of expenses to,
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directors and officers of the Corporation shall be made to the fullest extent
permitted by law. To this end, the provisions of this Article XXIII shall be
deemed to have been amended for the benefit of directors and officers of the
Corporation effective immediately upon any modification of the BCL or any
modification, or adoption of any other law that expands or enlarges the power or
obligation of corporations organized under the BCL to indemnify, or advance
expenses to, directors and officers of corporations.
Section 23.4. The Corporation shall pay expenses incurred by an officer or
director, and may pay expenses incurred by any other employee or agent, in
defending a Proceeding, in advance of the final disposition of such action or
proceeding provided that if required by the BCL or other applicable law, the
payment of such expenses shall be made only upon receipt of an undertaking by or
on behalf of such person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation.
Section 23.5. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article XIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 23.6. The Corporation shall have the authority to create a fund of
any nature, which may, but need not be, under the control of a trustee, or
otherwise secure or insure in any manner, its indemnification obligations,
whether arising under these Bylaws or otherwise. This authority shall include,
without limitation, the authority to: (i) deposit funds in trust or in escrow;
(ii) establish any form of self-insurance; (iii) secure its indemnity obligation
by grant of a security interest, mortgage or other lien on the assets of the
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Corporation; or (iv) establish a letter of credit, guaranty or surety
arrangement for the benefit of such persons in connection with the anticipated
indemnification or advancement of expenses contemplated by this Article XXIII.
The provisions of this Article XXIII shall not be deemed to preclude the
indemnification of or advancement of expenses to, any person who is not
specified in Section 23.1 of this Article XXIII but whom the Corporation has the
power or obligation to indemnify, or to advance expenses for, under the
provisions of the BCL, other applicable law or otherwise. The authority granted
by this Section 23.5 shall be exercised by the Board of Directors of the
Corporation.
Section 23.7. The Corporation shall have the authority to enter into a
separate indemnification agreement with any officer, director, employee or agent
of the Corporation or any subsidiary providing for such indemnification of such
person as the Board of Directors shall determine up to the fullest extent
permitted by law.
Section 23.8. The termination of any Proceeding by judgment, order,
settlement, conviction, or upon a plea of guilty or nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person's conduct
constituted willful misconduct or recklessness.
Section 23.9. The indemnification provisions of this Article XXIII shall
constitute a contract between the Corporation and each of its directors,
officers, employees and agents who are or may be entitled to indemnification
hereunder and who serve in any such capacity at any time while such provisions
are in effect. Any repeal or modification of the indemnification provisions of
this Article XXIII shall not limit any such person's rights to indemnification
(including the advancement of expenses) then existing or arising out of
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events, acts or omissions occurring prior to such repeal or modification,
including, without limitation, the right to indemnification with respect to
Proceedings commenced after such repeal or modification based in whole or in
part upon any such event, act or omission.
Section 23.10. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise against any expense, liability or loss asserted
against him and incurred by him or on his behalf in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article XIV or under any provision of the BCL or other applicable law.
Section 23.11. Notwithstanding any other provision of these Bylaws relating
to their amendment generally, any repeal or amendment of this Article XXIII
which is adverse to any director or officer shall apply to such director or
officer only on a prospective basis, and shall not reduce any limitation on the
personal liability of a director of the Corporation, or limit the rights of any
person entitled under Article XXIII to indemnification or to the advancement of
expenses with respect to any action or failure to act occurring prior to the
time of such repeal or amendment. Notwithstanding any other provision of these
Bylaws, no repeal or amendment of these Bylaws shall affect any or all of this
Article so as either to reduce the limitation of directors' liability or limit
indemnification or the advancement of expenses in any manner unless adopted by
the affirmative vote of the shareholders entitled
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to cast at least a majority of the votes that all shareholders are entitled to
cast in the election of directors; provided that no such amendment shall have
retroactive effect inconsistent with the preceding sentence.
Section 23.12. References in this Article XXIII to Pennsylvania law or to
any provision thereof shall be to such law as it existed on the date this
Article XXIII was adopted or as such law thereafter may be changed; provided
that (a) in the case of any change which expands the liability of directors or
limits the indemnification rights or the rights to advancement of expenses which
the Corporation may provide, the rights to limited liability, to indemnification
and to the advancement of expenses which the Corporation may provide, the rights
to limited liability, to indemnification and to the advancement of expenses
provided in this Article shall continue as theretofore to the extent permitted
by law; and (b) if such change permits the Corporation without the requirement
of any further action by shareholders or directors to limit further the
liability of directors (or limit the liability of officers) or to provide
broader indemnification rights or rights to the advancement of broader
indemnification rights or rights to the advancement of expenses than the
Corporation was permitted to provide prior to such change, then liability
thereupon shall be so limited and the rights to indemnification and the
advancement of expenses shall be so broadened to the extent permitted by law.
Article XXIV
SHARES: SHARE CERTIFICATES
Section 24.1 Except as otherwise provided in Section 24.2, the shares of
the Corporation shall be represented by certificates. Unless otherwise provided
by the Board
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of Directors, every share certificate shall be signed by two officers and sealed
with the corporate seal, which may be a facsimile, engraved or printed, but
where such certificate is signed by a transfer agent or a registrar, the
signature of any corporate officer upon such certificate may be a facsimile,
engraved or printed. In case any officer who has signed, or whose facsimile
signature has been placed upon, any share certificate shall have ceased to be
such officer because of death, resignation or otherwise, before the certificate
is issued, it may be issued with the same effect as if the officer had not
ceased to be such at the date of its issue. The provisions of this Section 24.1
shall be subject to any inconsistent or contrary agreement at the time between
the Corporation and any transfer agent or registrar. To the extent the
Corporation is authorized to issue shares of more than one class or series,
every certificate shall set forth upon the face or back of the certificate (or
shall state on the face or back of the certificate that the Corporation will
furnish to any shareholder upon request and without charge) a full or summary
statement of the designation, voting rights, preferences, limitations and
special rights of the shares of each class or series authorized to be issued so
far as they have been fixed and determined and the authority of the Board of
Directors to fix and determine the designations, voting rights, preferences,
limitations and special rights of the classes and series of shares of the
Corporation.
Section 24.2. Notwithstanding anything herein to the contrary, any or all
classes and series of shares, or any part thereof, may be represented by
uncertificated shares to the extent determined by the Board of Directors, except
that shares represented by a certificate that is issued and outstanding shall
continue to be represented thereby until the certificate is surrendered to the
Corporation. Within a reasonable time after the issuance or transfer
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of uncertificated shares, the Corporation shall send to the registered owner
thereof, a written notice containing the information required to be set forth or
stated on certificates. The rights and obligations of the holders of shares
represented by certificates and the rights and obligations of the holders of
uncertificated shares of the same class and series shall be identical.
Notwithstanding anything herein to the contrary, the provisions of Section 24.1
shall be inapplicable to uncertified shares and in lieu thereof the Board of
Directors shall adopt alternative procedures for registration of transfers.
Article XXV
TRANSFER OF SHARES
Section 25.1. Upon surrender to the Corporation of a share certificate duly
endorsed by the person named in the certificate or with duly executed stock
powers attached and otherwise in proper form for transfer, or by attorney duly
appointed in writing and accompanied where necessary by proper evidence of
succession, assignment or authority to transfer, a new certificate shall be
issued to the person entitled thereto and the old certificate cancelled and the
transfer recorded on the share register of the Corporation. Except as otherwise
provided pursuant to Section 6.2 hereof, a transferee of shares of the
Corporation shall not be a record holder of such shares entitled to the rights
and benefits associated therewith unless and until the share transfer has been
recorded on the share transfer books of the Corporation. No transfer shall be
made if it would be inconsistent with the provisions of Article 8 of the
Pennsylvania Uniform Commercial Code.
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Article XXVI
LOST CERTIFICATES
Section 26.1. Unless waived in whole or in part by the Board of Directors,
any person requesting the issuance of a new certificate in lieu of an alleged
lost, destroyed, mislaid or wrongfully taken certificate shall (a) give to the
Corporation his or her bond of indemnity with an acceptable surety, and (b)
satisfy such other requirements as may be imposed by the Corporation. Thereupon,
a new share certificate shall be issued to the registered owner or his or her
assigns in lieu of the alleged lost, destroyed, mislaid or wrongfully taken
certificate, provided that the request therefor and issuance thereof have been
made before the Corporation has notice that such shares have been acquired by a
bona fide purchaser.
Article XXVII
FINANCIAL REPORT TO SHAREHOLDERS
Section 27.1. Except as otherwise agreed between the Corporation and a
shareholder, or if not required by the BCL, the Corporation shall furnish
financial reports to its shareholders, including at least a balance sheet as of
the end of each fiscal year and statement of income and expenses for the fiscal
year. The financial statements shall be prepared on the basis of generally
accepted accounting principles, if the Corporation prepares financial statements
for the fiscal year on that basis for any purpose, and may be consolidated
statements of the Corporation and one or more of its subsidiaries.
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Article XXVIII
FISCAL YEAR
Section 28.1. The fiscal year of the Corporation shall be as determined by
the Board of Directors.
Article XXIX
MANNER OF GIVING WRITTEN NOTICE; WAIVERS OF NOTICE
Section 29.1. Whenever written notice is required to be given to any person
under the provisions of these Bylaws, it may be given to the person either
personally or by sending a copy thereof by first class or express mail, postage
prepaid, or by telegram (with messenger service specified), telex or TWX (with
answerback received) or courier service, charges prepaid, or by telecopier, to
his address (or to his telex, TWX, telecopier or telephone number) appearing on
the books of the Corporation or, in the case of written notice to directors,
supplied by each director to the Corporation for the purpose of the notice. If
the notice is sent by mail, telegraph or courier service, it shall be deemed to
have been given to the person entitled thereto when deposited in the United
States mail or with a telegraph office or courier service for delivery to that
person or, in the case of telex or TWX, when dispatched.
Section 29.2. Any written notice required to be given to any person under
the provisions of statute, the Corporation's Articles of Incorporation or these
Bylaws may be waived in a writing signed by the person entitled to such notice
whether before or after the time stated therein. Except as otherwise required by
statute, and except in the case of a special meeting, neither the business to be
transacted at, nor the purpose of, a meeting need
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be specified in the waiver of notice. In the case of a special meeting of
shareholders, the waiver of notice shall specify the general nature of the
business to be transacted. Attendance of any person, whether in person or by
proxy, at any meeting shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
Article XXX
AMENDMENTS
Section 30.1. Except as provided in Section 23.11 hereof, these Bylaws may
be amended or repealed, and new Bylaws adopted, by the affirmative vote of a
majority of the votes cast by the shareholders at any regular or special meeting
duly convened after written notice to the shareholders that the purpose, or one
of the purposes, of the meeting is to consider the amendment or repeal of these
Bylaws and the adoption of new Bylaws. There shall be included in, or enclosed
with, the notice, a copy of the proposed amendment or a summary of the changes
to be effected thereby.
Section 30.2. Except as provided in Section 23.11 hereof, and except as
provided in Section 1504(b) of the BCL, these Bylaws may be amended or repealed,
and new Bylaws adopted, by the affirmative vote of a majority of the members of
the Board of Directors (but not a committee thereof) at any regular or special
meeting duly convened, regardless of whether the shareholders have previously
adopted the Bylaw being amended or repealed, subject to the power of the
shareholders to change such action of the Board of Directors, provided that the
Board of Directors shall not have the power to amend these Bylaws on
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any subject that is expressly committed to the shareholders by the express terms
hereof, by Section 1504 of the BCL or otherwise.
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Exhibit 3.5
CERTIFICATE OF INCORPORATION
OF
ICS TECHNOLOGIES, INC.
1. The name of the corporation is ICS TECHNOLOGIES, INC.
2. The address of its registered office in the State of Delaware is Suite 10A,
2500 West Fourth Street, in the City of Wilmington, County of New Castle, 19805.
The name of its registered agent at such address is Robert C. Campbell.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of common stock which the Corporation shall have
authority to issue is Ten Thousand (10,000) and the par value of each of such
share is One Cent ($0.01) amounting in the aggregate to One Hundred Dollars
($100.00).
5. The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Paula L. Tanksley McCausland, Keen & Buckman
Five Radnor Corporate Center
Suite 500, 100 Matsonford Road
Radnor, PA 19087
6. The Corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by the General
Corporation Law of the State of Delaware, the board of directors is expressly
authorized to make, alter or repeal the by-laws of the Corporation.
8. Elections of directors need not be by written ballot unless the by-law of the
Corporation shall so provide.
<PAGE>
9. Meetings of stockholders may be held within or without the State of Delaware,
as the by-laws may provide. The books of the Corporation may be kept (subject to
any provision contained in the General Corporation Law of the State of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the board of directors or in the by-laws of the Corporation.
10. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the General Corporation Law of the State of Delaware,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 25th day of June, 1992.
/s/ Paula L.Tanksley
---------------------------
Paula L. Tanksley
<PAGE>
Exhibit 3.6
BY-LAWS
OF
ICS TECHNOLOGIES, INC.
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
other place. both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Meetings of Stockholders
Section 2.1. Place. All meetings of the stockholders for the election of
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Date of Annual Meeting. An annual meeting of the stockholders,
commencing with the year 1993, shall be held on such day and at such time and
place as the Board of Directors (or the Executive Committee thereof) shall fix,
at which the stockholders shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting. Any business may
be transacted at the annual meeting, irrespective of whether the notice of such
meeting contains a reference thereto, except as otherwise provided in these
By-Laws, or by statute.
Section 2.3. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 2.4. Business at Special Meetings. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
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Section 2.5. Notice of Meetings. Written notice of every meeting of
stockholders, stating the purpose or purposes for which the meeting is called,
the date, place and hour of the meeting shall be given, not less than ten nor
more than sixty days before the meeting, either personally or by mail, to each
stockholder entitled to vote at such meeting and to each stockholder of record
who, by reason of any action proposed at such meeting, would be entitled to have
his stock appraised if much action were taken. If mailed, much notice shall be
directed to a stockholder at his address as it shall appear on the books of the
corporation unless he shall have filed with the secretary of the corporation a
written request that notices intended for bin be mailed to some other address,
in which case it shall be mailed to the address designated in such request. If
all the stockholders are present, a meeting of stockholders may be held without
notice provided that the stockholders unanimously consent thereto and waive the
notice requirements.
Section 2.6. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and shoving the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place. within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
daring the whole time thereof, and may be inspected by any stockholder who is
present.
Section 2.7. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. Every proxy must be executed in writing by the stockholder
or by his duly authorized attorney. No proxy shall be valid after the expiration
of one year from the date of its execution unless it shall have specified
therein the duration.
Section 2.8. Questions Before Meeting. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting unless the question is one upon which by express provision
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of the statutes or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 2.9. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less then the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were presented and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
Directors
Section 3.1. Size of Board. The Board of Directors shall consist of three
(3) members all of whom shall be of full age. The directors need not be
residents of this state or stockholders in the Corporation.
Section 3.2. Election of Directors. The directors shall be elected at the
annual meeting of stockholders, except as provided herein and in Section 3.3. of
this Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 3.3. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in off ice, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole Board as
constituted immediately prior to any such increase, the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the rights to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors than in office.
Section 3.4. Power. The business of the Corporation shall be managed by
its Board of Directors which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute or by the Certificate
of Incorporation or by these By-Laws directed or required to be exercised or
done by the stockholders.
Section 3.5. Election of Subsidiary Directors. The Board of Directors
shall, by resolution passed by a majority of the whole board, designate
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the persons to serve as directors of any and all wholly-owned subsidiaries of
the corporation. The secretary shall certify such designations under seal of the
corporation and shall furnish copies of such certificates as may be necessary or
desirable. Except to the extent the Board of Directors shall otherwise direct,
the president of the Corporation shall be empowered by these by-laws to act for
the Corporation by proxy in the election of directors of all other subsidiaries
not wholly-owned by the Corporation.
Section 3.6. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 3.7. First Meetings. The first meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present; or the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 3.8 Regular Meetings. Regular meetings of the Board may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 3.9. Special Meetings. Special meetings of the Board may be called
by the President on two business days' notice to each director, either
personally or by mail, by telegram or by telephone; special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of two directors.
Section 3.10. Quorums At all meetings of the Board of Directors a majority
of the total number of directors shall constitute a quorum for the transaction
of business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.11. Meeting of Board of Directors by Conference Telephone.
Members of the Board of Directors may participate in a meeting of the Board, of
a committee of the Board or of the stockholders, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other; participation in this manner
shall constitute presence in person at such meeting.
Section 3.12. Unanimous Consent. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
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case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 3.13. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.
Section 3.14. Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
Section 3.15 Fees and Expenses. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors and a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed additional
compensation for attending committee meetings.
ARTICLE IV
Notices
Section 4.1. Methods of Notice. Whenever, under the provisions of the laws
of the State of Delaware or of the Certificate of Incorporation or of these
By-Laws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram or
telephone.
Section 4.2. Waiver. Whenever any notice is required to be given under the
provisions of the laws of the state of Delaware or of the Certificate of
Incorporation or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
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ARTICLE V
Officers
Section 5.1. Titles. The officers of the Corporation shall be chosen by the
Board of Directors and shall be: a President, a Secretary and a Treasurer. The
Board of Directors may also elect or appoint one or more vice-presidents, one or
more assistant secretaries and assistant treasurers, and such other officers,
agents, trustees and fiduciaries as it shall deem necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board. Any number of
offices my be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 5.2. Election of Officers. The Board of Directors at its first
meeting after each annual meeting of Stockholders shall choose a President, a
Secretary, a Treasurer and such other officers as the Board of Directors shall
deem necessary or appropriate.
Section 5.3. Salaries. The salaries and other compensation of all officers
and agents of the Corporation shall be fixed by the Board of Directors.
Section 5.4. Terms. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
Section 5.5. President. Subject to the Board of Directors the President
shall be the chief executive officer of the Corporation and in addition shall
perform such duties as from time to time may be assigned to him by the board. He
may execute on behalf of the Corporation all contracts, deeds, bonds, mortgages,
notes or other documents whether or not requiring the seal of the Corporation,
and unless provided otherwise by the Board of Directors, the President shall
preside at all meetings of the shareholders and Board of Directors. He shall
have general and active management of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
Section 5.6. Vice-Presidents. In the absence of the President or in the
event of his inability or refusal to act, the Vice-President (or in the event
there by more than one Vice-President, the Vice-Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5.7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
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standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
Section 5.8. Assistant Secretary. The Assistant Secretary, or if there is
more than one, the Assistant Secretaries in the order determined by the Board of
Directors or if there is no such determination, then in the order of their
election, shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 5.9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond, which shall be renewed
every six years in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 5.10. Assistant Treasurer. The Assistant Treasurer or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, or if there shall be no such determination, then in the
order of their election, shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
ARTICLE VI
Indemnification and Insurance
Section 6.1. Scope of indemnification. The Corporation shall indemnify its
officers and directors and the officers and directors of its subsidiaries to the
full extent permitted by and under the terms and conditions
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of Section 145 of the Delaware General Corporation Law, as amended from time to
time, and the Corporation may, by action of its Board of Directors, indemnify
all other persons it may indemnify under said Section 145 pursuant thereto.
Section 6.2. Insurance. The Board of Directors may authorize, by a vote of
a majority of the full Board, the Corporation to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability wider the provisions of this Article VI.
ARTICLE VII
Certificates of Stock
Section 7.1. Right to Certificate. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by or in the name of the
Corporation by the President or a Vice-President and the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation.
Section 7.2. Statements Setting Forth Rights. If the Corporation shall be
authorized to issue more than one (1) class of stock or more than one (1) series
of any class, the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the designations,
preferences and relative1 participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and rights (except as otherwise provided in
Section 202 of the General Corporation Law of Delaware).
Section 7.3. Facsimile Signature. Where a certificate is countersigned (1)
by a transfer agent other than the Corporation or its employee, or, (2) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
Section 7.4. Lost Certificates. The Board of Directors may delegate to its
transfer agent the authority to issue without further action or approval of the
Board, a new certificate or certificates in place of any certificate or
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certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the receipt by the transfer agent of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen, or
destroyed, and upon the receipt from the owner of such lost, stolen or destroyed
certificate, or certificates, or his legal representative of a bond as indemnity
against any claim that may be made with respect to the certificate alleged to
have been lost, stolen or destroyed.
Section 7.5. Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and if such shares are not restricted as to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 7.6. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7.7. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
Section 7.8. Transfer Agents and Registrars. The Board of Directors may
appoint one or more corporate transfer agents and registrars.
ARTICLE VIII
General Provisions
Section 8.1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 8.2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such
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sum or sums as the directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 8.3. Annual Statement. The Board of Directors shall present prior
to each annual meeting a full and clear statement of the business and condition
of the Corporation.
Section 8.4. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 8.5. Seal. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
Amendments
Section 9.1. Amendments. These By-Laws may be altered or repealed at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration or repeal is contained in the notice of such special meeting.
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Exhibit 3.7
RESTATED CERTIFICATE OF INCORPORATION
OF MICROCLOCK, INC.
MircroClock, Inc., a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is MircroClock, Inc. MircroClock, Inc.
was originally incorporated under the name ICS Acquisition Company, and the
Certificate of Incorporation of the corporation was filed with the Secretary of
State of the State of Delaware on February 12, 1997.
2. Pursuant to Section 245 of the General Corporation Law of the State
of Delaware, this Restated Certificate of Incorporation restates and integrates,
without further amending, the provisions of the Certificate of Incorporation of
this corporation.
3. The text of the Certificate of Incorporation, as heretofore
amended, is hereby restated to read in its entirety as follows:
FIRST: The name of the corporation is MircroClock, Inc.
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SECOND: The registered office of the corporation is located at
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Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the
County of New Castle, in the State of Delaware. The name of its registered
agent at that address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act
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or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The corporation shall be authorized to issue One Thousand
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(1,000) shares all of which are to be of one class of Common Stock with a par
value of $.01 per share.
FIFTH: Elections of directors need not be by written ballot.
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SIXTH: The board of directors shall have the power, in addition to
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the stockholders, to make, alter, or repeal the by-laws of the corporation.
SEVENTH: A director of the corporation shall not be liable to the
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corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. All references in this paragraph to a director shall also be
deemed to refer to such other person or persons, if any, who, pursuant to any
provision of this Certificate of Incorporation in accordance with subsection (a)
of Section 141 of Title 8 of the Delaware Code, exercise or perform any of the
powers or
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duties otherwise conferred or imposed upon the board of directors by Title 8 of
the Delaware Code.
EIGHTH: The corporation reserves the right to amend, alter, change or
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repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders are granted subject to this reservation.
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Exhibit 3.8
BYLAWS
OF
MICROCLOCK, INC.
(a Delaware Corporation)
...ooOoo...
ARTICLE I
Offices and Fiscal Year
SECTION 1.01. Registered Office.--The registered office of the corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware
until otherwise established by resolution of the board of directors, and a
certificate certifying the change is filed in the manner provided by statute.
SECTION 1.02. Other Offices.--The corporation may also have offices at such
other places within or without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation requires.
SECTION 1.03. Fiscal Year.--The fiscal year of the corporation shall end on
the 31st of December in each year.
ARTICLE II
Notice - Waivers - Meetings
SECTION 2.01. Notice, What Constitutes.--Whenever, under the provisions of
the Delaware General Corporation Law ("GCL") or the certificate of incorporation
or of these bylaws, notice is required to be given to any director or
stockholder, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail or by telegram (with messenger service
specified), telex or TWX (with answerback received) or courier service, charges
prepaid, or by facsimile transmission to the address (or to the telex, TWX,
facsimile or telephone number) of the person appearing on the books of the
corporation, or in the case of directors, supplied to the corporation for the
purpose of notice. If the notice is sent by mail, telegraph or courier service,
it shall be deemed to be given when deposited in the United States mail or with
a telegraph office or courier service for delivery to that person or, in the
case of telex or TWX, when dispatched, or in the case of facsimile transmission,
when received.
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SECTION 2.02. Notice of Meetings of Board of Directors.--Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or facsimile transmission) or 48 hours (in the case of notice by
telegraph, courier service or express mail) or five days (in the case of notice
by first class mail) before the time at which the meeting is to be held. Every
such notice shall state the time and place of the meeting. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of
the board need be specified in a notice of the meeting.
SECTION 2.03. Notice of Meetings of Stockholders.--Written notice of the
place, date and hour of every meeting of the stockholders, whether annual or
special, shall be given to each stockholder of record entitled to vote at the
meeting not less than ten nor more than 60 days before the date of the meeting.
Every notice of a special meeting shall state the purpose or purposes thereof.
If the notice is sent by mail, it shall be deemed to have been given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at the address of the stockholder as it appears on the records of
the corporation.
SECTION 2.04. Waivers of Notice.
(a) Written Waiver.--Whenever notice is required to be given under any
provisions of the GCL or the certificate of incorporation or these bylaws, a
written waiver, signed by the person or persons entitled to the notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice of such meeting.
(b) Waiver by Attendance.--Attendance of a person at a meeting, either in
person or by proxy, shall constitute a waiver of notice of such meeting, except
where a person attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened.
SECTION 2.05. Exception to Requirements of Notice.
(a) General Rule.--Whenever notice is required to be given, under any
provision of the GCL or of the certificate of incorporation or these bylaws, to
any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
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(b) Stockholders Without Forwarding Addresses.--Whenever notice is required
to be given, under any provision of the GCL or the certificate of incorporation
or these bylaws, to any stockholder to whom (i) notice of two consecutive annual
meetings, and all notices of meetings or of the taking of action by written
consent without a meeting to such person during the period between such two
consecutive annual meetings, or (ii) all, and at least two, payments (if sent by
first class mail) of dividends or interest on securities during a 12 month
period, have been mailed addressed to such person at his address as shown on
the records of the corporation and have been returned undeliverable, the giving
of such notice to such person shall not be required. Any action or meeting which
shall be taken or held without notice to such person shall have the same force
and effect as if such notice had been duly given. If any such person shall
deliver to the corporation a written notice setting forth the person's then
current address, the requirement that notice be given to such person shall be
reinstated.
SECTION 2.06. Conference Telephone Meetings.--One or more directors may
participate in a meeting of the board, or of a committee of the board, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE III
Meetings of Stockholders
SECTION 3.01. Place of Meeting.--All meetings of the stockholders of the
corporation shall be held at the registered office of the corporation, or at
such other place within or without the State of Delaware as shall be designated
by the board of directors in the notice of such meeting.
SECTION 3.02. Annual Meeting.--The board of directors may fix and designate
the date and time of the annual meeting of the stockholders, but if no such date
and time is fixed and designated by the board, the meeting for any calendar year
shall be held on the Second Monday of April in such year, if not a legal holiday
under the laws of Delaware, and, if a legal holiday, then on the next succeeding
business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the
stockholders then entitled to vote shall elect directors and shall transact such
other business as may properly be brought before the meeting.
SECTION 3.03. Special Meetings.--Special meetings of the stockholders of
the corporation may be called at any time by the chairman of the board, a
majority of the board of directors, the president, or at the request, in
writing, of stockholders entitled to cast at least a majority of the votes that
all stockholders are entitled to cast at the particular meeting. At any time,
upon the written request of any person or persons who have duly
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called a special meeting, which written request shall state the purpose or
purposes of the meeting, it shall be the duty of the secretary to fix the date
of the meeting which shall be held at such date and time as the secretary may
fix, not less than ten nor more than 60 days after the receipt of the request,
and to give due notice thereof. If the secretary shall neglect or refuse to fix
the time and date of such meeting and give notice thereof, the person or persons
calling the meeting may do so.
SECTION 3.04. Quorum, Manner of Acting and Adjournment.
(a) Quorum.--The holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders except as otherwise provided by the GCL, by the
certificate of incorporation or by these bylaws. If a quorum is not present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present or represented. At any such adjourned
meeting at which a quorum is present or represented, the corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
(b) Manner of Acting.--Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote thereon shall
be the act of the stockholders, unless the question is one upon which, by
express provision of the applicable statute, the certificate of incorporation or
these bylaws, a different vote is required in which case such express provision
shall govern and control the decision of the question. The stockholders present
in person or by proxy at a duly organized meeting can continue to do business
until adjournment, notwithstanding withdrawal of enough stockholders to leave
less than a quorum.
SECTION 3.05. Organization.--At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the vice chairman, if one has been appointed, the
president, the vice presidents in their order of rank or seniority, a chairman
designated by the board of directors or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in the absence of the secretary, an assistant secretary, or in
the absence of the secretary and the assistant secretaries, a person appointed
by the chairman, shall act as secretary.
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SECTION 3.06. Voting.
(a) General Rule.--Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock having voting power held by such
stockholder.
(b) Voting and Other Action by Proxy. --
(1) A stockholder may execute a writing authorizing another person or
persons to act for the stockholder as proxy. Such execution may be
accomplished by the stockholder or the authorized officer, director,
employee or agent of the stockholder signing such writing or causing his or
her signature to be affixed to such writing by any reasonable means
including, but not limited to, by facsimile signature. A stockholder may
authorize another person or persons to act for the stockholder as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or
other means of electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission if such telegram,
cablegram or other means of electronic transmission sets forth or is
submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder.
(2) No proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only so long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the corporation
generally.
SECTION 3.07. Consent of Stockholders in Lieu of Meeting.--Any action
required to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every
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written consent shall bear the date of signature of each stockholder who signs
the consent and no written consent shall be effective to take the corporate
action referred to therein unless, within 60 days of the earliest dated consent
delivered in the manner required in this section to the corporation, written
consents signed by a sufficient number of holders to take action are delivered
to the corporation by delivery to its registered office in Delaware, its
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
SECTION 3.08. Voting Lists.--The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 3.09. Inspectors of Election.
(a) Appointment.--All elections of directors shall be by written ballot,
unless otherwise provided in the certificate of incorporation; the vote upon any
other matter need not be by ballot. In advance of any meeting of stockholders
the board of directors may appoint inspectors, who need not be stockholders, to
act at the meeting. If inspectors are not so appointed, the chairman of the
meeting may, and upon the demand of any stockholder or his proxy at the meeting
and before voting begins shall, appoint inspectors. The number of inspectors
shall be either one or three, as determined, in the case of judges appointed
upon demand of a stockholder, by stockholders present entitled to cast a
majority of the votes which all stockholders present are entitled to cast
thereon. No person who is a candidate for office shall act as an inspector. In
case any person appointed as an inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made by the board of directors in
advance of the convening of the meeting, or at the meeting by the chairman of
the meeting.
(b) Duties.--If inspectors are appointed, they shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum and the authenticity, validity and effect
of proxies, shall receive votes
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or ballots, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all
votes, shall determine the result, and shall do such acts as may be proper to
conduct the election or vote with fairness to all stockholders. If there be
three inspectors of election, the decision, act or certificate of a majority
shall be effective in all respects as the decision, act or certificate of all.
(c) Report.--On request of the chairman of the meeting or of any
stockholder or his proxy, the inspectors shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate of
any fact found by them.
ARTICLE IV
Board of Directors
SECTION 4.01. Powers--All powers vested by law in the corporation shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of directors.
SECTION 4.02. Number and Term of Office.--The board of directors shall
consist of such number of directors, not less than one nor more than nine, as
may be determined from time to time by resolution of the board of directors.
Each director shall hold office until the expiration of the term for which he or
she was selected and until a successor shall have been elected and qualified or
until his or her earlier death, resignation or removal. Directors need not be
residents of Delaware or stockholders of the corporation.
SECTION 4.03. Vacancies.--Vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having a right to vote as a single class may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until
their successors are elected and qualified or until their earlier death,
resignation or removal. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. Whenever the holders of
any class or classes of stock or series thereof are entitled to elect one or
more directors by the provisions of the certificate of incorporation, vacancies
and newly created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be
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held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
SECTION 4.04. Resignations.--Any director may resign at any time upon
written notice to the corporation. The resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as shall be
specified in the notice of resignation and, unless otherwise specified in the
notice, the acceptance of the resignation shall not be necessary to make it
effective.
SECTION 4.05. Removal.--Any director or the entire board of directors may
be removed, with or without cause, by the holders of shares entitled to cast a
majority of the votes which all stockholders are entitled to cast at an election
of directors.
SECTION 4.06. Organization.--At every meeting of the board of directors,
the chairman of the board, if there be one, or, in the case of a vacancy in the
office or absence of the chairman of the board, one of the following officers
present in the order stated: the vice chairman of the board, if there be one,
the president, the vice presidents in their order of rank and seniority, or a
chairman chosen by a majority of the directors present, shall preside, and the
secretary, or, in the absence of the secretary, an assistant secretary, or in
the absence of the secretary and the assistant secretaries, any person appointed
by the chairman of the meeting, shall act as secretary.
SECTION 4.07. Place of Meeting.--Meetings of the board of directors shall
be held at such place within or without the State of Delaware as the board of
directors may from time to time determine, or as may be designated in the notice
of the meeting.
SECTION 4.08. Regular Meetings.--Regular meetings of the board of directors
shall be held without notice at such time and place as shall be designated from
time to time by resolution of the board of directors.
SECTION 4.09. Special Meetings.--Special meetings of the board of directors
shall be held whenever called by the president or by two or more of the
directors.
SECTION 4.10. Quorum, Manner of Acting and Adjournment.
(a) General Rule.--At all meetings of the board one-third of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the board of directors, except as may be
otherwise specifically provided by the GCL or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
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(b) Unanimous Written Consent.--Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors may be taken without a meeting, if all
members of the board consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board.
SECTION 4.11. Executive and Other Committees.
(a) Establishment.--The board of directors may, by resolution adopted by a
majority of the whole board, establish an Executive Committee and one or more
other committees, each committee to consist of one or more directors. The board
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee and the alternate
or alternates, if any, designated for such member, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not they constitute a quorum, may unanimously appoint another director to act at
the meeting in the place of any such absent or disqualified member.
(b) Powers. --The Executive Committee, if established, and any such other
committee to the extent provided in the resolution establishing such committee
shall have and may exercise all the power and authority of the board of
directors in the management of the business and affairs of the corporation and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the GCL, fix the designation and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of shares of any series), adopting an agreement of merger or
consolidation under Section 251 or 252 of the GCL, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporatiOn or a revocation of a dissolution, or amending the
bylaws of the corporation. The Executive Committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger pursuant to Section 253 of the GCL. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee so
formed shall keep regular minutes of its meetings and report the same to the
board of directors when required.
(c) Committee Procedures.--The term "board of directors" or "board," when
used in any provision of these bylaws relating to the organization or procedures
of or the manner
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of taking action by the board of directors, shall be construed to include and
refer to the Executive Committee or other committee of the board.
SECTION 4.12. Compensation of Directors.--Unless otherwise restricted by
the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors.
ARTICLE V
Officers
SECTION 5.01. Number, Qualifications and Designation.--The officers of the
corporation shall be chosen by the board of directors and shall be a president,
one or more vice presidents, a secretary, a treasurer, and such other officers
as may be elected in accordance with the provisions of section 5.03 of this
Article. Any number of offices may be held by the same person. Officers may, but
need not, be directors or stockholders of the corporation. The board of
directors may elect from among the members of the board a chairman of the board
and a vice chairman of the board who shall be officers of the corporation. The
chairman of the board or the president, as designated from time to time by the
board of directors, shall be the chief executive officer of the corporation.
SECTION 5.02. Election and Term of Office.--The officers of the
corporation, except those elected by delegated authority pursuant to section
5.03 of this Article, shall be elected annually by the board of directors, and
each such officer shall hold office for a term of one year and until a successor
is elected and qualified, or until his or her earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation.
SECTION 5.03. Subordinate Officers, Committees and Agents.--The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these bylaws, or as the board of directors may from
time to time determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain or appoint
employees or other agents, or committees thereof, and to prescribe the authority
and duties of such subordinate officers, committees, employees or other agents.
SECTION 5.04. The Chairman and Vice Chairman of the Board.--The chairman of
the board, if there be one, or in the absence of the chairman, the vice chairman
of the board, if there be one, shall preside at all meetings of the stockholders
and of the board of directors, and shall perform such other duties as may from
time to time be assigned to them by the board of directors.
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SECTION 5.05. The President.--The president shall have general supervision
over the business and operations of the corporation, subject, however, to the
control of the board of directors. The president shall, in general, perform all
duties incident to the office of president, and such other duties as from time
to time may be assigned by the board of directors and, if the chairman of the
board is the chief executive officer, the chairman of the board.
SECTION 5.06. The Vice Presidents.--The vice presidents shall perform the
duties of the president in the absence of the president and such other duties as
may from time to time be assigned to them by the board of directors or by the
president.
SECTION 5.07. The Secretary.--The secretary, or an assistant secretary,
shall attend all meetings of the stockholders and of the board of directors and
shall record the proceedings of the stockholders and of the directors and of
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on behalf
of the corporation under its seal; and, in general, shall perform all duties
incident to the office of secretary, and such other duties as may from time to
time be assigned by the board of directors or the president.
SECTION 5.08. The Treasurer.--The treasurer, or an assistant treasurer,
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of moneys earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other places of deposit as the board of directors may from time to time
designate; whenever so required by the board of directors, shall render an
account showing his or her transactions as treasurer and the financial condition
of the corporation; and, in general, shall discharge such other duties as may
from time to time be assigned by the board of directors or the president.
SECTION 5.09. Officers' Bonds.--No officer of the corporation need provide
a bond to guarantee the faithful discharge of the officer's duties unless the
board of directors shall by resolution so require a bond in which event such
officer shall give the corporation a bond (which shall be renewed if and as
required) in such sum and with such surety or sureties as shall be satisfactory
to the board of directors for the faithful performance of the duties of office.
SECTION 5.10. Salaries.--The salaries of the officers and agents of the
corporation elected by the board of directors shall be fixed from time to time
by the board of directors.
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<PAGE>
ARTICLE VI
Certificates of Stock, Transfer, Etc.
SECTION 6.01. Form and Issuance.
(a) Issuance.--The shares of the corporation shall be represented by
certificates unless the board of directors shall by resolution provide that some
or all of any class or series of stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until the
certificate is surrendered to the corporation. Notwithstanding the adoption of
any resolution providing for uncertificated shares, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president or vice president, and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, representing the number of shares
registered in certificate form.
(b) Form and Records.--Stock certificates of the corporation shall be in
such form as approved by the board of directors. The stock record books and the
blank stock certificate books shall be kept by the secretary or by any agency
designated by the board of directors for that purpose. The stock certificates of
the corporation shall be numbered and registered in the stock ledger and
transfer books of the corporation as they are issued.
(c) Signatures. --Any of or all the signatures upon the stock certificates
of the corporation may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
share certificate shall have ceased to be such officer, transfer agent or
registrar, before the certificate is issued, it may be issued with the same
effect as if the signatory were such officer, transfer agent or registrar at the
date of its issue.
SECTION 6.02. Transfer.--Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made which would be
inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform
Commercial Code-Investment Securities.
SECTION 6.03. Lost, Stolen, Destroyed or Mutilated Certificates. --The
board of directors may direct a new certificate of stock or uncertificated
shares to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing
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<PAGE>
such issue of a new certificate or certificates, the board of directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or the
legal representative of the owner, to give the corporation a bond sufficient to
indemnify against any claim that may be made against the corporation on account
of the alleged loss, theft or destruction of such certificate or the issuance of
such new certificate or uncertificated shares.
SECTION 6.04. Record Holder of Shares.--The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
SECTION 6.05. Determination of Stockholders of Record.
(a) Meetings of Stockholders.--In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which record date shall
not be more than 60 nor less than ten days before the date of such meeting.
If no record date is fixed by the board of directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting unless the board of
directors fixes a new record date for the adjourned meeting.
(b) Consent of Stockholders. --In order that the corporation may determine
the stockholders entitled to consent to corporate action in writing without a
meeting, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors, and which date shall not be more than ten days after
the date upon which the resolution fixing the record date is adopted by the
board of directors. If no record date has been fixed by the board of directors,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by the GCL, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the
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<PAGE>
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by the GCL, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.
(c) Dividends.--In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto.
ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
SECTION 7.01. Indemnification of Authorized Representatives in Third Party
Proceedings. --The corporation shall indemnify any person who was or is an
authorized representative of the corporation, and who was or is a party, or is
threatened to be made a party to any third party proceeding, by reason of the
fact that such person was or is an authorized representative of the corporation,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such third party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal third party proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent, shall not of itself create a presumption
that the authorized representative did not act in good faith and in a manner
which such person reasonably believed to be in or not opposed to, the best
interests of the corporation, and, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
SECTION 7.02. Indemnification of Authorized Representatives in Corporate
Proceedings.--The corporation shall indemnify any person who was or is an
authorized representative of the corporation and who was or is a party or is
threatened to be made a
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<PAGE>
party to any corporate proceeding, by reason of the fact that such person was or
is an authorized representative of the corporation, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such corporate proceeding if such person acted in good faith and
in a manner reasonably believed to be in, or not opposed to, the best interests
of the corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such corporate proceeding was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such authorized representative is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
SECTION 7.03. Mandatory Indemnification of Authorized Representatives.--To
the extent that an authorized representative or other employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
third party or corporate proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses actually and
reasonably incurred by such person in connection therewith.
SECTION 7.04. Determination of Entitlement to Indemnification.--Any
indemnification under section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
or other employee or agent is proper in the circumstances because such person
has either met the applicable standard of conduct set forth in section 7.01 or
7.02 or has been successful on the merits or otherwise as set forth in section
7.03 and that the amount requested has been actually and reasonably incurred.
Such determination shall be made:
(1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such third party or
corporate proceeding; or
(2) if such a quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel
in a written opinion; or
(3) by the stockholders.
SECTION 7.05. Advancing Expenses.--Expenses actually and reasonably
incurred in defending a third party or corporate proceeding shall be paid on
behalf of an authorized representative by the corporation in advance of the
final disposition of such third party or corporate proceeding upon receipt of an
undertaking by or on behalf of the authorized representative to repay such
amount if it shall ultimately be determined that the
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<PAGE>
authorized representative is not entitled to be indemnified by the corporation
as authorized in this Article. The financial ability of any authorized
representative to make a repayment contemplated by this section shall not be a
prerequisite to the making of an advance. Expenses incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
SECTION 7.06. Definitions.--For purposes of this Article:
(1) "authorized representative" shall mean any and all directors and
officers of the corporation and any person designated as an authorized
representative by the board of directors of the corporation (which may, but
need not, include any person serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise);
(2) "corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify
its directors, officers, employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued;
(3) "corporate proceeding" shall mean any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor or investigative proceeding by the corporation;
(4) "criminal third party proceeding" shall include any action or
investigation which could or does lead to a criminal third party
proceeding;
(5) "expenses" shall include attorneys' fees and disbursements;
(6) "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan;
(7) "not opposed to the best interests of the corporation" shall
include actions taken in good faith and in a manner the authorized
representative reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan;
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<PAGE>
(8) "other enterprises" shall include employee benefit plans;
(9) "party" shall include the giving of testimony or similar
involvement;
(10)"serving at the request of the corporation" shall include any
service as a director, officer or employee of the corporation which imposes
duties on, or involves services by, such director, officer or employee with
respect to an employee benefit plan, its participants, or beneficiaries;
and
(11) "third party proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right
of the corporation.
SECTION 7.07. Insurance.--The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
the person and incurred by the person in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
or the obligation to indemnify such person against such liability under the
provisions of this Article.
SECTION 7.08. Scope of Article.--The indemnification of authorized
representatives and advancement of expenses, as authorized by the preceding
provisions of this Article, shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office. The indemnification and advancement of
expenses provided by or granted pursuant to this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be an authorized representative and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.09. Reliance on Provisions. --Each person who shall act as an
authorized representative of the corporation shall be deemed to be doing so in
reliance upon rights of indemnification provided by this Article.
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ARTICLE VIII
General Provisions
SECTION 8.01. Dividends.--Subject to the restrictions contained in the GCL
and any restrictions contained in the certificate of incorporation, the board of
directors may declare and pay dividends upon the shares of capital stock of the
corporation.
SECTION 8.02. Contracts.--Except as otherwise provided in these bylaws, the
board of directors may authorize any officer or officers including the chairman
and vice chairman of the board of directors, or any agent or agents, to enter
into any contract or to execute or deliver any instrument on behalf of the
corporation and such authority may be general or confined to specific instances.
SECTION 8.03. Corporate Seal.--The corporation shall have a corporate seal,
which shall have inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
SECTION 8.04. Deposits.--All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies, or other depositories as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees as the board of directors shall from time to
time determine.
SECTION 8.05. Corporate Records.
(a) Examination by Stockholders. --Every stockholder shall, upon written
demand under oath stating the purpose thereof have a right to examine, in person
or by agent or attorney, during the usual hours for business, for any proper
purpose, the stock ledger, list of stockholders, books or records of account,
and records of the proceedings of the stockholders and directors of the
corporation, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
- -In every instance where an attorney or other agent shall be the person who
seeks the right to inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing which authorizes the attorney or other
agent to so act on behalf of the stockholder. The demand under oath shall be
directed to the corporation at its registered office in Delaware or at its
principal place of business. Where the stockholder seeks to inspect the books
and records of the corporation, other than its stock ledger or list of
stockholders, the stockholder shall first establish (1) that the stockholder has
complied with the provisions of this section respecting the form and manner of
making demand for inspection of such documents; and (2) that the inspection
sought is for a proper purpose. Where the stockholder seeks to inspect the stock
ledger or list of stockholders of the
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<PAGE>
corporation and has complied with the provisions of this section respecting the
form and manner of making demand for inspection of such documents, the burden of
proof shall be upon the corporation to establish that the inspection sought is
for an improper purpose.
(b) Examination by Directors.--Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders and its other books
and records for a purpose reasonably related to the person's position as a
director.
SECTION 8.06. Amendment of Bylaws.--These bylaws may be altered, amended or
repealed or new bylaws may be adopted either (1) by vote of the stockholders at
a duly organized annual or special meeting of stockholders, or (2) by vote of a
majority of the board of directors at any regular or special meeting of
directors if such power is conferred upon the board of directors by the
certificate of incorporation.
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<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
INTEGRATED CIRCUIT SYSTEMS, INC.
Issuer
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
___________________________
Dated as of May 11, 1999
___________________________
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
Trustee
___________________________
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Act Section Indenture Section
- ----------- -----------------
<S> <C>
310 (a)(1)................................................................. 7.10
(a)(2)..................................................................... 7.10
(a)(3)..................................................................... N.A.
(a)(4)..................................................................... N.A.
(a)(5)............................................................... 7.08, 7.10
(i)(b)........................................................ 7.08, 7.10, 12.02
(ii)(c).................................................................... N.A.
311(a)..................................................................... 7.11
(b)........................................................................ 7.11
(iii)(c)................................................................... N.A.
312 (a).................................................................... 2.05
(b)....................................................................... 12.03
(iv)(c)................................................................... 12.03
313(a)..................................................................... 7.06
(b)(2)..................................................................... 7.07
(v)(c).............................................................. 7.06; 12.02
(vi)(d).................................................................... 7.06
314(a).............................................................. 4.03, 12.02
(c)(1).................................................................... 12.04
(c)(2).................................................................... 12.04
(c)(3)..................................................................... N.A.
(vii)(e).................................................................. 11.05
(f)........................................................................ N.A.
315 (a).................................................................... 7.01
(b)................................................................. 7.05, 12.02
(A)(c)..................................................................... 7.01
(d)........................................................................ 7.01
(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
(B)(c)..................................................................... 9.04
317 (a)(1)................................................................. 6.08
(a)(2)..................................................................... 6.09
(b)........................................................................ 2.04
318 (a)................................................................... 12.01
</TABLE>
I
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(b)........................................................................ N.A.
(c)....................................................................... 12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
II
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE................. 1
Section 1.01. Definitions................................................ 1
Section 1.02. Certain Other Definitions.................................. 22
Section 1.03. Trust Indenture Act Definitions............................ 22
Section 1.04. Rules of Construction...................................... 23
Section 1.05. One Class of Securities.................................... 23
ARTICLE 2. THE NOTES.................................................. 24
Section 2.01. Form and Dating............................................ 24
Section 2.02. Execution and Authentication; Aggregate Principal Amount... 24
Section 2.03. Registrar and Paying Agent................................. 25
Section 2.04. Paying Agent to Hold Money in Trust........................ 26
Section 2.05. Holder Lists............................................... 26
Section 2.06. [Intentionally Omitted].................................... 26
Section 2.07. Replacement Notes.......................................... 26
Section 2.08. Outstanding Notes.......................................... 27
Section 2.09. Treasury Notes............................................. 27
Section 2.10. Temporary Notes............................................ 27
Section 2.11. Cancellation............................................... 28
Section 2.12. Defaulted Interest......................................... 28
Section 2.13. CUSIP Numbers.............................................. 28
Section 2.14. Issuance of Additional Notes............................... 29
ARTICLE 3. REDEMPTION AND PREPAYMENT.................................. 29
Section 3.01. Notices to Trustee......................................... 29
Section 3.02. Selection of Notes to Be Redeemed.......................... 30
Section 3.03. Notice of Redemption....................................... 30
Section 3.04. Effect of Notice of Redemption............................. 31
Section 3.05. Deposit of Redemption Price................................ 31
Section 3.06. Notes Redeemed in Part..................................... 32
Section 3.07. Optional Redemption........................................ 32
Section 3.08. Mandatory Redemption....................................... 33
</TABLE>
III
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.09. Offer to Purchase by Application of Net Proceeds
Offer Amount......................................... 33
ARTICLE 4. COVENANTS.................................................. 35
Section 4.01. Payment of Notes........................................... 35
Section 4.02. Maintenance of Office or Agency............................ 36
Section 4.03. Reports.................................................... 37
Section 4.04. Compliance Certificate..................................... 37
Section 4.05. Taxes...................................................... 38
Section 4.06. Stay, Extension and Usury Laws............................. 38
Section 4.07. Restricted Payments........................................ 39
Section 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries............................... 42
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock...................................... 43
Section 4.10. Asset Sales................................................ 47
Section 4.11. Transactions with Affiliates............................... 49
Section 4.12. Liens...................................................... 51
Section 4.13. Conduct of Business........................................ 51
Section 4.14. Corporate Existence........................................ 51
Section 4.15. Offer to Repurchase Upon Change of Control................. 52
Section 4.16. No Senior Subordinated Debt................................ 53
Section 4.17. Additional Note Guarantees................................. 53
ARTICLE 5. SUCCESSORS................................................. 54
Section 5.01. Merger, Consolidation, or Sale of Assets................... 54
Section 5.02. Successor Corporation Substituted.......................... 55
ARTICLE 6. DEFAULTS AND REMEDIES...................................... 55
Section 6.01. Events of Default.......................................... 55
Section 6.02. Acceleration............................................... 57
Section 6.03. Other Remedies............................................. 58
Section 6.04. Waiver of Past Defaults.................................... 58
Section 6.05. Control by Majority........................................ 59
Section 6.06. Limitation on Suits........................................ 59
Section 6.07. Rights of Holders of Notes to Receive Payment.............. 60
Section 6.08. Collection Suit by Trustee................................. 60
Section 6.09. Trustee May File Proofs of Claim........................... 60
Section 6.10. Priorities................................................. 61
Section 6.11. Undertaking for Costs...................................... 61
</TABLE>
IV
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7. TRUSTEE.................................................... 62
Section 7.01. Duties of Trustee.......................................... 62
Section 7.02. Rights of Trustee.......................................... 63
Section 7.03. Individual Rights of Trustee............................... 64
Section 7.04. Trustee's Disclaimer....................................... 64
Section 7.05. Notice of Defaults......................................... 65
Section 7.06. Reports by Trustee to Holders of the Notes................. 65
Section 7.07. Compensation and Indemnity................................. 65
Section 7.08. Replacement of Trustee..................................... 67
Section 7.09. Successor Trustee by Merger, etc........................... 68
Section 7.10. Eligibility; Disqualification.............................. 68
Section 7.11. Preferential Collection of Claims Against Company.......... 68
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................... 69
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance... 69
Section 8.02. Legal Defeasance and Discharge............................. 69
Section 8.03. Covenant Defeasance........................................ 69
Section 8.04. Conditions to Legal or Covenant Defeasance................. 70
Section 8.05. Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions............. 72
Section 8.06. Repayment to Company....................................... 72
Section 8.07. Reinstatement.............................................. 73
Section 8.08. Survival................................................... 73
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER........................... 73
Section 9.01. Without Consent of Holders of Notes........................ 73
Section 9.02. With Consent of Holders of Notes........................... 74
Section 9.03. Compliance with Trust Indenture Act........................ 76
Section 9.04. Revocation and Effect of Consents.......................... 76
Section 9.05. Notation on or Exchange of Notes........................... 77
Section 9.06. Trustee to Sign Amendments, etc............................ 77
ARTICLE 10. SUBORDINATION.............................................. 77
Section 10.01. Agreement to Subordinate................................... 77
Section 10.02. Certain Definitions........................................ 78
Section 10.03. Liquidation; Dissolution; Bankruptcy....................... 79
</TABLE>
V
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 10.04. Default on Designated Senior Debt.......................... 79
Section 10.05. Acceleration of Securities................................. 80
Section 10.06. When Distribution Must Be Paid Over........................ 80
Section 10.07. Notice by Company.......................................... 81
Section 10.08. Subrogation................................................ 81
Section 10.09. Relative Rights............................................ 81
Section 10.10. Subordination May Not Be Impaired by Company............... 82
Section 10.11. Distribution or Notice to Representative................... 82
Section 10.12. Rights of Trustee and Paying Agent......................... 83
Section 10.13. Authorization to Effect Subordination...................... 83
Section 10.14. Amendments................................................. 83
Section 10.15. Changes in Senior Debt..................................... 83
ARTICLE 11. NOTE GUARANTEES............................................ 84
Section 11.01. Guarantee.................................................. 84
Section 11.02. Subordination Of Note Guarantee............................ 85
Section 11.03. Limitation On Subsidiary Guarantor Liability............... 85
Section 11.04. Execution And Delivery Of Note Guarantee................... 86
Section 11.05. Subsidiary Guarantors May Consolidate, Etc.,
On Certain Terms..................................... 87
Section 11.06. Releases Following Sale Of Assets.......................... 88
ARTICLE 12. MISCELLANEOUS.............................................. 88
Section 12.01. Trust Indenture Act Controls............................... 88
Section 12.02. Notices.................................................... 89
Section 12.03. Communication By Holders Of Notes With Other
Holders Of Notes..................................... 90
Section 12.04. Certificate And Opinion As To Conditions Precedent......... 90
Section 12.05. Statements Required in Certificate or Opinion.............. 91
Section 12.06. Rules By Trustee And Agents................................ 91
Section 12.07. No Personal Liability Of Directors, Officers, Employees
And Stockholders..................................... 91
Section 12.08. Governing Law.............................................. 92
Section 12.09. No Adverse Interpretation Of Other Agreements.............. 92
Section 12.10. Successors................................................. 92
Section 12.11. Severability............................................... 92
Section 12.12. Counterpart Originals...................................... 92
Section 12.13. Table Of Contents, Headings, Etc........................... 92
</TABLE>
VI
<PAGE>
Appendix..................................................................... I
EXHIBITS
Exhibit A FORM OF INITIAL NOTE
Exhibit B FORM OF EXCHANGE NOTE AND PRIVATE EXCHANGE NOTE
Exhibit C FORM OF NOTE GUARANTEE
Exhibit D FORM OF SUPPLEMENTAL INDENTURE
VII
<PAGE>
INDENTURE dated as of May 11, 1999 by and among Integrated Circuit
Systems, Inc., a Pennsylvania corporation (the "Company"), the Subsidiary
Guarantors (as herein defined) and Chase Manhattan Trust Company, National
Association, as trustee (the "Trustee").
The Company has duly authorized the creation of an issue of $100,000,000
11 1/2% Senior Subordinated Notes Due 2009 in the form of Initial Notes (as
defined below) and, if and when issued in connection with a registered exchange
for such Initial Notes, 11 1/2% Senior Subordinated Exchange Notes Due 2009 in
the form of Exchange Notes (as defined below) and, if and when issued in
connection with a private exchange for such Initial Notes, 11 1/2% Senior
Subordinated Private Exchange Notes Due 2009 in the form of Private Exchange
Notes (as defined below), and such Additional Notes (as defined below) that the
Company may from time to time choose to issue pursuant to this Indenture, and,
to provide therefor, the Company and each of the Subsidiary Guarantors has duly
authorized the execution and delivery of this Indenture. The Subsidiary
Guarantors have agreed to guarantee the Notes on a senior subordinated basis.
Each party agrees as follows for the benefit of each other party and for
the equal and ratable benefit of the Holders of the Notes.
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.0. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or that is assumed by the Company or any of its Restricted
Subsidiaries in connection with the acquisition of assets from such Person, in
each case excluding any Indebtedness incurred by such Person in connection with,
or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition.
"Additional Notes" means, subject to the Company's compliance with Section
4.09, 11 1/2% Senior Subordinated Notes Due 2009 issued from time to time after
May 11, 1999 under the terms of this Indenture (other than those issued pursuant
to Section 2.07, 2.10, 3.06, 3.09, 4.15 or 9.05 of this Indenture or Section 2.3
of the Appendix and other than Exchange Notes or Private Exchange Notes issued
pursuant to an exchange offer for other Notes outstanding under this Indenture).
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or controlled by, or is under common control with, the
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Company. The term "control" means the possession directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at the Redemption Date of (1) the redemption
price of such Note at May 15, 2004 (such redemption price being set forth in
Section 3.07 hereof) plus (2) all required interest payments due on such Note
through May 15, 2004 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Treasury Rate at the Redemption Date plus 75 basis
points over (B) the principal amount of such Note, if greater.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary of the Company, or
shall be merged with or into the Company or any Restricted Subsidiary of the
Company, or (b) the acquisition by the Company or any Restricted Subsidiary of
the Company of all or substantially all of the assets of any other Person or any
division or line of business of any other Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries to any Person other than the Company or a Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $1.0
million, (ii) the sale, lease, conveyance, disposition or other transfer of all
substantially all of the assets of the Company as permitted by Section 5.01
hereof or any disposition that constitutes a Change of Control, (iii) the sale
or discount, in each case without recourse, of accounts receivable arising in
the ordinary course of business, but only in connection with the compromise or
collection thereof, (iv) the factoring of accounts receivable arising in the
ordinary course of business pursuant to arrangements customary in the industry,
(v) disposals or replacements of obsolete, uneconomical, negligible, worn out or
surplus property in the ordinary course of business, (vi) the licensing of
intellectual property in the ordinary course of business or in accordance
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with industry practice, and (vii) the sale, lease conveyance, disposition or
other transfer by the Company or any Restricted Subsidiary of assets or property
to one or more Restricted Subsidiaries in connection with Investments permitted
by Section 4.07 hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means: (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, Japan or any
member of the European Economic Community or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $200.0 million; provided that instruments issued by
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banks not having one of the two highest ratings obtainable from either S&P or
Moody's or by banks organized under the laws of Japan or any member of the
European Economic Community shall not constitute Cash Equivalents for purposes
of the subordination provisions of this Indenture; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons, as defined in Section 13(d)
of the Exchange Act (a "Group"), whether or not otherwise in compliance with the
provisions hereof, other than the Principals and their respective Related
Parties and members of the Permitted Group; (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 hereof); (iii) any Person or Group (other than the Principals and
their respective Related Parties and members of the Permitted Group) shall
become the owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power represented by
the issued and outstanding Voting Stock of the Company or any successor to all
or substantially all of its assets; or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"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" means, with respect to any Person, for any period,
the sum (without duplication) of such Person's (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes (including, without limitation, any state single business, unitary
or similar taxes) and foreign withholding taxes of such Person and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period,
(B) Consolidated Interest Expense, (C) Consolidated Noncash Charges, and (D) all
one-time cash compensation payments made in connection with the
Recapitalization.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the most recent
four
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full fiscal quarters for which internal financial statements are available (the
"Four-Quarter Period") ending on or prior to the date of the transaction giving
rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four-
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, Consolidated EBITDA and Consolidated Fixed Charges
shall be calculated after giving effect on a pro forma basis for the period of
such calculation to (i) the incurrence of any Indebtedness or the issuance of
any preferred stock of such Person or any of its Restricted Subsidiaries (and
the application of the proceeds thereof) and any repayment of other Indebtedness
or redemption of other preferred stock occurring during the Four-Quarter Period
or at any time subsequent to the last day of the Four-Quarter Period and on or
prior to the Transaction Date, as if such incurrence, repayment, issuance or
redemption, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four-Quarter Period and (ii) any Asset Sale or
Asset Acquisition (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one of
its Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (including any Pro Forma Cost Savings) associated with any
such Asset Acquisition) occurring during the Four-Quarter Period or at any time
subsequent to the last day of the Four-Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence of, or assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four-Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly Guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Restricted
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating Consolidated Fixed Charges
for purposes of determining the denominator (but not the numerator) of this
Consolidated Fixed Charge Coverage Ratio, (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four-Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
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"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(before amortization or write-off of debt issuance costs), plus (ii) the amount
of all cash dividend payments on (x) any series of preferred stock of such
Person, (y) any Refunding Capital Stock of such Person, to the extent paid
pursuant to the terms of clause (2) of the second paragraph of Section 4.07, and
(z) any series of preferred stock of any Restricted Subsidiary of such Person;
provided that with respect to any series of preferred stock or Refunding Capital
Stock that was not paid cash dividends during such period but that is eligible
to be paid cash dividends during any period, or matures or is mandatorily
redeemable, prior to the maturity date of the Notes, cash dividends shall be
deemed to have been paid with respect to such series of preferred stock or
Refunding Capital Stock during such period for purposes of clause (ii) of this
definition.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (i) the aggregate of all cash and non-
cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, (ii) the consolidated interest expense of such Person and
its Restricted Subsidiaries that was capitalized during such period, and (iii)
the interest component of Capital Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP,
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $1.0 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP, (b) gains and losses due solely to fluctuations in
currency values and the related tax effects according to GAAP, (c) items
classified as a cumulative effect of an accounting change or as extraordinary,
unusual or nonrecurring gains and losses (including, without limitation,
severance, relocation and other restructuring costs), and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of the Company
of that income is restricted by contract, operation, operation of law or
otherwise, (f) the net income of any Person, other than a Restricted Subsidiary
of the
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Company, except to the extent of cash dividends or distributions paid to the
Company or a Restricted Subsidiary of the Company by such Person, (g) the net
loss of any Person, other than a Restricted Subsidiary, (h) only for purposes of
the definition of Consolidated EBITDA, one-time cash charges resulting from any
merger, recapitalization or acquisition transaction, and (i) only for purposes
of clause (c)(i) of the first paragraph of Section 4.07 hereof, any amounts
included pursuant to clause (c)(iii) of the first paragraph of Section 4.07
hereof. For purposes of clause (c)(i) of the first paragraph of Section 4.07,
Consolidated Net Income (A) shall be reduced by any cash dividends paid with
respect to any series of Designated Preferred Stock, and (B) shall be increased
by the proceeds of any (1) sale or other disposition of Restricted Investments
made by the Company and its Restricted Subsidiaries, or (2) dividend from, or
the sale of stock of, an Unrestricted Subsidiary; provided, however, that there
shall be deducted from such proceeds, in the case of clause (1), the amount of
such Restricted Investment previously made (and treated as a Restricted
Investment) by the Company or any Restricted Subsidiary and, in the case of
clause (2), the amount of Investments previously made (and treated as a
Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary.
"Consolidated Noncash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person for such period, determined on a consolidated basis in accordance
with GAAP excluding any such non-cash charge constituting an extraordinary item
or loss or any such non-cash charge which requires an accrual of or a reserve
for cash charges for any future period.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors by any of the Principals or with the approval
of a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means one or more debt facilities (including, without
limitation, the Senior Credit Agreements) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose
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entities formed to borrow from such lenders against such receivables) and/or
letters of credit.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Preferred Stock" means Preferred Stock that is so designated
as Designated Preferred Stock, pursuant to an Officers' Certificate executed by
the principal executive officer and the principal financial officer of the
Company, on the issuance date thereof.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any offering of Qualified Capital Stock of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" has the meaning provided in the Appendix.
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"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Agreements) in
existence on the date hereof, until such amounts are repaid.
"Foreign Subsidiaries" means the Company's current and future non-U.S.
Subsidiaries which are Restricted Subsidiaries.
"Four-Quarter Period" has the meaning specified in the definition of
Consolidated Fixed Charge Coverage Ratio.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect on the date hereof.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements (including Interest Swap
Obligations) and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates (including Currency Agreements).
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable or
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representing any Hedging Obligations, if and to the extent any of the foregoing
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Notes" has the meaning provided in the Appendix.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Persons calculated
by applying a fixed or a floating rate of interest on the same notional amount.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07.
"Issue Date" means the date of original issuance of the Notes.
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"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city of the Corporate Trust Office of
the Trustee or at a place of payment are authorized or required by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on such
payment for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Marketable Securities" means publicly traded debt or equity securities
that are listed for trading on a national securities exchange and that were
issued by a corporation whose debt securities are rated in one of the three
highest rating categories by either S&P or Moody's.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Guarantor Subsidiaries" means the Foreign Subsidiaries.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
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Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Note Guarantee" means the Guarantee by each Subsidiary Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"Notes" means the Initial Notes, the Exchange Notes and the Private
Exchange 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 any principal, interest (including, without
limitation, interest that, but for the filing of a petition in bankruptcy with
respect to an obligor, would accrue on such obligations), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Offering Memorandum" means (i) with respect to the Initial Notes issued
on May 11, 1999, the Offering Circular dated May 5, 1999, pursuant to which the
$100.0 million of 11 1/2% Senior Subordinated Notes Due 2009 in the form of
Initial Notes were offered, and any supplement thereto and (ii) with respect to
each issuance of Additional Notes, the offering circular, prospectus or other
similar offering document pursuant to which such Additional Notes were offered,
and any supplement thereto.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The
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counsel may be an employee of or counsel to the Company, any Subsidiary of the
Company or the Trustee.
"Paying Agency Office" means the office of the Paying Agent designated in
writing by the Paying Agent to the Company and the Trustee.
"Permitted Business" means any business (including stock or assets) that
derives a majority of its revenues from the manufacture, distribution or sale of
integrated circuits and activities that are reasonably similar, ancillary or
related to, or a reasonable extension, development or expansion of, the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the date of this Indenture.
"Permitted Domestic Subsidiary Preferred Stock" means any series of
Preferred Stock of a domestic Subsidiary Guarantor that constitutes Qualified
Capital Stock and has a fixed dividend rate, the liquidation value of all series
of which, when combined with the aggregate amount of Indebtedness of the Company
and its Restricted Subsidiaries incurred pursuant to clause (xv) of Section 4.09
does not exceed $12.5 million.
"Permitted Group" means any group of investors if deemed to be a "person"
(as such terms is used in Section 13(d)(3) of the Exchange Act) by virtue of the
Shareholders Agreement, as the same may be amended, modified or supplemented
from time to time, provided that (i) the Principals are party to such
Shareholders Agreement, (ii) the persons party to the Shareholders Agreement as
so amended, supplemented or modified from time to time that were not parties,
and are not Affiliates of persons who were parties, to the Shareholders
Agreement as of the date of this Indenture, together with their respective
Affiliates (collectively, the "New Investors"), are not direct or indirect
beneficial owners (determined without reference to the Shareholders Agreement)
of more than 50% of the Voting Stock owned by all parties to the Shareholders
Agreement as so amended, supplemented or modified, and (iii) the New Investors,
individually or in the aggregate, do not, directly or indirectly, have the
right, pursuant to the Shareholders Agreement (as so amended, supplemented or
modified) or otherwise to designate more than 50% of the members of the Board of
Directors of the Company or any direct or indirect parent entity of the Company.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Restricted Subsidiary of the Company
that is a Subsidiary Guarantor or a Foreign Subsidiary (whether existing on the
date of this Indenture or created thereafter) or in any other Person (including
by means of any transfer of cash or other property) if as a result of such
Investment such Person shall become a Restricted Subsidiary of the Company that
is a Subsidiary Guarantor or a
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Foreign Subsidiary and Investments in the Company by any Restricted Subsidiary
of the Company, (ii) cash and Cash Equivalents, (iii) Investments existing on
the date of this Indenture, (iv) loans and advances to employees and officers of
the Company and its Restricted Subsidiaries in the ordinary course of business,
(v) accounts receivable created or acquired in the ordinary course of business,
(vi) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's businesses and otherwise in compliance with
this Indenture, (vii) 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, (viii) guarantees
by the Company of Indebtedness otherwise permitted to be incurred by Restricted
Subsidiaries of the Company that are either Subsidiary Guarantors or Foreign
Subsidiaries under this Indenture, (ix) Investments the payment for which
consists exclusively of Qualified Capital Stock of the Company, (x) Investments
received by the Company or its Restricted Subsidiaries as consideration for
asset sales, including Asset Sales; provided that in the case of an Asset Sale,
such Asset Sale is effected in compliance with Section 4.10, and (xi) other
Investments that do not exceed in the aggregate $15.0 million at any one time
outstanding.
"Permitted Foreign Subsidiary Preferred Stock" means any series of
Preferred Stock of a foreign Restricted Subsidiary of the Company that
constitutes Qualified Capital Stock and has a fixed dividend rate, the
liquidation value of all series of which, when combined with the aggregate
amount of Indebtedness of foreign Restricted Subsidiaries of the Company
incurred pursuant to clause (iii) of the definition of Permitted Indebtedness,
does not exceed $15.0 million.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance
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and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized
Lease Obligation;
(vii) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (a) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company
or any Restricted Subsidiary of the Company other than the property and
assets so acquired and (b) the Lien securing such Indebtedness shall be
created with 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
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(xi) Liens securing Interest Swap Obligations or Currency
Agreements which Interest Swap Obligations or Currency Agreements relate
to Indebtedness that is otherwise permitted under this Indenture;
(xii) Liens securing Indebtedness of foreign Restricted Subsidiaries
of the Company incurred in reliance on clause (iii) of the second
paragraph of Section 4.09;
(xiii) Liens securing Acquired Indebtedness incurred in reliance on
clause (viii) of the second paragraph of Section 4.09;
(xiv) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary with respect to obligations that do
not in the aggregate exceed $5.0 million at any one time outstanding;
(xv) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries;
(xvi) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customer duties in connection with the
importation of goods;
(xviii) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; and
(xix) Liens existing on the date hereof, together with any Liens
securing Indebtedness incurred in reliance on clause (xiv) of the Section
4.09 in order to refinance the Indebtedness secured by Liens existing on
the date of this Indenture; provided that the Liens securing the
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
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"Preferred Stock," of any person, means Capital Stock of such Person of
any class or series (however designated) that ranks prior, as to payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class or series of such Person.
"Principals" means Bain Capital, Inc. and Bear, Stearns & Co. Inc.
"Private Exchange Notes" has the meaning provided in the Appendix.
"Pro Forma Cost Savings" means, with respect to any period, the reduction
in costs that occurred during the Four-Quarter Period or after the end of the
Four-Quarter Period and on or prior to the Transaction Date that were (i)
directly attributable to an Asset Acquisition and calculated on a basis that is
consistent with Regulation S-X under the Securities Act as in effect and applied
as of May 1, 1999 or (ii) implemented by the business that was the subject any
such Asset Acquisition within six months of the date of the Asset Acquisition
and that are supportable and quantifiable by the underlying accounting records
of such business, as if, in the case of each of clause (i) and (ii), all such
reductions in costs had been effected as of the beginning of such period.
"Productive Assets" means assets (including Capital Stock) that are used
or usable by the Company and its Restricted Subsidiaries in Permitted
Businesses.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Recapitalization" has the meaning set forth in the Purchase Agreement,
dated as of May 5, 1999, among the Company, the Subsidiary Guarantors and the
Initial Purchasers named therein.
"Registration Rights Agreement" has the meaning set forth in the Appendix.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, or 80% (or more) owned Subsidiary of such Principal, or (ii) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (i).
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"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's Corporation.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Agreements" means that certain Credit Agreement, dated as
of the Issue Date, by and among the Company, the guarantors named therein,
Credit Suisse First Boston, as administrative agent and the financial
institutions party thereto, initially providing for up to $95.0 million of
revolving and term credit borrowings, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended (including any amendment and restatement
thereof), modified, renewed, refunded, replaced, refinanced or restructured
(including, without limitation, any amendment increasing the amount of available
borrowing thereunder) from time to time and whether with the same or any other
agent, lender or group of lenders.
"Shareholders Agreement" means collectively that certain shareholders
agreement and that certain voting agreement, each dated as of the date of this
Indenture, among the Principals and the other shareholders of the Company named
as parties therein from time to time.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
this Indenture.
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"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof), but shall not include
any Unrestricted Subsidiary.
"Subsidiary Guarantors" means (i) ICS Technologies, Inc., a Pennsylvania
corporation, ICST Inc., a Pennsylvania corporation, and Microclock, Inc, a
Delaware corporation, and (ii) any other Subsidiary that executes a Note
Guarantee in accordance with the provisions hereof, including their respective
successors and assigns.
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet, adjusted to give pro forma effect to any acquisitions or
dispositions since the date of the relevant balance sheet (including any
acquisitions for which any Indebtedness is proposed to be incurred).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to such Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from such Redemption Date to May 15, 2004; provided,
however, that if the period from such Redemption Date to May 15, 2004 is less
than one year, the weekly average yield on
19
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actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the
Board of Directors, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
Notwithstanding the foregoing, no Subsidiary of the Company that was a
Subsidiary Guarantor as of the date hereof shall be permitted to become an
Unrestricted Subsidiary; provided, however, that any Subsidiary of the Company
that becomes a Subsidiary Guarantor after the date hereof shall be permitted to
become an Unrestricted Subsidiary and the Note Guarantee of any such Subsidiary
Guarantor shall be released upon such designation in accordance with the terms
hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the Company
shall be in default of such covenant). The Board of Directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such
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designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under Section 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the four-quarter reference
period, (ii) such Subsidiary shall execute a Note Guarantee and deliver an
Opinion of Counsel, in accordance with the terms of this Indenture and (iii) no
Default or Event of Default would be in existence following such designation.
"U.S. Subsidiary" means any Subsidiary of the Company that is incorporated
in a State in the United States or the District of Columbia or that Guarantees
or otherwise becomes an obligor with respect to any Indebtedness of the Company
or another Subsidiary Guarantor.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) 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 (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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Section 1.02. Certain Other Definitions.
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Affiliate Transaction"................ 4.11
"Change of Control Offer".............. 4.15
"Change of Control Payment"............ 4.15
"Change of Control Payment Date"....... 4.15
"Covenant Defeasance".................. 8.03
"Event of Default"..................... 6.01
"incur"................................ 4.09
"Legal Defeasance"..................... 8.02
"Net Proceeds Offer"................... 4.10
"Net Proceeds Offer Amount"............ 4.10
"Net Proceeds Offer Payment Date"...... 4.10
"Net Proceeds Offer Trigger Date"...... 4.10
"Offer Period"......................... 3.09
"Payment Blockage Notice"............. 10.04
"Paying Agent"......................... 2.03
"Permitted Indebtedness................ 4.09
"Purchase Date"........................ 3.09
"Refunding Capital Stock".............. 4.07
"Registrar"............................ 2.03
"Restricted Payments".................. 4.07
"Retired Capital Stock"................ 4.07
</TABLE>
Section 1.03. Trust Indenture Act Definitions.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
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"obligor" on the Notes and the Note Guarantees means the Company and the
Subsidiary Guarantors, respectively, and any successor obligor upon the Notes
and the Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) 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 in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
Section 1.05. One Class of Securities.
The Initial Notes, the Private Exchange Notes and the Exchange
Notes shall be treated as a single class for all purposes under this Indenture
and shall vote and consent together on all matters as one class. None of the
Initial Notes, the Private Exchange Notes or the Exchange Notes shall have the
right to vote or consent as a separate class on any matter.
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ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) Provisions relating to the Initial Notes, the Private Exchange Notes
and the Exchange Notes are set forth in the Rule 144A/Regulation S Appendix
attached hereto (the "Appendix"), which is hereby incorporated in and expressly
made a part of this Indenture. The Initial Notes and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit A hereto. The
Exchange Notes, the Private Exchange Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or depository
rule or usage. The Company shall approve the forms of the Notes and any
notation, legend or endorsement on them. Each Note shall be dated the date of
its issuance and shall show the date of its authentication.
(b) The terms and provisions contained in the Appendix and in the forms
of the Notes, annexed hereto as Exhibits A and B, shall constitute, and are
hereby expressly made, a part of this Indenture and, to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
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.
If an Officer or Assistant Secretary whose signature is on a
Note was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
On May 11, 1999, the Trustee shall authenticate and deliver
$100.0 million of 11 1/2% Senior Subordinated Notes Due 2009 in the form of
Initial Notes. In addition, the Trustee shall authenticate Exchange Notes and
Private Exchange Notes, as applicable, for original issue in the aggregate
principal amount not to exceed $100.0 million, in each case upon a written order
of the Company in the form of an Officers' Certificate, provided that such
Exchange Notes and Private Exchange Notes shall be
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<PAGE>
issuable only upon the valid surrender for cancellation of such Initial Notes of
a like aggregate principal amount. Further, at any time and from time to time
thereafter, the Trustee shall authenticate and deliver Notes for original issue
in an aggregate principal amount specified, in each case in a written order of
the Company in the form of an Officers' Certificate. Such order shall specify
the amount of the Notes to be authenticated and the date on which the original
issue of Notes is to be authenticated and, in the case of an issuance of
Additional Notes pursuant to Section 2.14 after May 11, 1999, shall certify that
such issuance will not be prohibited by Section 4.09.
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 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.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent with respect to the Notes. The Paying Agency Office of the Trustee
is located at the address set forth in Section 12.02.
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<PAGE>
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or interest on the Notes, and will notify the Trustee of any
default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee. Upon payment over to the Trustee, the Paying
Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent,
it shall segregate and hold in a separate trust fund for the benefit of the
Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
Section 2.05. Holder 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
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. [Intentionally Omitted]
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
Authenticating Agent of the Trustee from any loss that any of them may suffer if
a Note is replaced. The Company may charge for its expenses in replacing a Note.
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<PAGE>
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though 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 that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate
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temporary Notes. Temporary Notes shall be substantially in the form of
certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall return
canceled Notes to the Company. Certification of the destruction of all canceled
Notes shall be delivered to the Company. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the
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Notes or as contained in any notice of a redemption and that reliance may be
placed only on the other identification numbers printed on the Notes, and any
such redemption shall not be affected by any defect in or the omission of such
numbers. The Company will promptly notify the Trustee of any change in the CUSIP
numbers.
Section 2.14. Issuance of Additional Notes.
The Company shall be entitled to issue Additional Notes under
this Indenture which shall have identical terms as the Notes issued on May 11,
1999, other than with respect to the date of issuance, issue price and amount of
interest payable on the first payment date applicable thereto (and, if such
Additional Notes shall be issued in the form of Exchange Notes, other than with
respect to transfer restrictions); provided, that such issuance is not
prohibited by Section 4.09.
With respect to any Additional Notes, the Company shall set
forth in a resolution of the Board of Directors and in an Officers' Certificate,
a copy of each which shall be delivered to the Trustee, the following
information:
(A) the aggregate principal amount of such Additional
Notes to be authenticated and delivered pursuant to this
Indenture;
(B) the issue price, the issue date and the CUSIP number
of such Additional Notes and the amount of interest payable on
the first payment date applicable thereto; provided, however,
that no Additional Notes may be issued at a price that would
cause such Additional Notes to have "original issue discount"
within the meaning of Section 1273 of the Code; and
(C) whether such Additional Notes shall be transfer
restricted securities and issued in the form of Initial Notes or
shall be registered securities issued in the form of Exchange
Notes as set forth in the Appendix.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the
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clause of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the
redemption price, (v) the CUSIP numbers of the Notes to be redeemed.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee 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 and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
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.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address and to the Trustee.
The notice shall identify the Notes to be redeemed, including CUSIP
numbers, and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such
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Note, a new Note or Notes in principal amount equal to the unredeemed portion
shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
Prior to 9 a.m. on the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date. The Trustee or
the Paying Agent shall promptly return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all Notes to
be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions
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of Notes called for redemption. If a Note is redeemed on or after an interest
record date but on or prior to the related interest payment date, then any
accrued and unpaid interest shall be paid to the Person in whose name such Note
was registered at the close of business on such record date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as provided below, the Notes will not be redeemable at the
Company's option prior to May 15, 2004. Thereafter, the Notes will be subject
to redemption at any time at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Amount
---- --------
<S> <C>
2004.................. 105.750%
2005.................. 103.833%
2006.................. 101.916%
2007 and thereafter... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, during the first 36 months after May
15, 1999, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of Notes originally issued under this Indenture
(including the original principal amount of any Additional Notes) at a
redemption price of 111.500% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date, with the net cash
proceeds from one or more Equity Offerings, provided that at least $65.0 million
of the original aggregate principal amount of Notes (including the original
principal amount of any Additional Notes) remains
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outstanding immediately after the occurrence of such redemption (excluding Notes
held by the Company and its Subsidiaries); and provided, further, that such
redemption shall occur within 120 days of the date of the closing of any such
Equity Offering.
(c) At any time prior to May 15, 2004, the Notes may also be redeemed,
as a whole but not in part, 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 may any such redemption occur 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").
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption payments or
sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Net Proceeds Offer Amount.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence a Net Proceeds Offer, it shall follow the procedures
specified below.
The Net Proceeds Offer shall be mailed to the record Holders within 25
days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee,
and shall remain open for a period of at least 20 (but not more than 30)
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the Net Proceeds Offer Amount or,
if less than the Net Proceeds Offer Amount has been tendered, all Notes tendered
in response to the Net Proceeds Offer. Payment for any Notes so purchased shall
be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no
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additional interest shall be payable to Holders who tender Notes pursuant to the
Net Proceeds Offer.
Upon the commencement of a Net Proceeds Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, 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. The Net Proceeds Offer shall be made to all Holders. The notice, which
shall govern the terms of the Net Proceeds Offer, shall state:
(a) that the Net Proceeds Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Net Proceeds Offer shall
remain open;
(b) the Net Proceeds Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer may elect to have all of such Note or only a portion of such Note
purchased;
(f) that Holders electing to have a Note purchased pursuant to any Net
Proceeds Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Note purchased;
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<PAGE>
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Net Proceeds Offer Amount, 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 integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before 9:00 a.m. on the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Net Proceeds Offer Amount of Notes or portions thereof tendered pursuant to
the Net Proceeds Offer, or if less than the Net Proceeds Offer Amount has been
tendered, all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company, the Depositary or the Paying Agent, as the case may be, shall promptly
(but in any case not later than five days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note 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 Net Proceeds Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company or a Subsidiary Guarantor shall pay or cause to be paid the
principal of, premium, if any, and interest on the Notes on the dates and in the
manner provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof,
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holds as of 9:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. All references in this
Indenture, the Notes or any Note Guarantee to "interest" on the Notes shall be
deemed, for all purposes, to include Additional Interest or other liquidated
damages required to be paid on all or a portion of the Notes pursuant to the
terms of a Registration Rights Agreement.
The Company or a Subsidiary Guarantor shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt 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 Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Paying Agency Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
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<PAGE>
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports, in each
case, within the time periods specified in the SEC's rules and regulations. In
addition, following consummation of the Registered Exchange Offer, whether or
not required by the rules and regulations of the SEC, the Company shall file a
copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall
at all times comply with TIA (S) 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Subsidiary Guarantors shall furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Subsidiary Guarantor (to the extent that such
Subsidiary Guarantor is so required under the TIA) shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company and the
Subsidiary Guarantors have kept, observed, performed and fulfilled their
respective obligations under this Indenture, and further stating, as to each
such Officer signing such certificate, that to the best of his or her knowledge
the Company and the Subsidiary Guarantors have kept, observed, performed and
fulfilled
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each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company and the Subsidiary Guarantors are taking or propose to
take with respect thereto) and that to the best of his or her knowledge no event
has occurred and remains in existence by reason of which payments on account of
the principal of or interest, if any, on the Notes is prohibited or if such
event has occurred, a description of the event and what action the Company and
the Subsidiary Guarantors are taking or propose to take with respect thereto.
For purposes of this paragraph, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Indenture.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company and the
Subsidiary Guarantors have violated any provisions of Article 4 or Article 5
hereof 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) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Subsidiary Guarantors covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any
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<PAGE>
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Subsidiary Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, 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 has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Equity Interests of the
Company or any Restricted Subsidiary (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
Restricted Subsidiary) or to the direct or indirect holders of the Equity
Interests of the Company or any Restricted Subsidiary in their capacity as such
(other than dividends or distributions payable in Qualified Capital Stock of the
Company and dividends or distributions payable solely to the Company or a
Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any merger or
consolidation involving the Company or any Restricted Subsidiary) any Equity
Interests of the Company or any Restricted Subsidiary or any direct or indirect
parent of the Company; or (iii) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iii) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable Four-Quarter Period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Consolidated
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clauses (2)(i), (3), (6) and (7) of the next succeeding paragraph), is less than
the sum, without duplication, of (i) 50% of the Consolidated Net Income of the
Company for the period (taken as one
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accounting period) from the beginning of the first fiscal quarter commencing
after the date of this Indenture to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds (including the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Company) of property other than cash
that would constitute Marketable Securities or a Permitted Business) received by
the Company since the date of this Indenture as a contribution to its common
equity capital (other than from a Subsidiary or that were financed with loans
from the Company or any Restricted Subsidiary) or from the issue or sale of
Qualified Capital Stock (including Capital Stock issued upon the conversion of
convertible Indebtedness or in exchange for outstanding Indebtedness) of the
Company (excluding any net proceeds from an Equity Offering or capital
contribution to the extent used to redeem Notes in accordance with the optional
redemption provisions of the Notes) or from the issue or sale of Disqualified
Stock or debt securities of the Company that have been converted into Qualified
Capital Stock (other than Qualified Capital Stock (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus (iii) an
amount equal to the aggregate net proceeds (including the fair market value (as
determined in good faith by a resolution of the Board of Directors of the
Company) of property other than cash that would constitute Marketable Securities
or a Permitted Business) of any (A) sale or other disposition of Restricted
Investments made by the Company and its Restricted Subsidiaries or (B) dividend
from, or the sale of the stock of, an Unrestricted Subsidiary, provided,
however, that the foregoing amount shall not exceed, in the case of clause (A),
the amount of such Restricted Investment previously made (and treated as a
Restricted Investment) by the Company or any Restricted Subsidiary, and, in the
case of any such clause (B), the amount of Investments previously made (and
treated as a Restricted Payment) by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no Event of Default shall have
occurred and be continuing or shall occur as a consequence thereof, the
acquisition of any shares of Capital Stock of the Company (the "Retired Capital
Stock"), either (i) solely in exchange for shares of Qualified Capital Stock of
the Company (the "Refunding Capital Stock"), or (ii) through the application of
the net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company,
and, in the case of subclause (i) of this clause (2), if immediately prior to
the retirement
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of the Retired Capital Stock the declaration and payment of dividends thereon
was permitted under clause (3) of this paragraph, the declaration and payment of
dividends on the Refunding Capital Stock in an aggregate amount per year no
greater than the aggregate amount of dividends per annum that was declarable and
payable on such Retired Capital Stock immediately prior to such retirement;
provided that at the time of the declaration of any such dividends on the
Refunding Capital Stock, no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; (3) if no Default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof, the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock (other than Disqualified Stock)
issued after the date of this Indenture (including, without limitation, the
declaration and payment of dividends on Refunding Capital Stock in excess of the
dividends declarable and payable thereon pursuant to clause (2) of this
paragraph); provided that, at the time of such issuance, the Company, after
giving effect to such issuance on a pro forma basis, would have had a
Consolidated Fixed Charge Coverage Ratio of at least 2.0 to 1.0 for the most
recent Four-Quarter Period; (4) payments to redeem or repurchase the Company's
common equity or options in respect thereof, in each case in connection with the
repurchase provisions of employee stock option or stock purchase agreements or
other agreements to compensate management and other employees and consultants;
provided that all such redemptions or repurchases pursuant to this clause (4)
shall not exceed $10.0 million in the aggregate since the date of this Indenture
(which amount shall be increased by the amount of any net cash proceeds received
from the sale since the date of this Indenture of Equity Interests (other than
Disqualified Stock) to members of the Company's management and other employees
and consultants that have not otherwise been applied to the payment of
Restricted Payments pursuant to the terms of the preceding paragraph (c) and by
the cash proceeds of any "key-man" life insurance policies which are used to
make such redemptions or repurchases); provided, however, notwithstanding the
foregoing limitations, that (A) for so long as any Indebtedness is outstanding
under the Senior Credit Agreements, the Company shall be permitted to make any
redemptions or repurchases not prohibited by the terms of such Senior Credit
Agreements, and (B) after payment in full of all Indebtedness outstanding under
the Senior Credit Agreements, the aggregate limitation set forth above shall
increase to an amount equal to the greater of (x) $10.0 million, and (y) 7.5% of
Total Assets, provided, further, however, that the cancellation of Indebtedness
owing to the Company from members of management of the Company or any of its
Restricted Subsidiaries in connection with such a repurchase of Capital Stock of
Parent will not be deemed to constitute a Restricted Payment under this
Indenture; (5) if no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and the Company would be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.09, other Restricted
Payments in an aggregate amount not to exceed $7.5 million since
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the date of this Indenture; (6) repurchases of Capital Stock deemed to occur
upon the exercise of stock options if such Capital Stock represents a portion of
the exercise price thereof; and (7) payments in connection with the
Recapitalization and related transactions made on or subsequent to the date of
this Indenture.
In determining the aggregate amount of Restricted Payments made subsequent
to the date of this Indenture in accordance with clause (c) of the immediately
preceding paragraph, (a) amounts expended pursuant to clauses (1), (2)(ii), (4),
and (5) shall be included in such calculation; provided such expenditures
pursuant to clause (4) shall not be included to the extent of the cash proceeds
received by the Company from any "key man" life insurance policies and (b)
amounts expended pursuant to clauses (2)(i), (3), (6), or (7) shall be excluded
from such calculation.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to (a) pay dividends or make any
other distributions on or in respect of its Capital Stock, (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) non-assignment provisions
of any contract or
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any lease entered into in the ordinary course of business; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (5) agreements
existing on the date of this Indenture (including, without limitation, the
Senior Credit Agreements); (6) restrictions on the transfer of assets subject to
any Lien permitted under this Indenture imposed by the holder of such Lien; (7)
restrictions imposed by any agreement to sell assets or Capital Stock permitted
under this Indenture to any Person pending the closing of such sale; (8) any
agreement or instrument governing Capital Stock of any Person that is in effect
on the date such Person is acquired by the Company or a Restricted Subsidiary of
the Company; (9) any agreement or instrument governing Indebtedness or Permitted
Foreign Subsidiary Preferred Stock (whether or not outstanding) of Foreign
Subsidiaries of the Company that was permitted by this Indenture to be incurred;
(10) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business; (11) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions on the property so acquired of the nature described in
clause (c) above; (12) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business; (13) Indebtedness
incurred after the date of this Indenture in accordance with the terms of this
Indenture; provided that the restrictions contained in the agreements governing
such new Indebtedness are, in the good faith judgment of the Board of Directors
of the Company, not materially less favorable, taken as a whole, to the Holders
of the Notes than those contained in the agreements governing Indebtedness
outstanding on the date of this Indenture; and (14) any encumbrances or
restrictions imposed by any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings of the
contracts, instruments or obligations referred to in clauses (1) through (13)
above; provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are, in the
good faith judgment of the Company's Board of Directors, no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding, replacement
or refinancing.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness and, the Company shall
not issue any Disqualified Stock and shall not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock;
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provided, however, that the Company may incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock and any Subsidiary Guarantor
may issue shares of preferred stock (provided, that either (x) such Subsidiary
Guarantor is a Wholly Owned Restricted Subsidiary or (y) if such series of
preferred stock does not pay cash dividends during any period prior to the
maturity date of the Notes, such preferred stock is Qualified Capital Stock) if
(i) no Default or Event of Default shall have occurred and be continuing at the
time or as a consequence of the incurrence of any such Indebtedness or the
issuance of any such Disqualified Stock and (ii) the Consolidated Fixed Charge
Coverage Ratio for the Company's most recently ended Four-Quarter Period would
have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, at
the beginning of such Four-Quarter Period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Indebtedness"):
(i) the Notes (other than Additional Notes) and the Note
Guarantees thereof;
(ii) Indebtedness incurred pursuant to one or more Credit
Facilities in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries
thereunder) not to exceed at any given date, the greater of (A) $110.0
million, or (B) $95.0 million, multiplied by a fraction (1) the numerator
of which shall be the Consolidated EBITDA of the Company for its most
recently ended fiscal year, and (2) the denominator of which shall be the
Consolidated EBITDA of the Company for its fiscal year ended July 3, 1999;
provided that the amount of Indebtedness permitted to be incurred pursuant
to the Senior Credit Agreements in accordance with this clause (ii) shall
be in addition to any Indebtedness permitted to be incurred pursuant to
the Senior Credit Agreements in reliance on, and in accordance with, the
first paragraph of this Section or clauses (x) and (xv) below;
(iii) the incurrence of Indebtedness and/or the issuance of
Permitted Foreign Subsidiary Preferred Stock by Foreign Subsidiaries of
the Company, which together with the aggregate principal amount of
Indebtedness incurred pursuant to this clause (iii) and the aggregate
liquidation value of all Permitted Foreign Subsidiary Preferred Stock
issued pursuant to this clause (iii), does not exceed $15.0 million at any
one time outstanding;
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(iv) other Indebtedness of the Company and its Subsidiaries
outstanding on the date of this Indenture for so long as such Indebtedness
remains outstanding;
(v) Hedging Obligations of the Company covering Indebtedness of
the Company; provided that any Indebtedness to which any such Hedging
Obligations correspond is otherwise permitted to be incurred under this
Indenture; and provided, further, that such Hedging Obligations are
entered into, in the judgment of the Company, to protect the Company from
fluctuation in interest rates on its outstanding Indebtedness;
(vi) Indebtedness of the Company under Currency Agreements;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (a) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, (b) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Subsidiary thereof and (c)
any sale or other transfer of any such Indebtedness to a Person that is
not either the Company or a Restricted Subsidiary thereof shall be deemed,
in each case, to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vii);
(viii) the incurrence of Acquired Indebtedness of Restricted
Subsidiaries of the Company to the extent the Company could have incurred
such Indebtedness in accordance with the first paragraph of this covenant
on the date such Indebtedness became Acquired Indebtedness;
(ix) Guarantees by the Company and the Subsidiary Guarantors of
each other's Indebtedness; provided that such Indebtedness is permitted to
be incurred under this Indenture;
(x) Indebtedness (including Capital Lease Obligations) incurred
by the Company or any of its Restricted Subsidiaries to finance the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets) in an aggregate principal amount outstanding
not to exceed 7.5% of
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Total Assets at the time of any incurrence thereof (including any
Refinancing Indebtedness with respect thereto) (which amount may, but need
not, be incurred in whole or in part under the Senior Credit Agreements);
(xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including,
without limitation, letters of credit in respect of workers' compensation
claims or self-insurance, or other Indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims;
(xii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Company, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition; provided that the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(xiv) any refinancing, modification, replacement, renewal,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale (collectively, "Refinances," and "Refinanced" shall
have a correlative meaning) of existing or future Indebtedness (other than
intercompany Indebtedness), including any additional Indebtedness incurred
to pay interest or premiums required by the instruments governing such
existing or future Indebtedness as in effect at the time of issuance
thereof ("Required Premiums") and fees in connection therewith
("Refinancing Indebtedness"); provided that any such event shall not (1)
directly or indirectly result in an increase in the aggregate principal
amount of Permitted Indebtedness of the Company and its Restricted
Subsidiaries, except to the extent such increase is a result of a
simultaneous incurrence of additional Indebtedness (A) to pay Required
Premiums and related fees, or (B) otherwise permitted to be incurred under
this Indenture; or (2) create Indebtedness with a
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Weighted Average Life to Maturity at the time such Indebtedness is
incurred that is less than the Weighted Average Life to Maturity at such
time of the Indebtedness being Refinanced (except that this subclause (2)
will not apply in the event the Indebtedness being Refinanced, was
originally incurred in reliance upon clauses (ii) or (xv) of this
paragraph); provided, further, however, that (x) Refinancing Indebtedness
shall not include (1) Indebtedness of a Subsidiary that is not a
Subsidiary Guarantor that Refinances Indebtedness of the Company, or (2)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary, (y) if the Indebtedness being
Refinanced is not Senior Debt, then such Refinancing Indebtedness shall
rank no more senior than, and shall be at least as subordinated in right
of payment, to the Notes as the Indebtedness being Refinanced, and (z)
Refinancing Indebtedness shall be secured only by assets of a similar type
and in a similar amount to those that secured the Indebtedness so
refinanced; and
(xv) the incurrence of additional Indebtedness by the Company or
any of its Restricted Subsidiaries and/or the issuance of Permitted
Domestic Subsidiary Preferred Stock by the Company's U.S. Subsidiaries,
which together with the aggregate principal amount of other Indebtedness
incurred pursuant to this clause (xv) and the aggregate liquidation value
of all other Permitted Domestic Subsidiary Preferred Stock issued pursuant
to this clause (xv), does not exceed $12.5 million at any one time
outstanding (which amount, in the case of Indebtedness, may, but need not,
be incurred in whole or in part under the Senior Credit Agreements).
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (i) through (xv) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant. Accrual of interest and accretion
or amortization of original issue discount will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of
this covenant; provided, in each such case, that the amount thereof is included
in Consolidated Fixed Charges of the Company as accrued.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at
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least equal to the fair market value of the assets sold or otherwise disposed of
(as determined in good faith by the Company's Board of Directors), (ii) at least
75% of the consideration received by the Company or the Restricted Subsidiary,
as the case may be, from such Asset Sale shall be cash or Cash Equivalents;
provided that the amount of (a) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
such Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of any such
assets, and (b) any notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are immediately converted
by the Company or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for the purposes of this provision,
and (iii) upon the consummation of an Asset Sale, the Company shall apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to
such Asset Sale within 365 days of receipt thereof either (A) to repay any
Senior Debt and, in the case of any Senior Debt under any revolving credit
facility, effect a commitment reduction under such revolving credit facility,
(B) to reinvest in Productive Assets, or (C) a combination of prepayment,
repurchase and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). Pending the final application of any such Net Cash Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any, or otherwise invest such Net Cash Proceeds
in Cash Equivalents. On the 366th day after an Asset Sale or such earlier date,
if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (iii)(A), (iii)(B) or (iii)(C) of the next
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), the aggregate
amount of Net Cash Proceeds that have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount")
shall be applied by the Company or such Restricted Subsidiary to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the applicable
Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis that
amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100%
of the principal amount of the Notes to be purchased, plus accrued and unpaid
interest thereon to the date of purchase; provided, however, that if at any time
any non-cash consideration received by the Company or any Restricted Subsidiary
of the Company, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant.
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Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating
to such initial Net Proceeds Offer Amount from all Asset Sales by the Company
and its Restricted Subsidiaries aggregates at least $5.0 million, at which time
the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to make a
Net Proceeds Offer (the first date the aggregate of all such deferred Net
Proceeds Offer Amounts is equal to $5.0 million or more shall be deemed to be a
"Net Proceeds Offer Trigger Date"). Upon the completion of any Net Proceeds
Offer in accordance with the terms of this Indenture, the Net Proceeds Offer
Amount shall be reset at zero.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Productive Assets, cash, Cash
Equivalents and/or Marketable Securities and (ii) such Asset Sale is for fair
market value (as determined in good faith by the Company's Board of Directors);
provided that any consideration not constituting Productive Assets received by
the Company or any of its Restricted Subsidiaries in connection with any Asset
Sale permitted to be consummated under this paragraph shall be subject to the
provisions of the two preceding paragraphs.
To the extent that the provisions of any securities laws or regulations
conflict with the Asset Sale provisions of this Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the Asset Sale provisions of this
Indenture by virtue thereof.
Section 4.11. Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to occur any
transaction or series or related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates involving aggregate
consideration in excess of $2.5 million (an "Affiliate Transaction"), other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are not materially less favorable than those that
might reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the Company and,
at the Company's option, either (i) a majority of the disinterested members of
the Board
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of Directors of the Company shall determine in good faith that such Affiliate
Transaction is on terms that are not materially less favorable than those that
might reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the Company or
(ii) the Board of Directors of the Company or any such Restricted Subsidiary
party to such Affiliate Transaction shall have received an opinion from a
nationally recognized investment banking firm that such Affiliate Transaction is
on terms not materially less favorable than those that might reasonably have
been obtained in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company; and provided, further,
that for an Affiliate Transaction with an aggregate value of $5.0 million or
more the Board of Directors of the Company or any such Restricted Subsidiary
party to such Affiliate Transaction shall have received an opinion from a
nationally recognized investment banking firm that such Affiliate Transaction is
on terms not materially less favorable than those that might reasonably have
been obtained in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company.
(b) The foregoing restrictions shall not apply to (i) reasonable fees
and compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and any
of its Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by this
Indenture; (iii) any agreement as in effect as of the date of this Indenture or
any amendment or replacement thereto or any transaction contemplated thereby
(including pursuant to any amendment or replacement thereto) so long as any such
amendment or replacement agreement is not more disadvantageous to the Holders in
any material respect than the original agreement as in effect on the date of
this Indenture; (iv) Restricted Payments permitted by this Indenture; (v) the
payment of customary management, consulting and advisory fees and related
expenses to the Principals and their Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement or in respect of other
investment banking activities, including, without limitation, in connection with
acquisitions or divestitures which fees and expenses are approved by the Board
of Directors of the Company or such Restricted Subsidiary in good faith; (vi)
payments or loans to employees or consultants that are approved by the Board of
Directors of the Company in good faith; (vii) the existence of, or the
performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any shareholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which it
is a party as of the date of this Indenture and any similar agreements which it
may enter into thereafter; provided, however, that the existence of, or the
performance by the Company
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or any of its Restricted Subsidiaries of obligations under, any future amendment
to any such existing agreement or under any similar agreement entered into after
the date of this Indenture shall only be permitted by this clause (vii) to the
extent that the terms of any such amendment or new agreement are not
disadvantageous to the Holders of the applicable series of Notes in any material
respect; and (viii) transactions with customers, clients, suppliers, joint
venture partners or purchasers or sellers of goods or services, in each case in
the ordinary course of business (including, without limitation, pursuant to
joint venture agreements) and otherwise in compliance with the terms of this
Indenture which are fair to the Company or its Restricted Subsidiaries, in the
reasonable determination of the Board of Directors of the Company or the senior
management thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets, or any proceeds therefrom, unless
(i) in the case of Liens securing Indebtedness that is expressly subordinate or
junior in right of payment to the Notes, the Notes are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes are equally and ratably secured, except for (A)
Liens existing as of the date of this Indenture and any extensions, renewals or
replacements thereof, (B) Liens securing Senior Debt, (C) Liens securing the
Notes, (D) Liens securing Indebtedness that is incurred to refinance
Indebtedness that was secured by a Lien permitted under this Indenture that was
incurred in accordance with the provisions of this Indenture; provided, however,
that such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries not securing the Indebtedness so
refinanced, and (E) Permitted Liens.
Section 4.13. Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any businesses a majority of whose revenues are not
derived from the same or reasonably similar, ancillary or related to, or a
reasonable extension, development or expansion of, the businesses in which the
Company and its Restricted Subsidiaries are engaged on the date of this
Indenture.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence,
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and the corporate, partnership or other existence of each of its Subsidiaries,
in accordance with the respective organizational documents (as the same may be
amended from time to time) of the Company or any such Subsidiary and (ii) the
rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest to the date of purchase. Within
30 days following any Change of Control, the Company shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes on the date specified in such notice,
which date shall be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by this Indenture and described in such notice. The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce
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the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date. Other than as specifically provided in this
Section 4.15 and unless the context otherwise requires, any purchase pursuant to
this Section 4.15 shall be made pursuant to the provisions of Section 3.01
through 3.06 hereof.
Prior to the mailing of any notice required by this Indenture, but in any
event within 30 days following any Change of Control, the Company shall (i)
repay in full in cash and terminate all commitments under Indebtedness under the
Senior Credit Agreements and all other Senior Debt the terms of which require
repayment upon a Change of Control or offer to repay in full in cash and
terminate all commitments under all Indebtedness under the Senior Credit
Agreements and all other such Senior Debt and to repay the Indebtedness owed to
each lender under the Senior Credit Agreements that has accepted such offer or
(ii) obtain the requisite consents under the Senior Credit Agreements and all
such other Senior Debt to permit the repurchase of the Notes as provided above.
The Company shall first comply with this covenant before it shall be required to
repurchase Notes pursuant to the provisions described herein. The Company's
failure to comply with the immediately preceding sentence shall constitute an
Event of Default described in clause (c) and not in clause (b) under "Events of
Default" below.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if (i) a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.15 and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer or (ii) the Company exercises its option to
purchase all the Notes upon a Change of Control as described in Section 3.07(c).
Section 4.16. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not incur, create, issue, assume, Guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes, and (ii) no
Subsidiary Guarantor shall incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of any Subsidiary Guarantor and senior in any respect
in right of payment to the Note Guarantees.
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Section 4.17. Additional Note Guarantees.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another U.S. Subsidiary after the date of this Indenture, or if any
Subsidiary becomes a U.S. Subsidiary after the date of this Indenture, then such
newly acquired or created Subsidiary, shall execute a Note Guarantee and deliver
an Opinion of Counsel, in accordance with the terms hereof; provided, that all
Subsidiaries that have properly been designated as Unrestricted Subsidiaries in
accordance herewith shall not be subject to the requirements of this covenant
for so long as they continue to constitute Unrestricted Subsidiaries.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under any
Registration Rights Agreement, the Notes and this Indenture pursuant to a
supplemental indenture in form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary of the Company and except in the case of a merger entered into solely
for the purpose of reincorporating the Company in another jurisdiction, the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable Four-Quarter Period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph
of Section 4.09 hereof. This Section
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5.01 shall not apply to a sale, assignment, transfer, conveyance or other
disposition of assets between or among the Company and any of its Wholly Owned
Restricted Subsidiaries which are Subsidiary Guarantors.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
"Event of Defaults" are:
(a) the failure to pay interest on any Notes when the same becomes due
and payable if the default continues for a period of 30 days, whether or not
such payment shall be prohibited by Article 10 hereof;
(b) the failure to pay the principal on any Notes when such principal
becomes due and payable, at maturity, upon redemption or otherwise (including
the failure to make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or a Net Proceeds Offer), whether or not such payment shall be
prohibited by Article 10 hereof;
(c) a default in the observance or performance of any other covenant or
agreement contained herein if the default continues for a period of 30 days
after the Company receives written notice specifying the default (and demanding
that such
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default be remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes;
(d) the failure to pay at final stated maturity (giving effect to any
extensions thereof) the principal amount of any Indebtedness of the Company or
any Restricted Subsidiary, which failure continues for at least 10 days, or the
acceleration of the maturity of any such Indebtedness, which acceleration
remains uncured and unrescinded for at least 10 days, if the aggregate principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $7.5 million or more at any time;
(e) one or more judgments in an aggregate amount in excess of $7.5
million shall have been rendered against the Company or any of its Significant
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a
period of 60 days after such judgment or judgments become final and non-
appealable;
(f) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is not paying its debts as they become due; or
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
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(ii) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(h) except as permitted by this Indenture, any Note Guarantee of a
Significant Subsidiary is held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Subsidiary Guarantor which is a Significant Subsidiary, or any Person acting on
behalf of any such Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Note Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (f) or (g) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under either of the Senior Credit Agreements, shall
become immediately due and payable upon the first to occur of an acceleration
under either of the Senior Credit Agreements or five Business Days after receipt
by the Company and the Representative under the applicable Senior Credit
Agreement of such Acceleration Notice but only if such Event of Default is then
continuing. Notwithstanding the foregoing, if an Event of Default specified in
clause (f) or (g) of Section 6.01 hereof occurs with respect to the Company, any
of its Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, all outstanding Notes shall be
due and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except
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nonpayment of principal, interest or premium that has become due solely because
of the acceleration) have been cured or waived.
If an Event of Default occurs on or after May 15, 2004 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium
shall also become and be immediately due and payable, to the extent permitted by
law, anything in this Indenture or in the Notes to the contrary notwithstanding.
If an Event of Default occurs prior to May 15, 2004 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of the
years beginning on May 15 of the years set forth below, as set forth below
(expressed as a percentage of the aggregate principal amount to the date of
payment that would otherwise be due but for the provisions of this sentence):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999..................... 115.332%
2000..................... 113.416%
2001..................... 111.500%
2002..................... 109.582%
2003..................... 107.666%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
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 of a Note 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. All remedies are
cumulative to the extent permitted by law.
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Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and interest on, the Notes (including in
connection with an offer to purchase) (provided, however, that the Holders of a
majority in aggregate principal amount of the then outstanding Notes may rescind
an acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee security or indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
security or indemnity; and
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(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and interest on the
Note, on or after the respective due dates expressed in the Note (including in
connection with an offer to purchase), 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.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal, premium and interest remaining unpaid on the Notes and interest on
overdue principal and, to the extent lawful, interest 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 is authorized to 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,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding 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, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses,
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disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. 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, 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 pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expenses,
disbursements and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal,
premium and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes 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 a 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.
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This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
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, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee shall be required to
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied duties, covenants, liabilities or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
accept and conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon notices, resolutions,
requests, consents, orders, certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the notices, resolutions, requests, consents,
orders, certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(iii) 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 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee or affects the liability
of or affords protection to the Trustee is subject to this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) The Trustee shall not be required to give any bond or security with
respect to the execution of its rights and duties under this Indenture.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely 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 any such document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. 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. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(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.
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(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(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 or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) If any payment under this Indenture is to be made by the Trustee to
the Company or its designees by wire transfer, the Company agrees to enter into
an Agreement For Issuance Of Payment Instructions with the Trustee in a form to
be provided by the Trustee. Until the Company executes such agreement, the
Trustee shall not be required to make any payment under this Indenture to the
Company or its designees by wire transfer.
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 or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes
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including any Offering Memorandum or pursuant to this Indenture other than its
certificate of authentication.
Section 7.05. Notice of Defaults.
(a) The Trustee shall not be required to take notice or be deemed to
have notice of any Default or Event of Default unless it is notified of such
default by written notice of any event which is in fact such a default from the
Company or a Holder is received by the Trustee at the Corporate Trust Office of
the Trustee, and such notice references the Notes and this Indenture; provided
that the Trustee shall be required to take and shall be deemed to take notice of
any failure to receive payments pursuant to Section 2.04.
(b) If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith reasonably determines
that withholding the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 1 beginning with the May 1 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company and the Subsidiary Guarantors shall pay to the Trustee from
time to time such compensation for its acceptance of this Indenture and services
hereunder as the parties shall agree from time to time. The Trustee's
compensation shall
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not be limited by any law on compensation of a trustee of an express trust. The
Company and the Subsidiary Guarantors shall reimburse the Trustee promptly upon
request for all reasonable disbursements, advances and expenses incurred or made
by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company and the Subsidiary Guarantors hereby agree to indemnify and
hold the Trustee and its directors, officers, agents and employees
(collectively, the "Indemnitees") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses, including out-of-
pocket, incidental expenses, legal fees and expenses, and the allocated costs
and expenses of in-house counsel and legal staff ("Losses") that may be imposed
on, incurred by, or asserted against, the Indemnitees or any of them for
following any instruction or other direction upon which the Trustee is
authorized to rely pursuant to the terms of this Indenture. In addition to and
not in limitation of the immediately preceding sentence, the Company and the
Subsidiary Guarantors also agree to indemnify and hold the Indemnitees and each
of them harmless from and against any and all Losses that may be imposed on,
incurred by, or asserted against the Indemnitees or any of them in connection
with or arising out of the Trustee's performance under this Indenture, including
its acceptance of its duties under this Indenture and the costs and expenses of
enforcing this Indenture against the Company and the Subsidiary Guarantors
(including this Section 7.07.), provided the Trustee has not acted with
negligence or engaged in willful misconduct. The provisions of this Section
7.07 shall survive the termination of this Indenture and the resignation or
removal of the Trustee for any reason. The Trustee shall notify the Company and
the Subsidiary Guarantors promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
and the Subsidiary Guarantors need not pay for any settlement made without their
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Subsidiary Guarantors under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Subsidiary Guarantors' payment obligations
in this Section, the Trustee shall have a Lien prior to the Notes on all money
or property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(f) or (g) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) 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 promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee (at the expense of
the Company), the Company, or the Holders of Notes of at least 10% in principal
amount of the then outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee in its individual capacity consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation or association, the successor corporation or association
without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation or
association organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100.0 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA /S/ 310(a)(1), (2) and (5). The Trustee is subject to TIA /S/ 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA /S/ 311(a), excluding any creditor
relationship listed in TIA /S/ 311(b). A Trustee who has resigned or been
removed shall be subject to TIA /S/ 311(a) to the extent indicated therein.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, 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 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) 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, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
2 and Section 4.02 hereof and under the Appendix, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to the outstanding
Notes on and after the date the conditions set
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forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and
the Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, 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 of Default under Section 6.01
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 Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(d) and 6.01(e) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the written opinion of a nationally recognized firm of
independent public accountants delivered to the Trustee, to pay the principal
of, premium and interest on the outstanding Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 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
outstanding 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
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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 8.03 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
outstanding 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 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(f) or 6.01(g) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the Senior Credit
Agreements or any other material agreement or instrument (other than a default
under this Indenture 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) 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 Opinion of
Counsel reasonably acceptable to the Trustee (which may be subject to customary
exceptions) to the effect that on the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) 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; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel reasonably acceptable to the Trustee, each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
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Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 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 notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
premium, if any, or interest has become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
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to make any such repayment, may at the expense of the Company cause to be
published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Subsidiary Guarantors' obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that,
if the Company makes any payment of principal of, premium, if any, or interest
on any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
Section 8.08. Survival.
The Trustee's rights under Article 8 shall survive termination of this
Indenture.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement this Indenture,
the Note Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof or the
Appendix (including the related definitions) in a manner that does not
materially adversely affect any Holder;
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(c) to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to the Holders of the Notes by a successor to the
Company or a Subsidiary Guarantor pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Subsidiary Guarantor to execute a supplemental
indenture and/or a Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02(b) hereof, the Trustee shall join with the Company and the Subsidiary
Guarantors in the execution of any amended or supplemental Indenture authorized
or permitted by the terms of this Indenture and in the making of any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof), the Note Guarantees and the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
Notes (including Additional Notes, if any) then outstanding voting as a single
class (including consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Note
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including Additional
Notes,
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if any) voting as a single class (including consents obtained in connection with
a tender offer or exchange offer for, or purchase of, the Notes). Without the
consent of at least 75% in aggregate principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for, or purchase of, such Notes), no waiver or amendment to this
Indenture may make any change in the provisions of Article 10 or Section 11.02
hereof that adversely affects the rights of any Holder of Notes. Any amendment
to the provisions of Article 10 or Section 11.02 hereof or the related
definitions will also require the consent of the holders of a majority of
Indebtedness then outstanding under each of the Senior Credit Agreements.
Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02(b) hereof, the Trustee
shall join with the Company in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture directly affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes 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 amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
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(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, other than provisions relating to Sections 3.09 or 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or interest on the Notes;
(g) waive a redemption payment with respect to any Note, other than a
payment required by Section 3.09 or 4.15;
(h) make any change in the foregoing amendment and waiver provisions; or
(i) release any Subsidiary Guarantor from any of its obligations under
its Note Guarantee or this Indenture, except in accordance with the terms of
this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect and the Trustee may rely on an Opinion of Counsel to such effect in
executing any amendment or supplement.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note 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. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the
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consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that the
Company's Obligations with respect to the Notes are subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt. The foregoing provisions regarding subordination are solely for
the purpose of defining the relative rights of the holders of the Senior Debt on
the one hand and the Holders on the other hand. Such provisions
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shall be enforceable by the holders of Senior Debt directly against the Holders
(and their successors and assigns). This Article 10 shall constitute a
continuing offer to all persons who become holders of, or continue to hold,
Senior Debt (whether such Senior Debt was created or acquired before or after
the issuance of the Notes).
Section 10.02. Certain Definitions.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Senior Credit Agreements and (ii) after payment in full of all Indebtedness
outstanding under the Senior Credit Agreements, any other Senior Debt permitted
under this Indenture, the principal amount of which is $25.0 million or more and
that has been designated by the Company as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in the Company or any
Subsidiary Guarantor or debt securities that are unsecured and are subordinated
to all Senior Debt (and any debt securities issued in exchange for Senior Debt)
to substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 hereof (without limiting the
generality of the foregoing, such securities shall have no required principal
payments until after the final maturity of all Senior Debt).
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness of the Company or any of the
Subsidiary Guarantors outstanding under Credit Facilities and all Hedging
Obligations with respect thereto, (ii) any other Indebtedness permitted to be
incurred by the Company or the Subsidiary Guarantors under the terms of this
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or the relevant Note Guarantee, as the case may be, and
(iii) all Obligations with respect to the foregoing. Notwithstanding anything to
the contrary in the foregoing, Senior Debt will not include (v) any liability
for foreign, federal, state, local or other taxes owed or owing by the Company
or any Subsidiary Guarantor, (w) any Indebtedness of the Company or any
Subsidiary Guarantor to any of its Subsidiaries or other Affiliates, (x) any
trade payables, (y) any Indebtedness that is incurred in violation of this
Indenture, or (z) any Capital Lease Obligations.
A distribution may consist of cash, securities or other property, by set-
off or otherwise.
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Section 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment
in full in cash or Cash Equivalents of all Obligations due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before
Holders of the Notes shall be entitled to receive any payment with respect
to the Notes (except that Holders may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made from any
defeasance trust created pursuant to Article Eight hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full in cash or Cash
Equivalents, any distribution to which Holders would be entitled but for
this Article 10 shall be made to holders of Senior Debt (except that
Holders of Notes may receive (i) Permitted Junior Securities and (ii)
payments and other distributions made from any defeasance trust created
pursuant to Article Eight hereof), as their interests may appear.
Section 10.04. Default on Designated Senior Debt.
The Company may not make any payment or distribution to the Trustee or any
Holder in respect of Obligations with respect to the Notes and may not acquire
from the Trustee or any Holder any Notes for cash or property (other than (a)
Permitted Junior Securities and (b) payments and other distributions made from
any defeasance trust created pursuant to Article Eight hereof) until all
principal and other Obligations with respect to the Senior Debt have been paid
in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement, indenture
or other document governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice
of the default
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(a "Payment Blockage Notice") from the trustee, agent or other
representative of the holders of Designated Senior Debt, or the holders of
Designated Senior Debt or the Company. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless and until (A) at least 360
days shall have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (B) all scheduled payments of principal,
premium, if any, and interest on the Notes that have come due have been
paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than
180 days.
The Company may and shall resume payments on and distributions in respect
of the Notes and may acquire them upon the earliest of:
(1) the date upon which the default is cured or waived,
(2) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days pass after the Payment Blockage Notice is received if the
maturity of such Designated Senior Debt has not been accelerated, if this
Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition, or
(3) in the case of a default referred to in Section 10.04(ii)
hereof, the Trustee receiving notice from the representative in respect of
such Designated Senior Debt rescinding such Payment Blockage Notice.
Section 10.05. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.03 or 10.04 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the
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indenture or other agreement (if any) pursuant to which such Senior Debt may
have been issued, as their respective interests may appear, for application to
the payment of all Obligations with respect to Senior Debt remaining unpaid to
the extent necessary to pay such Obligations in full in cash or Cash Equivalents
in accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt 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 Debt, 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 Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate this Article 10, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Debt as provided
in this Article 10.
Section 10.08. Subrogation.
After all Senior Debt is paid in full and all commitments to lend
thereunder have been terminated and until the Notes are paid in full, Holders of
Notes shall be subrogated (equally and ratably with all other Indebtedness pari
passu with the Notes) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders of Notes have been applied to the payment of
Senior Debt. A distribution made under this Article 10 to holders of Senior Debt
that otherwise would have been made to Holders of Notes is not, as between the
Company and Holders, a payment by the Company on the Notes.
Section 10.09. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
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(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors
of the Company other than their rights in relation to holders of Senior
Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure shall nevertheless be a Default
or Event of Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture.
Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt 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 10.
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Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice from the Company or any representative of the holders of
any Senior Debt of facts that would cause the payment of any Obligations with
respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
Nothing in this Section 10.12 is intended to or shall relieve any Holder of
Notes from the obligations imposed under Section 10.06 with respect to other
distributions received in violation of the provisions hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
Section 10.14. Amendments.
The provisions of this Article 10 and Section 11.02 below shall not be
amended or modified without the written consent of the holders of a majority of
the Indebtedness then outstanding under each of the Senior Credit Agreements.
Section 10.15. Changes in Senior Debt.
Any holder of Senior Debt may at any time and from time to time without
the consent of or notice to any Holder or the Trustee: (a) extend, renew,
modify, waive or
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amend the terms of the Senior Debt; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c)
release any guarantor or any other person (except the Company) liable in any
manner for the Senior Debt or amend or waive the terms of any guaranty of Senior
Debt; (d) exercise or refrain from exercising any rights against the Company or
any other Person; (e) apply any sums by whomever paid or however realized to
Senior Debt; and (f) take any other action which otherwise might be deemed to
impair the rights of the holders of Senior Debt without incurring any
responsibility to any Holder or the Trustee and without impairing or releasing
the obligations of any Holder or the Trustee to the holders of Senior Debt.
ARTICLE 11.
NOTE GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Subsidiary Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Notes, if any, if lawful, 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 (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that 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. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Subsidiary Guarantors shall
be jointly and severally obligated to pay the same immediately. Each Subsidiary
Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
The Subsidiary Guarantors hereby agree that their 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 circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment,
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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 covenant that this Note
Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Subsidiary Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Subsidiary Guarantors any amount paid either to the Trustee or such Holder,
then this Note Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Subsidiary Guarantor further agrees that, as between the Subsidiary
Guarantors, 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 6 hereof for the purposes of this Note 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 declaration of acceleration of such obligations as provided in
Article 6 hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Subsidiary Guarantors for the purpose of
this Note Guarantee. The Subsidiary Guarantors shall have the right to seek
contribution from any non-paying Subsidiary Guarantor so long as the exercise of
such right does not impair the rights of the Holders under the Note Guarantee.
Section 11.02. Subordination Of Note Guarantee.
The Obligations of each Subsidiary Guarantor under its Note Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
of such Subsidiary Guarantor on the same basis as the Notes are junior and
subordinated to Senior Debt of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Subsidiary Guarantors only at such times as they
may receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 11 hereof.
Section 11.03. Limitation On Subsidiary Guarantor Liability.
Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Note
Guarantee of
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such Subsidiary Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any Note Guarantee. To effectuate the foregoing intention, the
Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that
the obligations of such Subsidiary Guarantor under its Note Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Subsidiary Guarantor that are relevant under such laws, and after giving effect
to any collections from, rights to receive contribution from or payments made by
or on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under this Article 11, result in the obligations
of such Subsidiary Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
Section 11.04. Execution And Delivery Of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01, each Subsidiary
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit C shall be endorsed by an Officer of such
Subsidiary Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Subsidiary Guarantor by
one of its Officers (other than any Assistant Treasurer, Controller or
Secretary).
Each Subsidiary Guarantor hereby agrees that its Note 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 Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Note Guarantee set forth in this
Indenture on behalf of the Subsidiary Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.17 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture (substantially in the form included in Exhibit D to this
Indenture) and Note Guarantees in accordance with Section 4.17 hereof and this
Article 11, to the extent applicable.
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Section 11.05. Subsidiary Guarantors May Consolidate, Etc., On Certain Terms.
No Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person) another
Person whether or not affiliated with such Subsidiary Guarantor unless:
(a) subject to the last paragraph of this Section 11.05, the Person
formed by or surviving any such consolidation or merger (if other than a
Subsidiary Guarantor or the Company) unconditionally assumes all the obligations
of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Notes, the
Indenture, any Registration Rights Agreement and the Note Guarantee on the terms
set forth herein or therein;
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(c) either (i) the Company would be permitted, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof, or (ii) immediately after giving effect
to such transaction, the Consolidated Fixed Charge Coverage Ratio of the Company
shall be higher than the Consolidated Fixed Charge Coverage Ratio of the Company
immediately prior to such transaction.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Subsidiary
Guarantor, such successor Person 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. Such successor Person thereupon may cause to be signed
any or all of the Note Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Note Guarantees had been issued at the date
of the execution hereof.
Except as set forth in Articles 4 and 5 hereof and in this Section 11.05,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or
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merger of a Restricted Subsidiary with or into the Company or another Restricted
Subsidiary, or shall prevent any sale or conveyance of the property of a
Restricted Subsidiary as an entirety or substantially as an entirety to the
Company or another Restricted Subsidiary.
Section 11.06. Releases Following Sale Of Assets.
In the event of a sale or other disposition of all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Subsidiary Guarantor, then
such Subsidiary Guarantor (in the event of a sale or other disposition, by way
of merger, consolidation or otherwise, of all of the capital stock of such
Subsidiary Guarantor) or the corporation acquiring the property (in the event of
a sale or other disposition of all or substantially all of the assets of such
Subsidiary Guarantor) will be released and relieved of any obligations under its
Note Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in accordance
with the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Subsidiary Guarantor from its
obligations under its Note Guarantee.
Any Subsidiary Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Subsidiary Guarantor under
this Indenture as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S) 318(c), the imposed duties shall control.
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Section 12.02. Notices.
Any notice or communication by the Company, any Subsidiary Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company and/or any Subsidiary Guarantor:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attention: Chief Financial Officer
With a copy to:
Kirkland & Ellis
153 East 53/rd/ Street
New York, NY 10022-467
Telecopier No.: (212) 446-4900
Attention: Lance Balk, Esq.
If to the Trustee:
Corporate Trust Office:
Chase Manhattan Trust Company, National Association
One Liberty Place
1650 Market Street
Suite 5210
Philadelphia, PA 19103
Telecopier No.:(215) 568-1449
Attention: Corporate Trust Administration
Paying Agency Office:
Chase Bank of Texas
Corporate Trust Services
1201 Main Street 180MP
Dallas, TX 75202
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The Company, any Subsidiary Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. 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 within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 12.03. Communication By Holders Of Notes With Other Holders Of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
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:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
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(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
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 a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he or she has or
they have made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules By Trustee And Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability Of Directors, Officers, Employees
And Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or such Subsidiary Guarantor under
the Notes, the Note Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note
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waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation Of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10. Successors.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Notes and the Note Guarantees shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 12.11. Severability.
In case any provision in this Indenture or in the Notes 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 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table Of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
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[Indenture signature pages(s) follow]
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Dated as of the date listed above
ISSUER:
INTEGRATED CIRCUIT SYSTEMS, INC.
by:/s/Rudolf S. Gassner
--------------------------------
Name: Rudolf S. Gassner
Title: Chairman of the Board
SUBSIDIARY GUARANTORS:
ICS TECHNOLOGIES, INC.
by:/s/Hock E. Tan
--------------------------------
Name: Hock E. Tan
Title: President
ICST, INC.
by:/s/Henry I. Boreen
--------------------------------
Name: Henry I. Boreen
Title: President
MICROCLOCK, INC.
by:/s/Henry I. Boreen
--------------------------------
Name: Henry I. Boreen
Title: President
94
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TRUSTEE:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
by:/s/illegible
--------------------------------
Name:
Title:
95
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RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT
TO RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE
TRANSACTIONS IN RELIANCE ON REGULATION S
PROVISIONS RELATING TO INITIAL NOTES,
------------------------------------
PRIVATE EXCHANGE NOTES
----------------------
AND EXCHANGE NOTES
------------------
1. Definitions.
-----------
1.1 Definitions.
-----------
For the purposes of this Appendix the following terms shall have the
meanings indicated below, provided that all capitalized terms used but not
defined shall have the meanings given such terms in the Indenture:
"Depositary" means The Depository Trust Company, its nominees and
their respective successors and assigns.
"Exchange Notes" means (i) the 11 1/2% Senior Subordinated Exchange
Notes Due 2009 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to a Registration Rights Agreement and (ii)
Additional Notes, if any, issued in the form of 11 1/2% Senior Subordinated
Notes Due 2009 or other series of 11 1/2% Senior Subordinated Notes Due 2009
pursuant to a registration statement filed with the SEC under the Securities
Act.
"Initial Purchasers" means (i) with respect to the Initial Notes
issued on May 11, 1999, Bear, Stearns & Co., Inc. and Credit Suisse First Boston
Corporation and (ii) with respect to each issuance of Additional Notes, the
Persons purchasing such Additional Notes under the related Purchase Agreement.
"Initial Notes" means (i) $100.0 million principal amount of 11 1/2%
Senior Subordinated Notes Due 2009, issued on May 11, 1999 and (ii) Additional
Notes, if any, issued in the form of 11 1/2% Senior Subordinated Notes Due 2009
or other series of 11 1/2% Senior Subordinated Notes Due 2009 in a transaction
exempt from the registration requirements of the Securities Act.
"Private Exchange" means the offer by the Company, pursuant to a
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in
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exchange for the Initial Notes held by the Initial Purchaser as part of its
initial distribution, a like aggregate principal amount of Private Exchange
Notes.
"Private Exchange Notes" means the 11 1/2% Senior Subordinated Private
Exchange Notes Due 2009, if any, to be issued pursuant to this Indenture to the
Initial Purchasers in a Private Exchange.
"Purchase Agreement" means (i) with respect to the Initial Notes
issued on May 11, 1999, the Purchase Agreement dated May 5, 1999, among the
Company, the Subsidiary Guarantors and the Initial Purchasers named therein and
(ii) with respect to each issuance of Additional Notes, the purchase agreement
or underwriting agreement among the Company, the Subsidiary Guarantors and the
Persons purchasing such Additional Notes.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to a Registration Rights Agreement, to certain Holders of Initial Notes, to
issue and deliver to such Holders, in exchange for such Initial Notes, a like
aggregate principal amount of Exchange Notes registered under the Securities
Act.
"Registration Rights Agreement" means (i) with respect to the Initial
Notes issued on May 11, 1999, the Registration Rights Agreement dated May 11,
1999 among the Company, the Subsidiary Guarantors and the Initial Purchasers
named therein, and (ii) with respect to each issuance of Additional Notes issued
in a transaction exempt from the registration requirements of the Securities
Act, the registration rights agreement, if any, among the Company, the
guarantors thereunder and the Persons purchasing such Additional Notes under the
related Purchase Agreement.
"Securities" means the Initial Notes, the Exchange Notes and the
Private Exchange Notes, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the shelf registration statement
filed by the Company, in connection with the offer and sale of Initial Notes,
Exchange Notes or Private Exchange Notes, pursuant to a Registration Rights
Agreement.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(b) hereto.
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1.2 Other Definitions
-----------------
Term Defined in Section:
---- ------------------
"Agent Members"........................... 2.1(b)
"Global Security"......................... 2.1(a)
"Regulation S"............................ 2.1(a)
"Rule 144A"............................... 2.1(a)
2. The Securities.
2.1 Form and Dating.
On May 11, 1999, $100.0 million of the Initial Notes are being offered
and sold by the Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Notes offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on
Regulation S under the Securities Act ("Regulation S"), in each case as provided
in the Purchase Agreement, and Additional Notes, if any, issued in the form of
Exchange Notes, shall be issued initially in the form of one or more permanent
global Securities in definitive, fully registered form without interest coupons
with the global securities legend and, in the case of Notes issued in the form
of Initial Notes, the restricted securities legend set forth in Exhibit 1 hereto
(each, a "Global Security"), which shall be deposited on behalf of the
purchasers of the Initial Notes or Additional Notes, as applicable, represented
thereby with the Trustee as custodian for the Depositary (or with such other
custodian as the Depositary may direct), and registered in the name of the
Depositary or a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the
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Depositary or by the Trustee as the custodian of the Depositary or under such
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of such Depositary
governing the exercise of the rights of a holder of a beneficial interest in any
Global Security.
(c) Certificated Securities. Except as provided in this Section 2.1
or Section 2.3 or 2.4 of this Appendix, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1) On May
11, 1999, $100.0 million 11 1/2% Senior Subordinated Notes Due 2009, (2) any
Additional Notes for original issue in an aggregate principal amount specified
in the written order of the Company pursuant to Section 2.02 of the Indenture,
and (3) Exchange Notes or Private Exchange Notes for issue in a Registered
Exchange Offer or a Private Exchange, respectively, in exchange for a like
principal amount of Initial Notes, in each case upon a written order of the
Company in the form of an Officers' Certificate. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated and whether the Securities are to be
Initial Notes, Exchange Notes or Private Exchange Notes and in the case of an
issuance of Additional Notes pursuant to Section 2.14 of the Indenture, shall
certify, among other things that such issuance will not be prohibited by Section
4.09 of the Indenture.
2.3 Transfer and Exchange.
(a) Transfer and Exchange of Global Securities.
------------------------------------------
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depositary therefor. A
transferor of a beneficial interest in a Global Security shall deliver to
the Registrar a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions
instruct the Depositary to credit to the account of the Person specified in
such instructions a beneficial interest in the Global Security and to debit
the account of the Person making the transfer the beneficial interest in
the Global Security being transferred.
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(ii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4 of this Appendix), a Global
Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 of this Appendix or
Section 2.10 of this Indenture, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only in
accordance with such procedures as are substantially consistent with the
provisions of this Section 2.3 (including the certification requirements
set forth on the reverse of the Initial Notes intended to ensure that such
transfers comply with Rule 144A or Regulation S, as the case may be) and
such other procedures as may from time to time be adopted by the Company.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing Initial Notes and Private
Exchange Notes (and all Securities issued in exchange therefor or in
substitution thereof, other than Exchange Notes) shall bear a legend in
substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS
HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN
ACCORDANCE WITH
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RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act, the Registrar
shall permit the Holder thereof to exchange such Transfer Restricted
Security for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder certifies in writing to the Registrar
that its request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Security).
(iii) After a transfer of any Initial Notes or Private Exchange Notes
during the period of the effectiveness of a Shelf Registration Statement
with respect to such Initial Notes or Private Exchange Notes, as the case
may be, all requirements pertaining to legends on such Initial Notes or
such Private Exchange Notes will cease to apply, but the requirements
requiring such Initial Notes or such Private Exchange Notes issued to
certain Holders be issued in global form will continue to apply, and
Initial Notes or Private Exchange Notes in global form without legends will
be available to the transferee of the Holder of such Initial Notes or
Private Exchange Notes upon exchange of such transferring Holder's Initial
Notes or Private Exchange Notes or directions to transfer such Holder's
interest in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Notes pursuant to which Holders of such Initial
Notes are offered Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form will continue to apply and Initial
Notes in global form with the restricted securities legend set forth in
Exhibit 1 hereto will be available to Holders of such Initial Notes that do
not exchange their Initial Notes, and Exchange Notes in global form without
the restricted securities legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Notes in such Registered
Exchange Offer.
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(v) Upon the consummation of a Private Exchange with respect to the
Initial Notes pursuant to which Holders of such Initial Notes are offered
Private Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form will still apply, and Private
Exchange Notes in global form with the restricted securities legend set
forth in Exhibit 1 hereto will be available to Holders that exchange such
Initial Notes in such Private Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities
and Global Securities at the Registrar's or any co-registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 3.09, 4.15 and Section 9.05 of this Indenture).
(iii) The Registrar or any co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Security
selected for redemption in whole or in part pursuant to Article III of this
Indenture, except the unredeemed portion of any certificated Security being
redeemed in part, (b) any Security for a period beginning 15 Business Days
before the mailing of a notice of an offer to repurchase or redeem
Securities, or (c) any security between a record date and the next
succeeding Interest Payment Date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of
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and interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or other Person with respect to the accuracy of the records of
the Depositary or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global Security). The
rights of beneficial owners in any Global Security shall be exercised only
through the Depositary subject to the applicable rules and procedures of
the Depositary. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depositary with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities,
(a) A Global Security deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only
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if such transfer complies with Section 2.3 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Security and a successor depositary is not appointed by the Company within 90
days of such notice or if at any time such Depositary ceases to be a "clearing
agency" registered under the Exchange Act, or (ii) an Event of Default has
occurred and is continuing, or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary to the
Trustee, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount of
certificated Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section shall be executed, authenticated
and delivered only in denominations of $1,000 and any integral multiple thereof
and registered in such names as the Depositary shall direct. Any certificated
Initial Note delivered in exchange for an interest in the Global Security shall,
except as otherwise provided by Section 2.3(b), bear the restricted securities
legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered Holder
of a Global Security 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 Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a) above, the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
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EXHIBIT 1
TO RULE 144A/REGULATION S
APPENDIX
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THIS
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS NOTE
MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
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TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE
904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
XI
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[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Principal Amount of this Principal Amount of this Global Security following such officer of Trustee or
Date of Exchange Global Security Global Security decrease or increase Securities Custodian
</TABLE>
XII
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EXHIBIT A
FORM OF INITIAL NOTE
CUSIP/CINS _________ No. _______
$________
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
INTEGRATED CIRCUIT SYSTEMS, INC. promises to pay to _________________ or
registered assigns, the principal sum of __________________ Dollars on May 15,
2009.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Rudolf Gassner
-------------------------------
Name: Rudolf Gassner
Title: Chairman of the Board
By: /s/ Hock E. Tan
-------------------------------
Name: Hock E. Tan
Title: Senior Vice President, Chief
Financial Officer and Chief
Operating Officer
This is one of the 11 1/2% Senior Subordinated
Notes Due 2009 referred to in the
within-mentioned Indenture:
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:________________________ Dated:______________
Name:
Title:
A-1
<PAGE>
(Back of Note)
11 1/2% Senior Subordinated Note Due 2009
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Integrated Circuit Systems, Inc., a Pennsylvania corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate per annum shown above; [provided, however, that if a Registration
Default (as defined in the Registration Rights Agreement) occurs, additional
interest will accrue on this Note at a rate of 0.50% per annum, from and
including the date on which any such Registration Default shall occur to, but
excluding, the date on which all Registration Defaults have been cured,
calculated on the principal amount of this Note as of the date on which such
interest is payable. Such interest is payable in addition to any other interest
payable from time to time with respect to this Note.]/1/ Interest on the Notes
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from [May 11, 1999] [date of issuance of Additional
Notes]. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing [November 15, 1999] [first Interest Payment Date after
issuance of Additional Notes]. Interest will be computed on the basis of a 360-
day year of twelve 30-day months.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; the Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful.
2. Method Of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the May 1 or November 1 next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture
with respect to defaulted interest. The Notes will be payable as to principal,
premium and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal, interest and premium on all Global Securities and all other Notes the
Holders of which shall
- ------------------------------
/1/ To be included in the Initial Notes issues on the Issue Date and, to the
extent applicable, any Additional Notes issued in the form of Initial
Notes.
A-2
<PAGE>
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent And Registrar. Initially, Chase Manhattan Trust Company,
National Association, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. This Note is one of a duly authorized issue of Initial
Notes of the Company designated as its 11 1/2% Senior Subordinated Notes Due
2009. The Company shall be entitled to issue Additional Notes pursuant to
Section 2.14 of the Indenture; provided, that such issuance is not prohibited by
Section 4.09 of the Indenture. The Initial Notes issued on May 11, 1999 and any
Additional Notes, and any Private Exchange Notes and Exchange Notes issued
pursuant to the Indenture, are treated as a single class of securities under the
Indenture. The Company issued the Notes under an Indenture dated as of May 11,
1999 ("Indenture") between the Company, certain Subsidiary Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. To the extent of any conflict between the terms of the Notes or any
Note Guarantee and the Indenture, the applicable terms of the Indenture will
govern.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) or (c) of this Paragraph 5,
the Notes will not be redeemable at the Company's option prior to May 15, 2004.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on May 15
of the years indicated below:
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2004....................... 105.750%
2005....................... 103.833%
2006....................... 101.916%
2007 and thereafter........ 100.000%
</TABLE>
A-3
<PAGE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
5, during the first 36 months after May 15, 1999, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
originally issued under this Indenture (including the original principal amount
of any Additional Notes) at a redemption price of 111.500% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
redemption date, with the net cash proceeds from one or more Equity Offerings,
provided that at least $65.0 million of the original aggregate principal amount
of Notes (including the original principal amount of any Additional Notes)
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided,
further, that such redemption shall occur within 120 days of the date of the
closing of any such Equity Offering.
(c) At any time prior to May 15, 2004, the Notes may also be redeemed, as
a whole but not in part, 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 may any such redemption occur 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").
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. Repurchase At Option Of Holder.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, at any
time when the aggregate amount of Net Proceeds Offer Amount exceeds $5.0
million, the Company shall commence an offer to all Holders of Notes (as "Net
Proceeds Offer") pursuant to Sections 3.09 and 4.10 of the Indenture to purchase
the maximum principal amount of Notes (including any Additional Notes) that may
be purchased out of the Net Proceeds Offer Amount at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of
A-4
<PAGE>
Notes (including any Additional Notes) tendered pursuant to an Net Proceeds
Offer is less than the Net Proceeds Offer Amount, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Net Proceeds Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive a Net Proceeds Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. Notice Of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
[9. Registration Rights. Pursuant to the Registration Rights Agreement
(as defined in the Indenture), the Company will be obligated to consummate an
exchange offer pursuant to which the Holder of this Note shall have the right to
exchange this Note for the Company's 11 1/2% Senior Subordinated Exchange Notes
Due 2009 in the form of Exchange Notes, which shall have been registered under
the Securities Act, or the Company's 11 1/2% Senior Subordinated Private
Exchange Notes Due 2009 (the "Private Exchange Notes"), in each case in like
principal amount and having terms identical in all material respects to the
Initial Notes. The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments if such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement. The Company shall notify the Trustee
of the amount of any such payments.]/2/
10. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
- ----------------------------
/2/ To be included in the Initial Notes issued on the Issue Date and, to the
extent applicable, any Additional Notes issued in the form of Initial
Notes.
A-5
<PAGE>
11. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes and shall be so treated by the Trustee.
12. Amendment, Supplement And Waiver. Subject to certain exceptions, the
Indenture, the Note Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and Additional Notes, if any, voting as a single class,
and any existing default or compliance with any provision of the Indenture, the
Note Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes and Additional Notes,
if any, voting as a single class. Without the consent of any Holder of a Note,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or any Subsidiary Guarantor's obligations to Holders
of the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, to
provide for the issuance of Additional Notes in accordance with the limitations
set forth in the Indenture, or to allow any Subsidiary Guarantor to execute a
supplemental indenture to the Indenture and/or a Note Guarantee with respect to
the Notes.
13. Defaults And Remedies.
Events of Default include: (i) the failure to pay interest on any Notes
when the same becomes due and payable if the default continues for a period of
30 days, whether or not such payment shall be prohibited by Article 10 hereof;
(ii) the failure to pay the principal on any Notes when such principal becomes
due and payable, at maturity, upon redemption or otherwise (including the
failure to make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or a Net Proceeds Offer), whether or not such payment shall be
prohibited by Article 10 of the Indenture; (iii) a default in the observance or
performance of any other covenant or agreement contained herein if the default
continues for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from the
Trustee or the Holders of at least 25% of the outstanding principal amount of
the Notes; (iv) the failure to pay at final stated maturity (giving effect to
any extensions thereof) the principal amount of any Indebtedness of the Company
or any Restricted Subsidiary, which failure continues for at least 10 days, or
the acceleration of the maturity of any such Indebtedness, which acceleration
remains uncured and unrescinded for at least 10 days, if the aggregate principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $7.5 million or more at any time; (v) one
or more judgments in an aggregate amount in excess of $7.5 million shall have
been rendered against the Company or any of its Significant Subsidiaries and
such judgments
A-6
<PAGE>
remain undischarged, unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and non-appealable; (vi) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (vii) except as permitted by the Indenture, any Note Guarantee
of a Significant Subsidiary is held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary Guarantor which is a Significant Subsidiary, or any
Person acting on behalf of any such Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Note Guarantee. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it in good faith reasonably
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. Trustee Dealings With Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
15. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Subsidiary Guarantors,
as such, shall not have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Notes, the Note Guarantees or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder 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.
16. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an Authenticating Agent.
A-7
<PAGE>
17. Abbreviations. Customary abbreviations may be used in the name of a
Holder 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).
18. 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 and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
[19. Holders' Compliance with Registration Rights Agreement. Each Holder
of a Note, by acceptance hereof, acknowledges and agrees to the provisions of
the Registration Rights Agreement, including, without limitation, the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.]/3/
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attention: Chief Financial Officer
- ------------------------------
/3/ To be included in the Initial Notes issued on the Issue Date and, to the
extent applicable, any Additional Notes issued in the form of Initial
Notes.
A-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________, agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date: __________ Signed: ______________________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: _______________
(Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended).
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) [two years from date of original issuance], 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-9
<PAGE>
[Check One]
---------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act;
or
(3) __ outside the United States to a "foreign person" in compliance with Rule
904 of Regulation S under the Securities Act; or
(4) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act; or
(5) __ pursuant to an effective registration statement under the Securities
Act; or
(6) __ 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) or (6) 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 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-10
<PAGE>
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 the Appendix to the Indenture shall have been satisfied.
Dated: _________ Signed: ______________________________________________________
(Sign exactly as name
appears on the other side
of this Security)
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.
Dated: _________ ____________________________________________________________
NOTICE: To be executed by
an executive officer
A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased: $________
Date:__________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:____________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
A-12
<PAGE>
EXHIBIT B
FORM OF EXCHANGE NOTE AND PRIVATE EXCHANGE NOTE
CUSIP/CINS _________ No. _______
$________
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
INTEGRATED CIRCUIT SYSTEMS, INC. promises to pay to _________________ or
registered assigns, the principal sum of __________________ Dollars on May 15,
2009.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
INTEGRATED CIRCUIT SYSTEMS, INC.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
This is one of the 11 1/2% Senior Subordinated
[Exchange] [Private Exchange] Notes Due 2009
referred to in the within-mentioned Indenture:
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:________________________ Dated: _______________
Name:
Title:
[If the Note is to be issued in global form add the Global Securities Legend
from Exhibit 1 to the Appendix and the attachment form such Exhibit 1 captioned
"[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN
GLOBAL SECURITY".]
[If the Note is a Private Exchange Note issued in a Private Exchange to an
Initial Purchaser holding an unsold portion of its initial allotment, add the
restricted securities legend from Exhibit 1 to Appendix A and replace the
Assignment Form with that included in Exhibit A]
B-1
<PAGE>
(Back of Note)
11 1/2% Senior Subordinated [Exchange] [Private Exchange] Note Due 2009
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Integrated Circuit Systems, Inc., a Pennsylvania corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate per annum shown above; [provided, however, that if a Registration
Default (as defined in the Registration Rights Agreement) occurs, additional
cash interest will accrue on this Note at a rate of 0.50% per annum from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured,
calculated on the principal amount of this Note as of the date on which such
interest is payable. Such interest is payable in addition to any other interest
payable from time to time with respect to this Note.]/4/. Interest on the Notes
will accrue from [the most recent date on which interest has been paid on the
Initial Note in exchange for which this [Exchange Note] [Private Exchange Note]
was issued] [date of issuance of Additional Notes]. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
[November 15, 1999] [first interest payment date after issuance of Additional
Notes]. Interest will be computed on the basis of a 360-day year of twelve 30-
day months.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; the Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful.
2. Method Of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the May 1 or November 1 next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture
with respect to defaulted interest. The Notes will be payable as to principal,
premium and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest may be made by check mailed to the
- --------------------------------
/4/ Insert if at the time of issuance of the Exchange Note or Private Exchange
Note (as the case may be) neither the Registered Exchange Offer has been
consummated nor a Shelf Registration Statement has been declared effective
in accordance with a Registration Rights Agreement.
B-2
<PAGE>
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal, interest and premium on all Global Securities and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Company or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent And Registrar. Initially, Chase Manhattan Trust Company,
National Association, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. [This Note is one of a duly authorized issue of Exchange
Notes of the Company designated as its 11 1/2% Senior Subordinated Exchange
Notes Due 2009.] [This Note is one of a duly authorized issue of Private
Exchange Notes of the Company designated as its 11 1/2% Senior Subordinated
Private Exchange Notes Due 2009.] The Company shall be entitled to issue
Additional Notes pursuant to Section 2.14 of the Indenture; provided, that such
issuance is not prohibited by Section 4.09 of the Indenture. The Initial Notes
issued on May 11, 1999, and any Additional Notes, and any Private Exchange Notes
and Exchange Notes issued pursuant to the Indenture, are treated as a single
class of securities under the Indenture. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S)
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent of
any conflict between the terms of the Notes or any Note Guarantee and the
Indenture, the applicable terms of the Indenture will govern.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) or (c) of this Paragraph 5,
the Notes will not be redeemable at the Company's option prior to May 15, 2004.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on May 15
of the years indicated below:
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2004....................... 105.750%
2005....................... 103.833%
2006....................... 101.916%
2007 and thereafter........ 100.000%
</TABLE>
B-3
<PAGE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
5, during the first 36 months after May 15, 1999, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
originally issued under this Indenture (including the original principal amount
of any Additional Notes) at a redemption price of 111.500% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
redemption date, with the net cash proceeds from one or more Equity Offerings,
provided that at least $65.0 million of the original aggregate principal amount
of Notes (including the original principal amount of any Additional Notes)
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided,
further, that such redemption shall occur within 120 days of the date of the
closing of any such Equity Offering.
(c) At any time prior to May 15, 2004, the Notes may also be redeemed, as
a whole but not in part, 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 may any such redemption occur 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").
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. Repurchase At Option Of Holder.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, at any
time when the aggregate amount of Net Proceeds Offer Amount exceeds $5.0
million, the Company shall commence an offer to all Holders of Notes (as "Net
Proceeds Offer") pursuant to Sections 3.09 and 4.10 of the Indenture to purchase
the maximum principal amount of Notes (including any Additional Notes) that may
be purchased out of the Net Proceeds Offer Amount at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes (including any Additional Notes) tendered pursuant to an Net Proceeds
Offer is less
B-5
<PAGE>
than the Net Proceeds Offer Amount, the Company (or such Subsidiary) may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Net
Proceeds Offer Amount, the Trustee shall select the Notes to be purchased on a
pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive a Net Proceeds Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. Notice Of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
11. Amendment, Supplement And Waiver. Subject to certain exceptions, the
Indenture, the Note Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and Additional Notes, if any, voting as a single class,
and any existing default or compliance with any provision of the Indenture, the
Note Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes and Additional Notes,
if any, voting as a single class. Without the consent of any Holder of a Note,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or any Subsidiary Guarantor's obligations to Holders
of the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with the requirements of the SEC in order to
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effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Subsidiary Guarantor to
execute a supplemental indenture to the Indenture and/or a Note Guarantee with
respect to the Notes.
12. Defaults And Remedies.
Events of Default include: (i) the failure to pay interest on any Notes
when the same becomes due and payable if the default continues for a period of
30 days, whether or not such payment shall be prohibited by Article 10 hereof;
(ii) the failure to pay the principal on any Notes when such principal becomes
due and payable, at maturity, upon redemption or otherwise (including the
failure to make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or a Net Proceeds Offer), whether or not such payment shall be
prohibited by Article 10 of the Indenture; (iii) a default in the observance or
performance of any other covenant or agreement contained herein if the default
continues for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from the
Trustee or the Holders of at least 25% of the outstanding principal amount of
the Notes; (iv) the failure to pay at final stated maturity (giving effect to
any extensions thereof) the principal amount of any Indebtedness of the Company
or any Restricted Subsidiary, which failure continues for at least 10 days, or
the acceleration of the maturity of any such Indebtedness, which acceleration
remains uncured and unrescinded for at least 10 days, if the aggregate principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $7.5 million or more at any time; (v) one
or more judgments in an aggregate amount in excess of $7.5 million shall have
been rendered against the Company or any of its Significant Subsidiaries and
such judgments remain undischarged, unpaid or unstayed for a period of 60 days
after such judgment or judgments become final and non-appealable; (vi) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries; and (vii) except as permitted by the Indenture, any
Note Guarantee of a Significant Subsidiary is held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Subsidiary Guarantor which is a Significant Subsidiary, or any
Person acting on behalf of any such Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Note Guarantee. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it in good faith reasonably
determines that withholding notice is in their best interest. The Holders of a
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majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings With Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Subsidiary Guarantors,
as such, shall not have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Notes, the Note Guarantees or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder 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.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder 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).
17. 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 and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
[18. Registration Rights. Pursuant to the Registration Rights Agreement
(as defined in the Indenture), the Company will have certain obligations to the
Holders of the Exchange Notes and the Private Exchange Notes. The Holders of
the Exchange Notes and the Private Exchange Notes shall be entitled to receive
certain additional interest payments upon certain conditions, all pursuant to
and in accordance with the terms of the Registration
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<PAGE>
Rights Agreement. The Company shall notify the Trustee of the amount of any such
payments.]/5/
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Integrated Circuit Systems, Inc
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attention: Chief Financial Officer
- -----------------------------
/5/ To be included to the extent applicable.
B-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________, agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date: __________ Signed: _____________________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: _____________
(Signature must be guaranteed by an "eligible guarantor institution," that is, a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended).
B-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased: $________
Date:__________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:____________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
B-10
<PAGE>
EXHIBIT C
FORM OF NOTATION OF GUARANTEE
For value received, each Subsidiary Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of May 11, 1999 (the "Indenture")
among Integrated Circuit Systems, Inc., the Subsidiary Guarantors listed on
Schedule I thereto and Chase Manhattan Trust Company, National Association, as
trustee (the "Trustee"), (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, 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 of the Indenture and (b) 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 the Subsidiary Guarantors to the Holders of Notes
and to the Trustee pursuant to the Note Guarantee and the Indenture are
expressly set forth in Article 11 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Note Guarantee. Each Holder of a
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated
and subject in right of payment upon any defeasance of this Note in accordance
with the provisions of the Indenture.
[Name of Guarantor(s)]
By:________________________________
Name:
Title:
C-1
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Integrated Circuit Systems, Inc. (or its permitted successor), a
Pennsylvania corporation (the "Company"), the Company, the other Subsidiary
Guarantors (as defined in the Indenture referred to herein) and Chase Manhattan
Trust Company, National Association, as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of May 11, 1999 providing, among other
things, for the issuance of 11 1/2% Senior Subordinated Notes Due 2009 (the
"Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto mutually covenant and agree for the equal and ratable benefit of the
Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement To Guarantee. The Guaranteeing Subsidiary hereby agrees as
follows:
(a) Along with all Subsidiary Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that:
D-1
<PAGE>
(i) the principal of and interest on the Notes will be promptly paid
in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest on the
Notes, if any, if lawful, 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 any of such other obligations, that 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. Failing
payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly
and severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or the 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
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
(c) The following is hereby waived: 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.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Subsidiary Guarantors, or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Subsidiary Guarantors any amount paid either to the Trustee or such Holder,
this Note Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.
(g) As between the Subsidiary Guarantors, 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 6 of the Indenture
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in
D-2
<PAGE>
respect of the obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Subsidiary Guarantors for the purpose of the Note
Guarantees.
(h) The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Note Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, the obligations of the
Guaranteeing Subsidiary under its Notes Guarantee shall be limited to the
maximum amount as will, after giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant under any applicable
Bankruptcy Laws or fraudulent conveyance laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Subsidiary Guarantor in respect of the obligations of such
other Subsidiary Guarantor under Article 11 of the Indenture, result in the
obligations of such Subsidiary Guarantor under its Note Guarantee not
constituting a fraudulent transfer or conveyance.
3. Execution And Delivery. Each Guaranteeing Subsidiary agrees that the
Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. On Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with or
into (whether or not such Guaranteeing Subsidiary is the surviving Person)
another corporation, Person or entity whether or not affiliated with such
Guaranteeing Subsidiary unless:
(i) subject to the last paragraph of Section 11.05 of the Indenture, the
Person formed by or surviving any such consolidation or merger (if other than a
Subsidiary Guarantor or the Company) unconditionally assumes all the obligations
of such Guaranteeing Subsidiary, pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee, under the Notes, the
Indenture and the Note Guarantee on the terms set forth herein or therein;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(iii) either (A) the Company would be permitted, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 of the Indenture, or (B) immediately after
giving effect to such transaction, the Consolidated Fixed Charge Coverage Ratio
of the Company shall be higher than the
D-3
<PAGE>
Consolidated Fixed Charge Coverage Ratio of the Company immediately prior to
such transaction.
(b) In case of any such consolidation, merger, sale or conveyance and 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
Note Guarantee endorsed upon the Notes and the due and punctual performance of
all of the covenants and conditions of the Indenture to be performed by the
Guaranteeing Subsidiary, such successor corporation shall succeed to and be
substituted for the Guaranteeing Subsidiary with the same effect as if it had
been named herein as a Subsidiary Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under the Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture as though all of such Note Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.05 of the
Indenture, nothing contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Restricted Subsidiary with or into the
Company or another Restricted Subsidiary, or shall prevent any sale or
conveyance of the property of a Restricted Subsidiary as an entirety or
substantially as an entirety to the Company or another Restricted Subsidiary.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets of
any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all to the capital stock of any Subsidiary
Guarantor, then such Subsidiary Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Subsidiary Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all or substantially all of the
assets of such Subsidiary Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of the Indenture, including without limitation Section 4.10 of the
Indenture. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Subsidiary Guarantor from its obligations under its Note
Guarantee.
(b) Any Subsidiary Guarantor not released from its obligations under its
Note Guarantee shall remain liable for the full amount of principal of and
interest on the Notes
D-4
<PAGE>
and for the other obligations of any Subsidiary Guarantor under the Indenture as
provided in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or Subsidiary Guarantor under the Notes, any Note Guarantees, the Indenture or
this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect Of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals and statements contained herein,
all of which recitals and statements are made solely by the Guaranteeing
Subsidiary and the Company.
D-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: May 11, 1999
_____________
INTEGRATED CIRCUIT SYSTEMS, INC.
by:/s/Rudolf S. Gassner
----------------------------
Name:Rudolf S. Gassner
Title:Chairman of the Board
SUBSIDIARY GUARANTORS:
ICS TECHNOLOGIES, INC.
by:/s/Hock E. Tan
----------------------------
Name:Hock E. Tan
Title:President
ICST, INC.
by:/s/Henry I. Boreen
----------------------------
Name:Henry I. Boreen
Title:President
MICROCLOCK, INC.
by:/s/Henry I. Boreen
----------------------------
Name:Henry I. Boreen
Title:President
D-6
<PAGE>
CHASE MANHATTAN TRUST
COMPANY, NATIONAL ASSOCIATION
as Trustee
By:/s/illegible
----------------------------
Name:
Title:
D-7
<PAGE>
SCHEDULE I
SCHEDULE OF SUBSIDIARY GUARANTORS
The following schedule lists each Subsidiary Guarantor under the Indenture
as of the Issue Date:
1. ICS Technologies, Inc., a Delaware corporation
2. ICST, Inc., a Pennsylvania corporation
3. Microclock, Inc., a Delaware corporation
S-1
<PAGE>
Pepper Hamilton LLP
Attorneys at Law
3000 Two Logan Square
Philadelphia, PA 19103-2799
[Logo]
Exhibit 5.1
October 7, 1999
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Norristown, PA 19403
Re: Registration Statement on Form S-4
----------------------------------
Gentlemen:
You have requested our opinion, as special counsel for Integrated
Circuit Systems, Inc. (the "Company") and ICS Technologies, Inc., ICST, Inc.,
and MicroClock, Inc. (collectively, the "Guarantors" ) in connection with a
registration statement on Form S-4 (the "Registration Statement") being
filed by the Company under the Securities Act of 1933, as amended (the "Act")
with the Securities and Exchange Commission on or about the date hereof.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Registration Statement.
The Registration Statement relates to an offer to exchange (the
"Exchange Offer") the Company's 11 1/2% Senior Subordinated Notes due 2009 (the
"New Notes") for an equal principal amount of the Company's outstanding 11 1/2%
Senior Subordinated Notes due 2009 (the "Old Notes").
The Notes were issued, and the New Notes will be issued, under an
Indenture dated as of May 11, 1999 (the "Indenture") among the Company, the
Guarantors and Chase Manhattan Trust Company National Association, as Trustee
(the "Trustee").
In connection with this opinion, we have examined the Registration
Statement, the Indenture (included as Exhibit 4 to the Registration Statement),
the form of the New Notes (set forth as Exhibit B to the Indenture) and such
other documents, records and other matters as we have deemed necessary or
appropriate in order to give the opinions set forth herein.
We have, with your approval, assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of documents
submitted to us as certified, facsimile, conformed, electronic, or photostatic
copies and the authenticity of the originals of such copies. As to all
questions of fact material to this opinion that have not been independently
established, we have relied upon certificates or comparable documents, and oral
and written statements and representations, of officers
<PAGE>
Integrated Circuit Systems, Inc.
October 7, 1999
Page 2
and representatives of the Company. We have not independently verified such
information and assumptions.
Based upon and subject to the foregoing, assuming that the Indenture
has been duly authorized, executed and delivered by, and represents the valid
and binding obligation of, the Trustee, and when the Registration Statement,
including any amendment thereto, shall have become effective under the
Securities Act and the Indenture shall have been duly qualified under the Trust
Indenture Act of 1939, as amended, it is our opinion that:
1. Each of the Company and the Guarantors has been duly incorporated
and is validly existing and in good standing under the laws of their respective
jurisdictions of its incorporation with the corporate power and authority to
execute, deliver, and perform their respective obligations under the New Notes
and the Indenture; and each of the Indenture and the New Notes has been duly
authorized by the Company and the Guarantors;
2. The Indenture constitutes the legal, valid and binding obligation
of the Company and the Guarantors, enforceable against the Company and the
Guarantors in accordance with its terms;
3. The New Notes, when duly executed and delivered by or on behalf
of the Company and the Guarantors in the form contemplated by the Indenture upon
the terms set forth in the Exchange Offer and authenticated by the Trustee or an
authenticating agent appointed by the Trustee in accordance with the terms of
the Indenture, will constitute the legal, valid and binding obligations of the
Company and the Guarantors, enforceable against the Company and the Guarantors
in accordance with their terms;
subject, in the case of the opinions set forth in paragraphs numbered 2 and 3
hereof, to (i) bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights from time to time in effect; (ii) application of general
principles of equity (regardless of whether considered in proceedings in equity
or at law) and the discretion of the court before which any proceeding therefor
may be brought; (iii) standards of commercial reasonableness and the implied
covenant of good faith; and (iv) public policy.
<PAGE>
Integrated Circuit Systems, Inc.
October 7, 1999
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our Firm under the caption "Legal
Opinions" in the Registration Statement. In doing so, we do not admit that we
are in the category of persons whose consent it required under Section 7 of the
Act, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ PEPPER HAMILTON LLP
PEPPER HAMILTON LLP
<PAGE>
EXHIBIT 10.1
$100,000,000
INTEGRATED CIRCUIT SYSTEMS, INC.
11 1/2% Senior Subordinated Notes Due 2009
PURCHASE AGREEMENT
------------------
May 5, 1999
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
c/o Bear, Stearns & Co. Inc.
245 Park Avenue,
New York, N.Y. 10167
Ladies and Gentlemen:
1. Introductory. Integrated Circuit Systems, Inc., a Pennsylvania
corporation (the "Company"), proposes, subject to the terms and conditions
stated herein, to issue and sell to the several initial purchasers named in
Schedule A hereto (the "Initial Purchasers") the respective principal amounts
set forth in Schedule A hereto of U.S. $100,000,000 aggregate principal amount
of its 11 1/2% Senior Subordinated Notes Due 2009 (the "Notes"). The Notes are
to be issued pursuant to an indenture to be dated as of May 11, 1999 (the
"Indenture"), between the Company, the guarantors named therein and Chase
Manhattan Trust Company, National Association, as Trustee, which Notes will be
unconditionally guaranteed by ICS Technologies, Inc., ICST Inc. and Microclock,
Inc. (the "Guarantors," and together with the Company, the "Issuers"). For
purposes of this agreement, (i) the term "Offered Securities" means the Notes,
together with the guarantees (the "Guarantees") thereof by the Guarantors and
(ii) references to "Subsidiaries" or "subsidiaries" of the Company shall include
the direct and indirect subsidiaries of the Company. The United States
Securities Act of 1933 is herein referred to as the "Securities Act."
Pursuant to and in furtherance of the Agreement and Plan of Merger dated as
of January 20, 1999, as amended by Amendment No. 1 to the Agreement and Plan of
Merger dated as of February 16, 1999 (the "Recapitalization Agreement"), by and
between ICS Merger Corp. ("Merger Corp.") and the Company, among other things,
(i) Merger Corp. will be established and merged into the Company (the "Merger"),
with the Company as the surviving corporation, (ii) an equity investment of
$40.0 million (the "Equity Investment") will be made by Bain Capital, Inc. and
Bear, Stearns & Co. Inc. or one or more of their respective affiliates and
certain other investors (the "Investors") and certain management investors and
existing shareholders will convert certain outstanding shares of common stock
and options of the Company before the Merger (the "Rollover Equity") into common
stock and options of the Company following the consummation of the Merger
(collectively with the Investors, the "Equity Investors"), (iii) the Issuers
will issue and sell the Offered Securities, (iv) the Company will enter into a
new secured global credit facility consisting of an aggregate of $70 million
<PAGE>
of term loan facilities and an aggregate $25 million revolving credit facility
(the "New Credit Facility") with the agents and lenders named therein, and the
Company will make initial borrowings of approximately $77.4 million thereunder,
(v) the existing issued and outstanding capital stock of the Company (other than
the Rollover Equity) (the "Shares") will be redeemed and/or repurchased, for
aggregate cash consideration of $265.9 million, (vi) the Company will repay in
full all of the Existing Indebtedness, as defined in the New Credit Facility,
and (vii) the Company will pay reasonable fees and expenses (including, without
limitation, reasonable fees of outside counsel) in connection with the foregoing
in an amount not to exceed $17.5 million (all such transactions, including the
Merger, shall be referred to in this Agreement as the "Recapitalization"). The
net proceeds of the offering of the Notes will be used, together with a portion
of the borrowings under the New Credit Facility, the existing cash on hand of
the Company and the Equity Investment to finance the Recapitalization. As a
result of the Recapitalization, (i) the Equity Investors will own all of the
outstanding capital stock of the Company, (ii) the Company's common stock will
no longer be traded on the Nasdaq National Market and (iii) the registration of
the Company's common stock under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") will be terminated.
The Offered Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act, in reliance upon an exemption
therefrom. Pursuant to the terms of the Offered Securities and the Indenture,
the Initial Purchasers and investors that acquire Offered Securities may only
resell or otherwise transfer such Offered Securities if such Offered Securities
are hereafter registered under the Securities Act or if an exemption from the
registration requirements of the Securities Act is available (including, without
limitation, the exemption afforded by Rule 144A, Rule 144 or Regulation S of the
rules and regulations under the Securities Act).
Holders of the Offered Securities (including the Initial Purchasers and
their direct and indirect transferees) will be entitled to the benefits of a
Registration Rights Agreement dated the Closing Date, among the Issuers and the
Initial Purchasers (the "Registration Rights Agreement"), pursuant to which the
Company and the Guarantors will agree to file with the Securities and Exchange
Commission (the "Commission") (i) a registration statement under the Securities
Act (the "Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Company (together with the applicable subsidiary
guarantees, the "Exchange Notes"), which are identical in all material respects
to the Offered Securities (except that the Exchange Notes will not contain terms
with respect to transfer restrictions and interest rate increase) and (ii) under
certain circumstances, a shelf registration statement pursuant to Rule 415 under
the Securities Act.
This Agreement, the Indenture, the Offered Securities, the Exchange Notes,
the Registration Rights Agreement, all material agreements and instruments
relating to the Merger (including, but not limited to, the Recapitalization
Agreement and the Articles of Merger to be filed with the Department of State of
the Commonwealth of Pennsylvania on the Closing Date (the "Articles of
Merger")), and the New Credit Facility and the agreements creating security
interests in the assets of the Company for the benefit of the holders of
indebtedness arising under the New Credit Facility (together with the New Credit
Facility, the "Bank Agreement") are sometimes referred to in this Agreement,
individually, as a "Transaction Document" and, collectively, as the
"Transaction Documents." The transactions that comprise the Recapitalization
(including the Merger and the issuance and sale of the Offered Securities) are
sometimes referred to in this Agreement, individually, as a "Transaction" and
collectively, as the "Transactions."
Capitalized terms used but not defined herein shall have the meanings given
to such terms in the Offering Document (as defined below).
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<PAGE>
Each of the Issuers, jointly and severally, hereby agrees with the several
Initial Purchasers as follows:
2. Representations and Warranties of the Company. Each of the several
Issuers, jointly and severally, represents and warrants to, and agrees with, the
Initial Purchasers that:
(a) A preliminary offering circular dated April 20, 1999 and an
offering circular dated the date of this Agreement relating to the Offered
Securities to be offered by the Initial Purchasers have been prepared by
the Company. Such preliminary offering circular (the "Preliminary Offering
Circular") and offering circular (the "Offering Circular"), as supplemented
as of the date of this Agreement, together with any other document approved
by the Company for use in connection with the contemplated resale of the
Offered Securities, are hereinafter collectively referred to as the
"Offering Document." Any references herein to the Offering Document shall
be deemed to include all amendments and supplements thereto, unless
otherwise noted. The Preliminary Offering Circular as of its date does not,
and the Offering Circular as of its date and as of the Closing Date does
not and will not, and any supplement or amendment to them will not, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The preceding sentence does not apply to statements in or
omissions from the Offering Document based upon written information
furnished to the Company by any Initial Purchaser through Bear, Stearns &
Co. Inc. ("Bear Stearns") specifically for use therein, it being understood
and agreed that the only such information is that described as such in
Section 7(b) hereof. Except as disclosed in the Offering Document, each of
the Company's Annual Report on Form 10-K most recently filed with the
Commission and all subsequent reports, proxy statements and other
documents (collectively, the "Exchange Act Documents") which have been
filed by the Company with the Commission or sent to stockholders pursuant
to the Exchange Act (including, but not limited to the proxy statement on
Schedule 14A and the transaction statement on Schedule 13E-3 filed with the
Commission relating to the Recapitalization) does not include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Such documents, when they were filed
with the Commission, conformed in all material respects to the requirements
of the Exchange Act and the rules and regulations of the Commission
thereunder. No stop order preventing the use of the Offering Document, or
any order asserting that any of the Transactions are subject to the
registration requirements of the Securities Act, has been issued.
(b) Each of the Issuers and Merger Corp. has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Offering Document; and each of the Issuers and Merger Corp. is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified and in good standing would not reasonably be
expected to individually or in the aggregate (x) result in a material
adverse effect on the properties, business, result of operations, condition
(financial or other), affairs or prospects of the Company and its
subsidiaries taken as a whole, (y) interfere with or adversely affect the
issuance or marketability of the Offered Securities or (z) in any manner
draw into question the validity of this Agreement, any other Transaction
Document or any
3
<PAGE>
Transaction (any of the events set forth in clauses (x), (y) or (z), a
"Material Adverse Effect").
(c) Each subsidiary of the Company other than the Guarantors that (i)
generates 5% or more of the revenues, (ii) generates 5% or more of the
operating income, or (iii) holds 5% or more of the assets, in each case, of
the Company and its subsidiaries on a consolidated basis as reflected in
the financial statements included in the Offering Document under the
heading "Unaudited Pro Forma Consolidated Financial Data" (each, a
"Significant Non-Guarantor Subsidiary," and, together with the Guarantors,
each a "Significant Subsidiary"), has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Document; and each Significant Non-Guarantor Subsidiary of the Company is
duly qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified and in good standing could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect; all of the issued and outstanding capital stock of Merger Corp.,
the Company and of each Significant Subsidiary has been duly authorized and
validly issued and is fully paid and nonassessable; and except for pledges
in favor of Credit Suisse First Boston, as collateral agent, under the New
Credit Facility, the capital stock of each Significant Subsidiary owned by
the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(d) The Indenture has been duly authorized by each of the Issuers by
all necessary corporate action; the Offered Securities have been duly
authorized by each of the Issuers by all necessary corporate action; and
when the Offered Securities are delivered and paid for pursuant to this
Agreement and the Indenture on the Closing Date (as defined below), the
Indenture will have been duly executed and delivered by each of the
Issuers, such Offered Securities will have been duly executed,
authenticated, issued and delivered by each of the Issuers and will conform
in all material respects to the description thereof contained in the
Offering Document and the Indenture and such Offered Securities will
constitute valid and legally binding obligations of each of the Issuers,
enforceable in accordance with their terms and entitled to the benefits of
the Indenture, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity (regardless of whether enforceability is considered in a proceeding
at law or in equity). The Exchange Notes have been duly and validly
authorized for issuance by the Issuers and, when duly executed,
authenticated, issued and delivered by each of the Issuers in accordance
with the terms of the Exchange Offer and the Indenture, will constitute
valid and legally binding obligations of each of the Issuers, enforceable
in accordance with their terms and entitled to the benefits of the
Indenture, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws for general applicability
relating to or affecting creditors' rights and to general principles of
equity (regardless of whether enforceability is considered in a proceeding
at law or in equity).
(e) Except as disclosed or reflected in the fees and expenses set
forth in the Offering Document, there are no contracts, agreements or
understandings between Merger Corp. or the Company and any person that
would give rise to a valid claim against Merger Corp. or the Company or any
Initial Purchaser for a brokerage commission, finder's fee or other like
payment in connection with the Transactions.
4
<PAGE>
(f) Subject to the express assumptions set forth in Section 2(s)
below, no consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the Transactions as contemplated by (i) this Agreement and
the Registration Rights Agreement, or (ii) any other Transaction Document,
in each case, in connection with the consummation of the transactions
contemplated therein, except as may be required (i) in connection with the
registration of the Exchange Notes under the Securities Act, (ii) in
connection with the qualification of the Indenture under the Trust
Indenture Act (as defined in paragraph (s) below) pursuant to the
Registration Rights Agreement, or (iii) pursuant to state securities or
"Blue Sky" laws.
(g) The execution, delivery and performance by each of Merger Corp.,
the Company and its subsidiaries (to the extent each is a party thereto) of
each of the Transaction Documents and compliance with the terms and
provisions thereof and consummation of the Transactions will not result in
a breach or violation of any of the terms and provisions of, or constitute
a default under, (i) any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over Merger Corp., the Company or any of its subsidiaries or
any of their properties, or (ii) the Transaction Documents or any other
agreement or instrument to which Merger Corp., the Company or any of its
subsidiaries is a party or by which Merger Corp., the Company or any of its
subsidiaries is bound or to which any of the properties of Merger Corp.,
the Company or its subsidiaries is subject, or (iii) the charter or by-laws
of Merger Corp., the Company or any of its subsidiaries, except (A) in each
case, that any rights to indemnity and contribution may be limited by
federal and state securities laws and public policy considerations and (B)
in the case of clauses (i) and (ii) for such breaches, violations or
defaults as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and each of the Issuers has
full corporate power and authority to authorize, issue and sell the Offered
Securities as contemplated by this Agreement, and each of Merger Corp., the
Company and its subsidiaries have full corporate power and authority to
execute, deliver and perform the Transaction Documents to which it is a
party and to consummate the Transactions.
(h) This Agreement has been duly authorized, executed and delivered by
each of the Issuers. Each of the other Transaction Documents has been, or
as of the Closing Date will have been, duly authorized, executed and
delivered by each of Merger Corp., the Company and its subsidiaries (to the
extent each is a party thereto) and each Transaction Document conforms or
will conform in all material respects to the descriptions thereof contained
in the Offering Document and each Transaction Document (other than this
Agreement) is or will constitute valid and legally binding obligations of
Merger Corp., the Company and its subsidiaries (to the extent each is a
party thereto), enforceable in accordance with its respective terms,
except that any rights to indemnity and contribution may be limited by
federal and state securities laws and public policy considerations and
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in
equity).
(i) Except as disclosed in the Offering Document, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them that are material to the Company
and its subsidiaries taken as a whole, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or proposed to be made thereof by
them;
5
<PAGE>
and except as disclosed in the Offering Document, the Company and its
subsidiaries hold any leased real or personal property that is material to
the Company and its subsidiaries taken as whole under valid and enforceable
leases with no exceptions that would materially interfere with the use made
or proposed to be made thereof by them.
(j) The Company and its subsidiaries possess all certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(k) No labor strike, slowdown, stoppage or dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent, that would reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. None of the Company
or any of its subsidiaries has violated (A) any federal, state or local law
or foreign law relating to discrimination in hiring, promotion or pay of
employees, (B) any applicable wage or hour laws of, or (C) any provision of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or the rules and regulations thereunder, except those violations that could
not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(l) The Company and its subsidiaries own, possess, have the right to
use or can acquire on reasonable terms, adequate trademarks, trade names
and other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively, "intellectual
property rights") used in the conduct the business now operated by them, or
presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to
any intellectual property rights that, if determined adversely to the
Company or any of its subsidiaries, would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. To the
knowledge of the Company after due inquiry, the use of the intellectual
property rights in connection with the business and operations of the
Company or any of its subsidiaries does not infringe on the rights of any
person, except such infringements as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(m) Neither the Company nor any of its subsidiaries (i) is in
violation of any statute, any rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to
the use, disposal or release of hazardous or toxic substances or relating
to the protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"), (ii)
owns or operates any real property contaminated with any substance that is
subject to any environmental laws, (iii) is liable for any off-site
disposal or contamination pursuant to any environmental laws, or (iv) is
subject to any claim relating to any environmental laws, in each case,
which violation, contamination, liability or claim would reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect; and the Company is not aware of any pending investigation which
might lead to such a claim.
(n) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting Merger Corp., the
Company, any of its subsidiaries or any of their respective properties
that, if determined adversely to Merger
6
<PAGE>
Corp., the Company or any of its subsidiaries, would reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect, or would materially and adversely affect the ability of Merger
Corp., the Company or any of its subsidiaries to perform their respective
obligations under the Transaction Documents, or which are otherwise
material in the context of the sale of the Offered Securities and the
consummation of the other Transactions; and no such actions, suits or
proceedings are, to the Company's knowledge, threatened or contemplated.
(o) The financial statements included in the Offering Document present
fairly the financial position of the Company and its consolidated
subsidiaries as of the dates shown (subject in the case of interim
financial statements to normal year-end adjustments) and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis
and the schedules included in the Offering Document present fairly the
information required to be stated therein. The assumptions used in
preparing the pro forma financial data included in the Offering Document
provide a reasonable basis for presenting the significant effects directly
attributable to the transactions or events described therein, the related
pro forma adjustments give appropriate effect to those assumptions, and the
pro forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement amounts.
Except as otherwise disclosed in the Offering Document, such pro forma
financial data comply as to form in all material respects with the
requirements that would have been applicable to pro forma financial
statements had this Offering Document been a prospectus included in a
registration statement on Form S-1 filed with the Commission under the
Securities Act.
(p) Except as disclosed in the Offering Document, since the date of
the latest audited financial statements included in the Offering Document
there has been (i) no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole, (ii) except as disclosed in
or contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock, (iii) none of the Company or any of its subsidiaries
has incurred any liabilities or obligations, direct or contingent, which
are material, individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, nor entered into any transaction not in the
ordinary course of business, and (iv) none of the Company or any of its
subsidiaries has incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the
Company and its subsidiaries, taken as a whole, and that are required to be
disclosed on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest balance
sheet or notes thereto included in the Offering Document.
(q) None of the Issuers is an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940 (the "Investment Company Act"); and each of the Issuers is not
and, after giving effect to the offering and sale of the Offered Securities
and the application of the proceeds thereof as described in the Offering
Document and the consummation of the other Transactions, will not be an
"investment company" as defined in the Investment Company Act.
7
<PAGE>
(r) The Offered Securities are eligible for resale to "qualified
institutional buyers" pursuant to Rule 144A under the Securities Act and no
securities of the Company or any of its subsidiaries of the same class
(within the meaning of Rule 144A(d)(3) under the Securities Act) as the
Offered Securities are listed on any national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.
(s) Assuming that the representations and warranties of the Initial
Purchasers contained in Section 4(a) below are true in all material
respects, and assuming compliance in all material respects by the Initial
Purchasers with their covenants in Section 4 below, the offer and sale of
the Offered Securities in the manner contemplated by this Agreement will be
exempt from the registration requirements of the Securities Act by reason
of Section 4(2) thereof and Regulation S thereunder and it is not necessary
to qualify an indenture in respect of the Offered Securities under the
United States Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(t) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf (i) has, within the six-month period prior to
the date hereof, offered or sold in the United States or to any U.S. person
(as such terms are defined in Regulation S under the Securities Act) the
Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell the Offered
Securities (A) in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under
the Securities Act or (B) with respect to any such securities sold in
reliance on Rule 903 of Regulation S ("Regulation S") under the Securities
Act, by means of any directed selling efforts within the meaning of Rule
902(c) of Regulation S. The Company, its affiliates and each person acting
on its or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. The Company has not entered and
will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement.
(u) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (A) transactions are executed in accordance with management's general
or specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(v) Each of the Company and its subsidiaries maintains insurance
covering its properties, operations, personnel and businesses, insuring
against such losses and risks as are consistent with industry practice to
protect the Company and its subsidiaries and their respective businesses.
None of the Company or any of its subsidiaries has received notice from any
insurer or agent of such insurer that substantial capital improvements or
other expenditures will have to be made in order to continue such
insurance.
(w) Except as disclosed in the Offering Document, no relationship,
direct or indirect, exists between or among the Company or any of its
subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the
other hand, which would be required by the Securities Act to be
8
<PAGE>
described in the Offering Document if the Offering Document were a
prospectus included in a registration statement on Form S-1 filed with the
Commission under the Securities Act.
(x) The Company has (A) initiated a review and assessment of all areas
within its and each of its subsidiaries' business and operations (including
those affected by suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company or any of its subsidiaries (or suppliers,
vendors and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (B) developed a plan and timeline for addressing
the Year 2000 Problem on a timely basis and (C) to date, has implemented
that plan in accordance with that timetable. Based on the foregoing, the
Issuers believe that all computer applications used by the Company and its
subsidiaries that are material to the business and operations of the
Company and its subsidiaries taken as a whole are, and the Company has no
reason to believe, after due inquiry, that the computer applications used
by the Company's and its subsidiaries' key suppliers, vendors and customers
that are material to the business of the Company and its subsidiaries,
taken as a whole, are not, reasonably expected on a timely basis to be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent
that a failure to do so would not reasonably be expected, individually or
in the aggregate, to have Material Adverse Effect.
(z) The statistical and market-related data included in the Offering
Document are based on or derived from sources which the Issuers believe to
be reliable and accurate in all material respects.
(aa) The Offering Document, as of its date, and each amendment or
supplement thereto, as of its date, contains the information specified in,
and meets the requirements of, Rule 144A(d)(4) under the Act.
(bb) None of the Issuers intends to, nor believes that it will, incur
debts beyond its ability to pay such debts as they mature. The present fair
saleable value of the assets of each Issuer exceeds the amount that will be
required to be paid on or in respect of its existing debts and other
liabilities (including contingent liabilities) as they become absolute and
matured. The assets of each Issuer do not constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted. Upon the issuance of the Offered Securities, the present fair
saleable value of the assets of each Issuer will exceed the amount that
will be required to be paid on or in respect of its existing debts and
other liabilities (including contingent liabilities) as they become
absolute and matured. Upon the issuance of the Offered Securities, the
assets of each Issuer will not constitute unreasonably small capital to
carry out its business as now conducted, including the capital needs of
each such Issuer, taking into account the projected capital requirements
and capital availability.
(cc) None of the Issuers has (A) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of the
Company or any of its subsidiaries to facilitate the sale or resale of the
Offered Securities or (B) since the date of the Preliminary Offering
Circular (1) sold, bid for, purchased or paid any person any compensation
for soliciting purchases of the Offered Securities or (2) paid or agreed to
pay to any person any compensation for soliciting another to purchase any
other securities of the Company or any of its subsidiaries.
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(dd) None of the Issuers has used or will use any form of general
solicitation in connection with the offer and sale of any of the Offered
Securities, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation.
(ee) Each certificate signed by any officer of any Issuer and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by such Issuer to the
Initial Purchasers as to the matters covered thereby.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the Initial
Purchasers, and the Initial Purchasers agree, severally and not jointly, to
purchase from the Company, at a purchase price of 97.0% of the principal amount
thereof plus accrued interest from May 11, 1999 to the Closing Date (as
hereinafter defined), the respective principal amounts of the Offered Securities
set forth opposite the names of the several Initial Purchasers in Schedule A
hereto.
The Company will deliver against payment of the purchase price the Offered
Securities in the form of one or more permanent global securities in definitive
form (the "Global Securities") deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent Global Securities will be held only
in book-entry form through DTC, except in the limited circumstances described in
the Offering Document. Payment of the purchase price for the Offered Securities
shall be made by the Initial Purchasers in Federal (same day) funds by wire
transfer to an account of the Company at a bank designated by the Company and
acceptable to Bear Stearns at the office of Skadden, Arps, Slate, Meagher & Flom
LLP at 9 A.M. (New York time), on May 11, 1999 or at such other time not later
than seven full business days thereafter as Bear Stearns and the Company
determine, such time being herein referred to as the "Closing Date", against
delivery to the Trustee as custodian for DTC of the Global Securities
representing all of the Securities. The Global Securities will be made available
for checking at the office of Skadden, Arps, Slate, Meagher & Flom LLP at least
24 hours prior to the Closing Date.
4. Representations by Initial Purchasers; Resale by Initial Purchasers.
(a) Each Initial Purchaser severally represents and warrants to the
Company that it is a "qualified institutional buyer" within the meaning of
Rule 144A under the Securities Act.
(b) Each Initial Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or pursuant
to an exemption from the registration requirements of the Securities Act,
or to non-U.S. persons outside the United States except in accordance with
Regulation S or pursuant to an exemption from the registration requirements
of the Securities Act. Each Initial Purchaser severally represents and
agrees that it has offered and sold the Offered Securities, and will offer
and sell the Offered Securities only in accordance with Rule 903 of
Regulation S or Rule 144A under the Securities Act ("Rule 144A").
Accordingly, neither such Initial Purchaser nor its affiliates, nor any
persons acting on its or their behalf, have engaged or will engage in any
directed selling efforts with respect to the
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Offered Securities, and such Initial Purchaser, its affiliates and all
persons acting on its or their behalf have complied in all material
respects and will comply in all material respects with the offering
restrictions requirements of Regulation S and Rule 144A.
(c) Each Initial Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for any such arrangements with the other Initial Purchaser or
affiliates of the other Initial Purchaser or with the prior written consent
of the Company.
(d) Each Initial Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act, including, but
not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. Each Initial Purchaser severally agrees, with respect to
resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Initial Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the date six months after
the date of issue of the Offered Securities will not offer or sell any
Offered Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Offered Securities in, from or otherwise involving the United Kingdom; and
(iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the Offered Securities to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
5. Certain Agreements of the Company. Each of the Issuers, jointly and
severally, agrees with the several Initial Purchasers that:
(a) The Company will advise Bear Stearns promptly of any proposal to
amend or supplement the Offering Document and will not effect such
amendment or supplementation without Bear Stearns' consent. If, at any time
prior to the completion of the resale of the Offered Securities by the
Initial Purchasers, any event occurs as a result of which the Offering
Document as then amended or supplemented would include an untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, the Company promptly will notify Bear
Stearns of such event and promptly will prepare, at its own expense, an
amendment or supplement which will correct such statement or omission or
11
<PAGE>
effect such compliance. Upon receipt of such notice in written form, each
Initial Purchaser agrees to suspend use of the Offering Document until the
Company has amended or supplemented the Offering Document to correct such
misstatement or omission or to effect compliance with this paragraph (a).
Neither Bear Stearns' consent to, nor the Initial Purchasers' delivery to
offerees or investors of, any such amendment or supplement shall constitute
a waiver of any of the conditions set forth in Section 6. The Company's and
the Initial Purchasers' obligations under this paragraph (a) shall
terminate on the earliest to occur of (i) expiration of the Exchange Offer
(as defined in the Registration Rights Agreement) pursuant to the
Registration Rights Agreement, (ii) the effective date of a shelf
registration statement with respect to the Offered Securities filed
pursuant to the Registration Rights Agreement, (iii) the date upon which no
Initial Purchaser nor any of their respective affiliates continues to hold
Offered Securities acquired as part of their initial distribution, and (iv)
the date upon which no Initial Purchaser nor any of their respective
affiliates continues to hold Exchange Notes, if any.
(b) The Company will furnish to the Initial Purchasers copies of any
preliminary offering circular, the Offering Document and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as the Initial Purchasers request, and the Company will
furnish to Bear Stearns on the date hereof three copies of the Offering
Document signed by a duly authorized officer of the Company, one of which
will include the independent accountants' reports therein manually signed
by such independent accountants. At any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the Company will
promptly furnish or cause to be furnished to each Initial Purchaser and,
upon request of holders and prospective purchasers of the Offered
Securities, to such holders and purchasers, copies of the information
required to be delivered to holders and prospective purchasers of the
Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with Rule
144A in connection with resales by such holders of the Offered Securities.
The Company will pay the expenses of printing and distributing to the
Initial Purchasers all such documents.
(c) The Company will advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, of the
issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any of the Offered
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purpose by any state securities commission or other
regulatory authority. The Issuers shall use their best efforts to prevent
the issuance of any stop order suspending the qualification or exemption of
any of the Offered Securities under any state securities or Blue Sky laws
and, if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption of
any of the Offered Securities under any state securities or Blue Sky laws,
the Issuers shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(d) The Company will cooperate with the Initial Purchasers and their
counsel in connection with the registration and qualification of the
Offered Securities for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as Bear Stearns designates
and do all things necessary to continue such qualifications in effect so
long as required for the resale of the Offered Securities by the Initial
Purchasers, provided that the Company will not be required to qualify as a
foreign corporation or to file a general consent to service of process in
any such jurisdiction.
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(e) During the period of five years hereafter, the Company will
furnish to each Initial Purchaser, as soon as practicable after the end of
each fiscal year, a copy of its annual report to stockholders for such
year; and the Company will furnish to each Initial Purchaser (i) as soon as
available, a copy of each report and any definitive proxy statement of the
Company filed with the Commission under the Exchange Act or mailed to
holders of Offered Securities or any securities of the Company which have
been registered under Section 12 of the Exchange Act, and (ii) from time to
time, such other information concerning the Company as such Initial
Purchaser may reasonably request.
(f) During the period of two years after the Closing Date, the
Company will, upon request, furnish to the Initial Purchasers and any
holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.
(g) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Offered Securities
that have been reacquired by any of them.
(h) During the period of two years after the Closing Date, each of
the Issuers will not be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act.
(i) The Company will pay all expenses incidental to the performance
of the Issuers' obligations under this Agreement, the Indenture, the
Registration Rights Agreement and the other Transaction Documents,
including (i) the fees and expenses of counsel and accountant for the
Issuers and of the Trustee and its professional advisers; (ii) all expenses
in connection with the execution, issue, authentication, packaging and
initial delivery of the Offered Securities and, as applicable, the Exchange
Notes, the preparation and printing of this Agreement, the Registration
Rights Agreement, the Offered Securities, the Exchange Notes, the
Indenture, the Offering Document and amendments and supplements thereto,
and any other document relating to the issuance, offer, sale and delivery
of the Offered Securities and as applicable, the Exchange Notes; (iii) the
cost of listing the Offered Securities and qualifying the Offered
Securities for trading in The Portal/SM/ Market ("PORTAL") and any expenses
incidental thereto; (iv) the cost of any advertising approved by the
Company in connection with the issue of the Offered Securities; (v) for any
expenses (including fees and disbursements of counsel to the Initial
Purchasers) incurred in connection with qualification of the Offered
Securities or the Exchange Notes for sale under the laws of such
jurisdictions as Bear Stearns designates and the printing of memoranda
relating thereto; (vi) for any fees charged by investment rating agencies
for the rating of the Offered Securities or the Exchange Notes, and (vii)
for expenses incurred in printing and distributing preliminary offering
circulars and the Offering Document (including any amendments and
supplements thereto) to or at the direction of the Initial Purchasers. The
Company will also pay or reimburse the Initial Purchasers (to the extent
incurred by them) for all reasonable travel expenses of the Initial
Purchasers and the Company's officers and employees and any other expenses
of the Initial Purchasers and the Company in connection with attending or
hosting meetings with prospective purchasers of the Offered Securities from
the Initial Purchasers.
(j) In connection with the offering, until Bear Stearns shall have
notified the Company and the other Initial Purchaser of the completion of
the resale of the Offered Securities, neither the Company nor any of its
affiliates has or will, either alone or with one or more other persons, bid
for or purchase for any account in which it or any of its affiliates
13
<PAGE>
has a beneficial interest any Offered Securities or attempt to induce any
person to purchase any Offered Securities; and neither it nor any of its
affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Offered
Securities.
(k) For a period of 180 days after the date of the initial offering of
the Offered Securities by the Initial Purchasers, none of the Issuers will
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any United States dollar denominated debt securities issued or
guaranteed by any of the Issuers and having a maturity of more than one
year from the date of issue. None of the Issuers will at any time offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
pledge, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act, the safe harbor of Regulation S
thereunder or the resale exemption under Rule 144A thereunder to cease to
be applicable to the offer and sale of the Offered Securities.
(l) The Company will use the proceeds from the sale of the Offered
Securities in the manner described in the Offering Document under the
caption "Use of Proceeds."
(m) None of the Issuers will sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Offered
Securities in a manner that would require the registration under the
Securities Act of the sale to the Initial Purchasers of the Offered
Securities or to take any other action that would result in the resale of
the Offered Securities not being exempt from registration under the
Securities Act.
(n) None of the Issuers will take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of any of the
Issuers to facilitate the resale of the Offered Securities. Except as
permitted by the Securities Act, none of the Issuers will distribute any
(i) preliminary offering memorandum or offering memorandum, including
without limitation, the Offering Document or (ii) other offering material
in connection with the offering and sale of the Offered Securities.
6. Conditions of the Obligations of the Initial Purchasers. The
obligations of the several Initial Purchasers to purchase and pay for the
Offered Securities will be subject to the accuracy of the representations and
warranties on the part of the Issuers herein, to the accuracy of the statements
of officers of the Issuers made pursuant to the provisions hereof, to the
performance by the Issuers of their respective obligations hereunder and to the
following additional conditions precedent:
(a) The Initial Purchasers shall have received a letter, dated the
date of this Agreement, of KPMG LLP in agreed form confirming that they are
independent public accountants within the meaning of the Securities Act and
the applicable published rules and regulations thereunder ("Rules and
Regulations") and to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Offering Document comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and the related published Rules and
Regulations;
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(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards
No. 71, Interim Financial Information, on the unaudited financial
statements and certain specified financial information included in
the Offering Document;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Company, and of all subsidiaries of the Company for which such
interim financial statements are provided, inquiries of officials of
the Company and of such subsidiaries who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) with respect to the unaudited financial statements
included in the Offering Document, that any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally accepted
accounting principles;
(B) the unaudited consolidated net sales, net operating
income, net income and net income per share amounts for the
three-month periods ended March 28, 1998 and March 27, 1999
included in the Offering Document do not agree with the amounts
set forth in the unaudited consolidated financial statements for
those same periods or were not determined on a basis
substantially consistent with that of the corresponding amounts
in the audited statements of income;
(C) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of this Agreement,
there was any change in the capital stock or any increase in
short-term indebtedness or long-term debt of the Company and its
consolidated subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any decrease in
consolidated net current assets or net assets, as compared with
amounts shown on the latest balance sheet included in Offering
Document; or
(D) for the period from the closing date of the latest
income statement included in the Offering Document to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year and with the period of
corresponding length ended the date of the latest income
statement included in the Offering Document, in consolidated net
sales, net operating income or net income or in the ratio of
earnings to fixed charges;
except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Offering Document disclose have
occurred or may occur or which are described in such letter; and
(iv) they have performed the procedures specified therein on the
pro forma financial statements included in the Offering Document;
15
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(v) on the basis of the review referred to in clause (iv) above,
nothing came to their attention that caused them to believe that the
pro forma financial statements included in the Offering Document (not
including specified supplemental adjustments thereto) do not comply
as to form in all material respects with the applicable accounting
requirements of the Securities Act and the related published Rules and
Regulations or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements; and
(vi) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Offering Document (in each case to the extent that
such dollar amounts, percentages and other financial information are
derived from the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter; and
(vii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
management's discussion and analysis of financial condition and
results of operations as described in Statement of Auditing Standards
No. 86, Management's Discussion and Analysis, on certain specified
portions of the Management's Discussion and Analysis of Financial
Condition and Results of Operations section of the Offering Document.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any material adverse change in general
economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States
shall be such as, in the Initial Purchasers' reasonable judgment, makes it
inadvisable or impracticable to proceed with the delivery of the Offered
Securities as contemplated hereby, or (ii) (A) in the reasonable judgment
of the Initial Purchasers, any material adverse change in the condition
(financial or other), business, properties, assets, liabilities, prospects,
net worth, results of operations or cash flows of the Company or its
subsidiaries, taken as a whole, other than set forth in the Offering
Document; (B) (i) any downgrading, suspension or withdrawal of, nor shall
any notice have been given of any potential or intended down grading,
suspension or withdrawal of, or of any review for a possible change that
does not indicate the direction of possible change in, any rating of any of
the Issuers or any security of any of the Issuers (including, without
limitation, the placing of any of the foregoing ratings on credit watch
with negative or developing implications or under review with an uncertain
direction) by any "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Securities
Act, (ii) any change, nor shall any notice have been given of any potential
or intended change, in the outlook for any rating of any of the Issuers or
any securities of any of the Issuers by any such rating organization, and
(iii) any notice by any such rating organization that it has assigned (or
is considering assigning) a lower rating to the Offered Securities than
that on which the Offered Securities were marketed; (C) any suspension or
material limitation of trading in securities generally on the New York
Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or
the Nasdaq National Market, or any establishment of minimum or maximum
prices for trading, or any requirement of maximum ranges for prices for
securities, on such exchange or the Nasdaq National Market, or by such
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exchange or other regulatory body or governmental authority having
jurisdiction (other than limitations on price fluctuations or minimums or
maximums in effect as of the date of this Agreement); (D) any banking
moratorium declared by federal or state authorities, or any moratorium
declared in foreign exchange trading by major international banks or
persons; or (E) any outbreak or escalation of armed hostilities involving
the United States on or after the date hereof, or if there has been a
declaration by the United States of a national emergency or war, the effect
of which shall be, in the Initial Purchasers' judgment, to make it
inadvisable or impracticable to proceed with this offering or delivery of
the Offered Securities on the terms and in the manner contemplated in the
Offering Document.
(c) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Kirkland & Ellis, counsel for the Company, that:
(i) Assuming due authorization, execution and delivery by the
Initial Purchasers and each of the other parties thereto, the
Registration Rights Agreement constitutes a valid and legally binding
obligation of the Company and each of the Guarantors, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and
similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
(ii) Assuming due authorization, execution and delivery by the
Company, each Guarantor and, in the case of the Indenture and the
Notes, by the Trustee, the Indenture constitutes and the Notes and
Guarantees, when authenticated in accordance with the terms of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will constitute valid
and legally binding obligations of the Company and the Guarantors, as
the case may be, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(iii) To the knowledge of such counsel, the Company was not
required to obtain any consent, approval, authorization or order of
governmental agency under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976 for the consummation of the
Recapitalization.
(iv) To the knowledge of such counsel, the Company was not
required under any New York or federal law to obtain any consent,
approval, authorization or order of governmental agency for the
issuance, delivery and sale of the Notes being issued and sold by it
under this Agreement and the Indenture except for any such consent,
approval, authorization or order which may be required under the so-
called "Blue Sky" or securities laws of any states (as to which such
counsel need express no opinion or advice).
(v) The execution and delivery by the Company and each Guarantor
of this Agreement, the Registration Rights Agreement and the Indenture
and the performance of their agreements therein and the consummation
of the sale of the
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Notes to the Initial Purchasers in accordance with this Agreement do
not constitute a violation by the Company or any Guarantor of any
applicable provision of any New York or federal law, statute or
regulation (except that such counsel need express no opinion in this
paragraph as to compliance with any disclosure requirement or any
prohibition against fraud or misrepresentation or as to whether
performance of the indemnification or contribution provisions in this
Agreement would be permitted).
(vi) It is not necessary in connection with (i) the offer, sale
and delivery of the Notes to the several Initial Purchasers pursuant
to this Agreement or (ii) the resales of the Notes by the several
Initial Purchasers in the manner contemplated in the Offering
Document to register the Notes under the Securities Act or to qualify
an indenture in respect thereof under the Trust Indenture Act.
(vii) The Notes, the Guarantees and the Indenture conform in all
material respects to the descriptions thereof contained in the
Offering Document; the description in the Offering Document under the
heading "Description of Senior Credit Facility" is accurate in all
material respects; and the description in the Offering Document of
United States federal income tax matters under the heading "Federal
Income Tax Considerations" is accurate in all material respects and
fairly presents the information required to be shown.
(viii) Assuming due authorization of the Exchange Notes, when,
as and if (i) the Exchange Offer Registration Statement shall have
become effective pursuant to the provisions of the Securities Act,
(ii) the Indenture shall have been qualified pursuant to the
provisions of the Trust Indenture Act, (iii) the Notes shall have been
validly tendered to the Company, (iv) the Exchange Notes shall have
been duly executed, authenticated and issued in accordance with the
provisions of the Indenture and duly delivered to the purchasers
thereof in exchange for the Notes, (v) the board of directors and the
appropriate officers of the Company have taken all necessary action to
fix and approve the terms of the Exchange Notes and (iv) any legally
required consents, approvals, authorizations or other order of the
Commission or any other regulatory authorities have been obtained, the
Exchange Notes when issued pursuant to the Exchange Offer Registration
Statement will constitute valid and binding obligations of the Company
and the Guarantors, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(ix) Such counsel shall also state that the purpose of such
counsel's professional engagement was not to establish factual
matters, and preparation of the Offering Document involved many
determinations of a wholly or partially nonlegal character. Such
counsel need make no representation that it has independently verified
the accuracy, completeness or fairness of the Offering Document or
that the actions taken in connection with the preparation of the
Offering Document (including the actions described below) were
sufficient to cause the Offering Document to be accurate, complete or
fair. Such counsel need not pass upon and need not assume any
responsibility for the accuracy, completeness or fairness of the
Offering Document except to the extent otherwise explicitly indicated
in numbered paragraph (vii) above. Such counsel shall however confirm
that it has participated
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in conferences with representatives of the Company, representatives of
the Initial Purchasers, counsel for the Initial Purchasers and
representatives of the independent accountants for the Company during
which disclosures in the Offering Document and related matters were
discussed. Based upon such counsel's participation in the conferences
identified above, such counsel's understanding of applicable law and
the experience such counsel has gained in such counsel's practice
thereunder and relying as to materiality to a large extent upon the
opinions and statements of officers of the Company, such counsel can,
however, advise the Initial Purchasers that nothing has come to such
counsel's attention that has caused such counsel to conclude that the
Offering Document at the date it bears or on the date of this letter
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Pepper Hamilton LLP, counsel for the Company, that:
(i) Each of the Company and the Guarantors (a) is duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power and authority to carry on its business as it
is currently being conducted and as described in the Offering Document
and to own, lease and operate its properties, and (c) is duly
qualified and in good standing as a foreign corporation, authorized to
do business in each jurisdiction set forth beside such entity's name
on a schedule to such opinion.
(ii) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Transaction
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, to the
extent applicable, the corporate power and authority to issue, sell
and deliver the Offered Securities as provided herein.
(iii) All of the outstanding capital stock of each Guarantor is
owned by the Company of record and, to the best of such counsel's
knowledge, beneficially and, to the best of such counsel's knowledge,
such ownership is free and clear of any security interest, claim,
lien, limitation on voting rights or encumbrance; and all such
securities have been duly authorized, validly issued, and are fully
paid and nonassessable and were not issued in violation of any
preemptive or similar rights.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by each of the Issuers.
(v) Each of the Transaction Documents (other than this Agreement)
has been duly and validly authorized, executed and delivered by the
Company and each of the Guarantors (to the extent each is a party
thereto).
(vi) The Recapitalization Agreement is the valid and binding
agreement of the Company and each of the Guarantors (to the extent
each is a party thereto) and enforceable against each of them (to the
extent each is a party thereto) in accordance with its terms, except
to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
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moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
(vii) The Offered Securities have been duly and validly
authorized and executed by each of the Issuers for issuance and sale
to the Initial Purchasers pursuant to this Agreement.
(viii) The Exchange Notes have been duly and validly authorized
for issuance by each of the Issuers.
(ix) To the best of such counsel's knowledge, none of the Company
or any of its Subsidiaries is in violation of its charter or bylaws.
(x) None of (a) the execution, delivery or performance by the
Company or any of the Guarantors of this Agreement or any of the other
Transaction Documents (to the extent each is a party thereto), (b)
the issuance and sale of the Offered Securities and (c) consummation
by the Company and any of the Guarantors of the Transactions violates,
conflicts with or constitutes a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default under), or requires
consent under, or results in the imposition of a lien or encumbrance
on any properties of the Company or any of the Guarantors, or an
acceleration of any indebtedness of the Company or any of the
Guarantors pursuant to, (i) the charter or bylaws of the Company or
any of the Guarantors, (ii) any Transaction Document or any other
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of the Guarantors
is a party or by which any of them or their property is bound filed as
an exhibit to the Company's annual report on Form 10-K for the year
ended June 27, 1998 or to the Company's quarterly reports on Form 10-
Q for the quarters ended September 26, 1998 and December 26,1998,
(iii) any statute, rule or regulation of the United States, the Common
wealth of Pennsylvania or the State of Delaware applicable to the
Company or any of the Guarantors or any of their assets or properties
or (iv) to the best of such counsel's knowledge, any judgment, order
or decree known to such counsel of any court or governmental agency or
authority of the United States, the Commonwealth of Pennsylvania or
the State of Delaware having jurisdiction over the Company or any of
the Guarantors or any of their assets or properties. Assuming
compliance with applicable state securities and Blue Sky laws, as to
which no opinion is rendered hereby, and except for the filing of a
registration statement under the Securities Act and qualification of
the Indenture under the Trust Indenture Act, or otherwise in
connection with the Registration Rights Agreement, no consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (a) any court or
governmental agency, body or administrative agency or (b) any other
person is required for (i) the execution, delivery and performance by
the Company or any of the Guarantors of this Agreement or any of the
other Transaction Documents (to the extent each is a party thereto) or
(ii) the issuance and sale of the Offered Securities or any of the
other Transactions, except such as have been obtained and made or have
been disclosed in the Offering Document.
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(xi) To the best of such counsel's knowledge and except as
disclosed in the Offering Document, there is (a) no action, suit,
investigation or proceeding before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now
pending to which the Company or any of the Guarantors is a party or to
which the business or property of the Company or any of the Guarantors
is subject in any court in the jurisdictions set forth on a schedule
to such opinion next to the name of the Company and each of the
Guarantors, respectively, (b) no statute, rule, regulation or order
that has been enacted, adopted or issued by any governmental agency or
that has been proposed by any governmental body, (c) no injunction,
restraining order or order of any nature by a federal or state court
or foreign court of competent jurisdiction to which the Company or any
of the Guarantors is or may be subject or to which the business,
assets, or property of the Company or any of the Guarantors is or may
be subject, and (d) no bond, debenture, note, indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or
any of the Guarantors is a party or by which any of them or their
property is bound that, in the case of clauses (a), (b), (c) and (d)
above, would be required to be disclosed in the Offering Document had
it been a prospectus included in a registration statement on Form S-1
filed with the Commission under the Securities Act, and that is not so
disclosed.
(xii) The Offering Circular, as of its date, and each amendment
or supplement thereto, as of its date (except for the financial
statements and related notes, the financial statement schedules and
other financial data included therein or omitted therefrom, as to
which no opinion need be expressed), contains the type of information
specified in and required by Rule 144A(d)(4) under the Securities Act.
(xiii) When the Offered Securities are issued and delivered
pursuant to this Agreement, no Offered Security thereof will be of the
same class (within the meaning of Rule 144A under the Securities Act)
as securities of any Issuer that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
(xiv) None of the Issuers is an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act.
(xv) To the best of such counsel's knowledge, no stop order
preventing the use of the Offering Document, or any amendment or
supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued.
(xvi) The Department of State of the Commonwealth of
Pennsylvania has examined the Articles of Merger and determined that
the documents submitted for preclearance "appear to be correct," and
the Merger will be effective upon the filing of the Articles of Merger
with the Department of State of the Commonwealth of Pennsylvania.
(xvii) Such counsel shall also state that because the primary
purpose of such counsel's engagement was not to establish or confirm
factual matters or financial or accounting matters and because of the
wholly or partially non-legal character of many of the statements
contained in the Offering Document, such
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counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Offering Document and such counsel has not independently verified
the accuracy or completeness of such statements. Without limiting the
foregoing, such counsel assumes no responsibility for and such counsel
has not independently verified the accuracy, completeness or fairness
of the financial statements and any schedules and other financial data
included in the Offering Document and has not examined the accounting
or financial records from which such financial statements, schedules
(if any) and relevant financial data are derived. However, such
counsel participated in conferences with officers and other
representatives and legal counsel of the Company, representatives of
the independent public accountants of the Company and representatives
of the Initial Purchasers at which the contents of the Offering
Document were discussed. Based on such participation and review, and
relying as to materiality in part upon the statements of officers and
other representatives of the Company, no facts have come to such
counsel's attention that have caused such counsel to believe that the
Offering Document as of its date and at the Closing Date, contained an
untrue statement of a material fact or omitted 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, except that such counsel need not express any comment or
belief with respect to the financial statements or schedules, if any,
or any other financial information included in the Offering Document.
(e) The Initial Purchasers shall have received an opinion dated the
Closing Date, of Panitch Schwarze Jacobs & Nadel, P.C., trademark counsel
for the Company, that:
To the knowledge of such counsel and within the parameters of the
limited investigation such counsel has conducted, the Company and/or
its subsidiaries is the exclusive owner of, and has sole, full and
clear title to, the registrations for the Trademarks (as defined in
such opinion) currently registered in the United States Patent and
Trademark Office, as set forth on a schedule to such opinion, free and
clear of any encumbrances, liens or adverse claims of any kind, and
all of the registrations of said Trademarks are subsisting in the
records of the United States Patent and Trademark Office, and the
Company and/or its subsidiaries possess the right to employ such
Trademarks in their respective businesses as presently conducted.
(f) The Initial Purchasers shall have received an opinion dated the
Closing Date, of Townsend & Townsend & Crew, intellectual property counsel
for the Company, that:
(i) Attached as Exhibit A to such opinion is a list of patents
and patent applications such counsel has handled for the Company or
its subsidiaries. Attached as Exhibit B to such opinion is a
certificate of an officer of the Company that these are the patents
and patent applications which are material to the operations of the
Company and its subsidiaries. All of such patents are in full force
and effect, and all of such patent applications are currently pending.
Assignments to the Company have been prepared for each listed
application and patent, and have been recorded with the appropriate
patent office.
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(ii) Such counsel is not aware, after due inquiry, of any notice
of infringement if any patent received by the Company or any of its
subsidiaries, except as set forth in such opinion.
(g) The Initial Purchasers shall have received an opinion dated the
Closing Date, of Dechert Price & Rhoads, special Pennsylvania counsel for
the Company, that:
(i) Merger Corp. is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all requisite corporate power and authority to
execute and deliver the Recapitalization Agreement and to perform its
obligations thereunder.
(ii) The execution, delivery and performance by Merger Corp. of
each of the Transaction Documents to which Merger Corp. is a party
(collectively, the "MergeCorp Transaction Documents"), and the
consummation of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action on the part of Merger
Corp.
(iii) The MergeCorp Transaction Documents constitute the valid
and binding obligations of Merger Corp., enforceable against Merger
Corp. in accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws, decisions or equitable
principles now or hereafter in effect relating to or affecting the
enforcement of creditors' rights or debtors' obligations generally,
and except that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court
before which enforcement is sought.
(iv) To the knowledge of such counsel, Merger Corp. is not in
violation of any provision of its articles of incorporation or bylaws.
(v) Neither the execution, delivery or performance by Merger
Corp. of any of the MergeCorp Transaction Documents nor the
consummation by Merger Corp. of the transactions contemplated by the
MergeCorp Transaction Documents violates, conflicts with or
constitutes a breach of any of the terms or provisions of, or a
default under (or an event that with notice or the lapse of time, or
both, would constitute a default under), or requires consent under, or
results in the imposition of a lien or encumbrance on any properties
of Merger Corp., or an acceleration of any indebtedness of Merger
Corp. pursuant to (a) the articles of incorporation or bylaws of
Merger Corp., (b) any MergeCorp Transaction Documents or, to the
knowledge of such counsel, any bond, debenture, note, mortgage, deed
of trust or other agreement or instrument to which Merger Corp. is a
party or by which it or its property is bound, (c) any statute, rule
or regulation of the Commonwealth of Pennsylvania applicable to Merger
Corp. or any of its assets or properties or (d) to the knowledge of
such counsel, any judgment, order or decree of any court or
governmental agency or authority of the Commonwealth of Pennsylvania
having jurisdiction over Merger Corp. or any of its assets or
properties. Assuming compliance with applicable federal securities
laws and state securities and Blue Sky laws, as to which such counsel
is expressing no opinion, no consent, approval, authorization or order
of, or filing, registration, qualification, license of or with, (a)
any court or governmental agency, body or administrative agency or (b)
any other person is required for the execution, delivery and
performance by Merger Corp. of any of the MergeCorp Transaction
Documents, except for the filing
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in the Department of State of the Commonwealth of Pennsylvania of duly
completed and executed articles of merger in accordance with Section
1927 of the Pennsylvania Business Corporation Law of 1988, as amended.
(vi) To the knowledge of such counsel, and in the cases of
clauses (a) and (b), based upon a docket search of the courts of the
Commonwealth of Pennsylvania, there is (a) no action, suit,
investigation or proceeding before or by any court, arbitrator or
governmental agency, body or official now pending in the Commonwealth
of Pennsylvania to which Merger Corp. is a party or to which the
business or property of Merger Corp. is subject, (b) no injunction,
restraining order or order of any nature by a state court to which
Merger Corp. is or may be subject or to which the business, assets, or
property of Merger Corp. is or may be subject, or (c) no bond,
debenture, note, mortgage, deed of trust or other agreement or
instrument to which Merger Corp. is a party or by which it or its
property is or may be bound, that, in the case of clauses (a), (b),
and (c) above, would be required to be disclosed in the Offering
Document had it been a prospectus included in a registration statement
on Form S-1 filed with the Commission under the Securities Act, and
that is not so disclosed.
(h) The Initial Purchasers shall have received an opinion dated the
Closing Date, of Wong & Leow, special Singapore counsel for the Company,
that:
Integrated Circuit Systems Pte Ltd ("PTE") is a private company
with limited liability duly incorporated in Singapore on 18 March 1997
and is validly existing in accordance with the laws of Singapore; and
all of the shares in the issued capital of PTE are owned by the
Company, and all such shares are validly issued and fully paid.
(i) The Initial Purchasers shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Initial Purchasers, such opinion
or opinions, dated the Closing Date, with respect to the validity of the
Offered Securities, the Offering Document, the exemption from registration
for the offer and sale of the Offered Securities by the Company to the
several Initial Purchasers and the resales by the several Initial
Purchasers as contemplated hereby and other related matters as Bear Stearns
may require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters with reference to same in the Offering Circular.
(j) The Initial Purchasers shall have received a certificate, dated
the Closing Date, of the President or any Vice President and a principal
financial or accounting officer of each of the Issuers in which such
officers shall state that the representations and warranties of such Issuer
in this Agreement are true and correct, that such Issuer has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date, and that, subsequent
to the respective dates of the most recent financial statements in the
Offering Document, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in
the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole except as
set forth in or contemplated by the Offering Document or as described in
such certificate.
(k) The Initial Purchasers shall have received a letter, dated the
Closing Date, of KPMG LLP which meets the requirements of subsection (a) of
this Section, except that the specified date referred to in such subsection
will be a date not more than three days prior to the Closing Date for the
purposes of this subsection.
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(l) The Company, the Guarantors and the Trustee shall have entered
into the Indenture and you shall have received counterparts, conformed as
executed, thereof.
(m) The Company and the Guarantors shall have entered into the
Registration Rights Agreement and you shall have received counterparts,
conformed as executed, thereof.
(n) The Offered Securities shall have been designated PORTAL
securities in accordance with the rules and regulations adopted by the
NASD relating to trading in the PORTAL market.
(o) On or prior to the Closing Date, (i)(a) the Issuers shall have
entered into the Bank Agreements and all conditions precedent to the
effectiveness thereof shall have been satisfied or waived and (b) each of
the Transactions shall have been consummated; (ii) such transactions
described in the foregoing clause (i) shall continue to be in full force
and effect in accordance with the terms thereof; and (iii) the Company
shall have provided to each of the Initial Purchasers and counsel to the
Initial Purchasers copies of all Transaction Documents delivered to the
parties relating to the Transactions (including but not limited to legal
opinions relating thereto).
(p) The Initial Purchasers shall have been furnished with a copy of
the opinions delivered on behalf of Issuers in connection with the
Transactions, which opinions shall expressly state that the Initial
Purchasers are justified in relying upon the opinions therein.
(q) The Initial Purchasers shall have received a letter from Murray,
Devine & Co., Inc. permitting the Initial Purchasers to rely on the opinion
letter rendered by Murray, Devine & Co., Inc. to the Company's Board of
Directors in form and substance reasonably satisfactory to the Initial
Purchasers to the effect that the Transactions will not render any of the
Issuers insolvent, leave any of the Issuers with inadequate or unreasonably
small capital, or result in any of the Issuers incurring indebtedness
beyond their ability to repay as such indebtedness matures.
The Company will furnish the Initial Purchasers with such conformed copies
of such opinions, certificates, letters and documents as the Initial Purchasers
reasonably request. Bear Stearns may in its sole discretion waive on behalf of
the Initial Purchasers compliance with any conditions to the obligations of the
Initial Purchasers hereunder.
7. Indemnification and Contribution. (a) Each of the Issuers, jointly and
severally, will indemnify and hold harmless each Initial Purchaser, its
partners, directors and officers and each person, if any, who controls such
Initial Purchaser within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such Initial Purchaser may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular or the Exchange Act Reports, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
including any losses, claims, damages or liabilities arising out of or based
upon the Company's failure to perform its obligations under Section 5(a) of this
Agreement, and will reimburse each Initial Purchaser for any legal or other
expenses reasonably incurred by such Initial Purchaser in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, (i) that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue
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statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Initial Purchaser through Bear
Stearns specifically for use therein, it being understood and agreed that the
only such information consists of the information described as such in
subsection (b) below and (ii) that the Issuers shall not be liable to any such
Initial Purchaser with respect to any untrue statement or alleged untrue
statement or omission or alleged omission in the Preliminary Offering Circular
to the extent that any such loss, liability, claim, damage or expense of such
Initial Purchaser results from the fact that such Initial Purchaser sold Notes
to a person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Offering Circular as then amended or
supplemented if the Company had previously furnished copies thereof to such
Initial Purchaser and the loss, liability, claim, damage or expense of such
Initial Purchaser results from an untrue statement or omission of a material
fact contained in the Preliminary Offering Circular which was corrected in the
Offering Circular.
(b) Each Initial Purchaser will severally and not jointly indemnify
and hold harmless each of the Issuers, their respective directors and officers
and each person, if any, who controls any of the Issuers within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages or
liabilities to which such Issuers may become subject, under the Securities Act
or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Initial
Purchaser through Bear Stearns specifically for use therein, and will reimburse
each Issuer for any legal or other expenses reasonably incurred by the Issuers
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Initial Purchaser
consists of (i) the following information in the Offering Document furnished on
behalf of each Initial Purchaser: under the caption "Plan of Distribution", the
first, third, fifth, and eight paragraphs and (ii) the following information in
the Offering Document furnished on behalf of Bear Stearns and Credit Suisse
First Boston Corporation:
"The initial purchasers and their respective affiliates have performed and
expect to continue to perform financial advisory and investment and
commercial banking services for the Equity Investors and ICS for which they
have received and will receive customary compensation. Credit Suisse First
Boston, an affiliate of Credit Suisse First Boston Corporation, is a lender
and the administrative agent under the senior credit facility. An affiliate
of Bear, Stearns and Co. Inc. is one of the Equity Investors.";
provided, however, that the Initial Purchasers shall not be liable for any
losses, claims, damages or liabilities arising out of or based upon the
Company's failure to perform its obligations under Section 5(a) of this
Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section except to the extent that it has
been prejudiced in any material respect by such failure or from any liability
which it may otherwise have). In case any such action is brought against any
indemnified party, and it notifies
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an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to take charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying party or parties shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of counsel shall be
borne by the indemnifying parties; provided, however, that the indemnifying
party under subsection (a) or (b) above shall only be liable for the legal
expenses of one counsel (in addition to any local counsel) for all indemnified
parties in each jurisdiction in which any claim or action is brought. No
indemnifying party shall, without prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action and does not include a
statement as to and an admission of fault, culpability or failure to act by or
on behalf of any indemnified party. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its prior written consent, provided that
such consent was not unreasonably withheld, and that if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees it shall be liable for any settlement effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuers on the one hand and the Initial Purchasers on the other from the
offering of the Offered Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers on the one hand and the Initial
Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the Issuers
on the one hand and the Initial Purchasers on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Issuers bear to the total discounts and
commissions received by the Initial Purchasers from the Issuers under this
Agreement. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers or the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal
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or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Initial Purchaser shall be required to contribute any amount in excess of the
amount by which the total price at which the Offered Securities purchased by it
where resold exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Initial Purchasers' obligations
in this subsection (d) to contribute are several in proportion to their
respective purchase obligations and not joint.
(e) The obligations of the Issuers under this Section shall be in
addition to any liability which the Issuers may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Initial Purchaser within the meaning of the Securities Act or the Exchange Act;
and the obligations of the Initial Purchasers under this Section shall be in
addition to any liability which the respective Initial Purchasers may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls the Issuers within the meaning of the Securities Act or the
Exchange Act.
8. Default of Initial Purchasers. If either of the Initial Purchasers
defaults in its obligation to purchase Offered Securities hereunder and the
aggregate principal amount of Offered Securities that such defaulting Initial
Purchaser agreed but failed to purchase does not exceed 10% of the total
principal amount of Offered Securities, Bear Stearns may make arrangements
satisfactory to the Company for the purchase of such Offered Securities by other
persons, including the other Initial Purchaser, but if no such arrangements are
made by the Closing Date, the non-defaulting Initial Purchaser shall be
obligated to purchase the Offered Securities that such defaulting Initial
Purchaser agreed but failed to purchase. If one Initial Purchaser so defaults
and the aggregate principal amount of Offered Securities with respect to which
such default occurs exceeds 10% of the total principal amount of Offered
Securities and arrangements satisfactory to Bear Stearns and the Company for the
purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of the non-defaulting Initial Purchaser or the Company, except as provided
in Section 9. As used in this Agreement, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section. Nothing
herein will relieve the defaulting Initial Purchaser from liability for its
default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
each of the Issuers or its officers and of the several Initial Purchasers set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Initial Purchaser, the Issuers or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If this
Agreement is terminated pursuant to Sections 8 or 10, or if for any reason the
purchase of the Offered Securities by the Initial Purchasers is not consummated,
the Issuers shall remain responsible for the expenses to be paid or reimbursed
by them pursuant to Section 5 and the respective obligations of the Issuers and
the Initial Purchasers pursuant to Section 7 shall remain in effect; if any
Offered Securities have been purchased hereunder, the Issuers shall remain
responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Issuers and the Purchasers
pursuant to Section 7 shall remain in effect, and the representations and
warranties in Section 2 and all other obligations under Section 5 shall also
remain in effect. If the purchase of the Offered Securities by the Initial
Purchasers is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 or the occurrence of any
event specified in Section 6(b)(ii) (whether pursuant to Section 10 or
otherwise), the Company will reimburse the Initial Purchasers for all out-of-
28
<PAGE>
pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Termination. The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the Company
from the Initial Purchasers, without liability (other than with respect to
Section 7) on the Initial Purchasers' part to the Issuers if, on or prior to
such date, upon the occurrence of any of the events set forth in Section 6(b).
11. Notices. All communications hereunder will be in writing and, if sent
to the Initial Purchasers will be mailed, delivered or telegraphed and confirmed
to the Initial Purchasers, c/o Bear Stearns & Co. Inc., 245 Park Avenue, New
York, N.Y. 10167, Attention: Corporate Finance Department, or, if sent to the
Company, will be mailed, delivered or telegraphed and confirmed to it at
Integrated Circuit Systems, Inc., 2435 Boulevard of the Generals, Valley Forge,
PA 19482: Attention: Chief Financial Officer, with a copy to Pepper Hamilton
LLP, 3000 Two Logan Square, Philadelphia, PA 19103: Attention: Robert Friedel,
Esq.; provided, however, that any notice to an Initial Purchaser pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such Initial
Purchaser.
12. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.
13. Representation of Initial Purchasers. You will act for the several
Initial Purchasers in connection with the transactions contemplated by this
Agreement, and any action under this Agreement taken by you jointly or by Bear
Stearns on behalf of the Initial Purchasers will be binding upon all the Initial
Purchasers.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement. Delivery by
telecopy or facsimile transmission of an executed counterpart of this Agreement
shall be considered due and sufficient delivery.
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
EACH OF THE ISSUERS HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN
ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
29
<PAGE>
If the foregoing is in accordance with the Initial Purchasers'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Issuers and the Initial Purchasers in accordance with its terms.
Very truly yours,
INTEGRATED CIRCUIT SYSTEMS, INC.
by: /s/ Rudolf S. Gassner
--------------------------------------------------
Name: Rudolf S. Gassner
Title: Chairman of the Board
ICS TECHNOLOGIES, INC.
by: /s/ Hock E. Tan
---------------------------------------------------
Name: Hock E. Tan
Title: President
ICST INC.
by: /s/ Henry I. Boreen
--------------------------------------------------
Name: Henry I. Boreen
Title: President
MICROCLOCK, INC.
by: /s/ Henry I. Boreen
--------------------------------------------------
Name: Henry I. Boreen
Title: President
30
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
By: Bear, Stearns & Co. Inc.
/s/ illegible signature
---------------------------
Name:
Title:
By: Credit Suisse First Boston Corporation
/s/ illegible signature
---------------------------
Name:
Title:
31
<PAGE>
SCHEDULE A
Principal Amount of
Initial Purchasers Offered Securities
------------------ -------------------
Bear, Stearns & Co. Inc.................. $ 50,000,000
Credit Suisse First Boston Corporation... $ 50,000,000
------------
Total..................... $100,000,000
============
32
<PAGE>
EXHIBIT 10.2
$100,000,000
INTEGRATED CIRCUIT SYSTEMS, INC.
11 1/2% Senior Subordinated Notes Due 2009
REGISTRATION RIGHTS AGREEMENT
-----------------------------
May 11, 1999
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
c/o Bear, Stearns & Co. Inc.
245 Park Avenue,
New York, N.Y. 10167
Ladies and Gentlemen:
Integrated Circuit Systems, Inc., a Pennsylvania corporation (the
"Company"), proposes to issue and sell to Bear, Stearns & Co. Inc. and Credit
Suisse First Boston Corporation (the "Initial Purchasers"), upon the terms set
forth in a purchase agreement of even date herewith (the "Purchase Agreement"),
$100,000,000 aggregate principal amount of its 11 1/2% Senior Subordinated Notes
Due 2009 (the "Initial Securities") to be unconditionally guaranteed (the
"Guarantees") by ICS Technologies, Inc., ICST Inc., Ltd. and Microclock, Inc.
(the "Guarantors" and together with the Issuer, the "Company"). The Initial
Securities will be issued pursuant to an Indenture, dated as of May 11, 1999
(the "Indenture"), among the Company, the Guarantors named therein and Chase
Manhattan Trust Company, National Association, as trustee (the "Trustee"). As
an inducement to the Initial Purchasers to enter into the Purchase Agreement,
the Company agrees with the Initial Purchasers, for the benefit of the holders
of the Initial Securities (including, without limitation, the Initial
Purchasers), the Exchange Securities (as defined below) and the Private Exchange
Securities (as defined below) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost,
prepare and, not later than 150 days after (or if the 150th day is not a
business day, the first business day thereafter) the date of original issue of
the Initial Securities (the "Issue Date"), file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders of Transfer Restricted Securities
(as defined in Section 6 hereof), who are not prohibited by any law or policy of
the Commission from participating in the Registered Exchange Offer, to issue and
deliver to such
<PAGE>
Holders, in exchange for the Initial Securities, a like aggregate principal
amount of debt securities (together with the applicable guarantees by the
Guarantors, the "Exchange Securities") of the Company issued under the Indenture
and identical in all material respects to the Initial Securities (except for the
transfer restrictions relating to the Initial Securities and the provisions
relating to the matters described in Section 6 hereof) that would be registered
under the Securities Act. The Company shall use its best efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 210 days (or if the 210th day is not a business day, the first
business day thereafter) after the Issue Date of the Initial Securities and
shall keep the Exchange Offer Registration Statement effective for not less than
30 days (or longer, if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of the Securities Act, acquires the Exchange Securities in the ordinary course
of such Holder's business and has no arrangements with any person to participate
in the distribution of the Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the Registered Exchange Offer)
to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information substantially in the form set forth in (a) Annex A
hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection with a
sale of any such Exchange Securities received by such Exchanging Dealer pursuant
to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to
sell Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus
2
<PAGE>
and any amendment or supplement thereto must be delivered by an Exchanging
Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and
the date on which all Exchanging Dealers and the Initial Purchasers have sold
all Exchange Securities held by them (unless such period is extended pursuant to
Section 3(j) below) and (ii) the Company shall make such prospectus and any
amendment or supplement thereto available to any broker-dealer for use in
connection with any resale of any Exchange Securities for a period of not less
than 180 days after the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects (including the
existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States, but excluding
provisions relating to the matters described in Section 6 hereof) to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;
(y) deliver to the Trustee for cancellation all the Initial Securities so
accepted for exchange; and
3
<PAGE>
(z) cause the Trustee to authenticate and deliver promptly to each Holder
of the Initial Securities, Exchange Securities or Private Exchange Securities,
as the case may be, equal in principal amount to the Initial Securities of such
Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities. Each Exchange Security and Private Exchange Security will bear
interest at the rate set forth thereon; provided, that interest with respect to
the period prior to the issuance thereof shall accrue at the rate or rates borne
by the Initial Securities from time to time during such period
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements with any person to participate in the distribution of the
Securities or the Exchange Securities within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Securities and (v) if such Holder is a broker-dealer, that it will
receive Exchange Securities for its own account in exchange for Initial
Securities that were acquired as a result of market-making activities or other
trading activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, 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 not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
240 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Initial Securities (or the Private Exchange Securities) not eligible to
be exchanged for Exchange Securities in the Registered Exchange Offer and held
by it following consummation of the Registered
4
<PAGE>
Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not
eligible to participate in the Registered Exchange Offer or, in the case of any
Holder (other than an Exchanging Dealer) that participates in the Registered
Exchange Offer, such Holder does not receive freely tradeable Exchange
Securities on the date of the exchange, the Company shall take the following
actions:
(a) The Company shall, at its cost, as promptly as practicable (but in
no event more than 60 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its best
efforts to cause to be declared effective on or prior to the 60th day after
the date so required or requested pursuant to this Section 2 a registration
statement (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, a "Registration Statement") on an
appropriate form under the Securities Act relating to the offer and sale of
the Transfer Restricted Securities (as defined in Section 6 hereof) by the
Holders thereof from time to time in accordance with the methods of
distribution set forth in the Shelf Registration Statement and Rule 415
under the Securities Act (hereinafter, the "Shelf Registration"); provided,
however, that no Holder (other than an Initial Purchaser) shall be entitled
to have the Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the
provisions of this Agreement applicable to such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement (i) have been sold
pursuant thereto or (ii) are no longer restricted securities (as defined in
Rule 144 under the Securities Act, or any successor rule thereof) (the
"SHELF REGISTRATION PERIOD"). The Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement effective during
the requisite period if it voluntarily takes any action that would result
in Holders of Securities covered thereby not being able to offer and sell
such Securities during that period, unless such action is required by
applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that
5
<PAGE>
an Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered Exchange
Offer or the Shelf Registration Statement, the Company shall use its best
efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may propose;
(ii) include the information substantially in the form set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C
hereto in the "Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement and include the
information substantially in the form set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if requested by an Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement; (iv) include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the
staff of the Commission with respect to the potential "underwriter" status
of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of Exchange Securities received by such broker-dealer in the Registered
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the Commission or
such positions or policies, in the reasonable judgment of the Initial
Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Securities pursuant to the Shelf Registration
Statement as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from whom
the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of
any notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
6
<PAGE>
(v) of the happening of any event that requires the Company
to make changes in the Registration Statement or the prospectus in order
that the Registration Statement or the prospectus do not contain an untrue
statement of a material fact nor omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case
of the prospectus, in light of the circumstances under which they were
made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement,
to the use of the prospectus or any amendment or supplement thereto by each
of the selling Holders of the Securities in connection with the offering
and sale of the Securities covered by the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Exchange Dealer, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following the Registered
Exchange Offer in connection with the offering and sale of the Exchange
Securities covered by the prospectus, or any amendment or supplement
thereto, included in such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities pursuant to any
Registration Statement the Company shall register or qualify or cooperate
with the Holders of the
7
<PAGE>
Securities included therein and their respective counsel in connection with
the registration or qualification of the Securities for offer and sale
under the securities or "blue sky" laws of such states of the United States
or such provinces of Canada as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the
Securities covered by such Registration Statement; provided, however, that
the Company shall not be required to (i) qualify generally to do business
in any jurisdiction where it is not then so qualified or (ii) take any
action which would subject it to general service of process or to taxation
in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company
is required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
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.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made,
then the Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above and the Exchange Offer Registration Statement provided
for in Section 1 above shall each be extended by the number of days from
and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j). Notwithstanding the
foregoing, the Company shall not be required to amend or supplement a
Registration Statement, any related prospectus or any document incorporated
by reference, for a period not to exceed an aggregate of 30 days in any
calendar year, if (i) an event occurs and is continuing as a result of
which the Registration Statement would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading and (ii) the
board of directors of the Company determines in its good faith judgment
that the disclosure of such event at such time would have a material
adverse effect on the business or operations of the Company.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee
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with printed certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days
after the end of a 12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that fails to furnish all or any
material portion of such information which the Company reasonably requires,
in the reasonable opinion of its counsel, in order to insure the compliance
of the Shelf Registration Statement with applicable law and Commission
policy within a reasonable time after receiving such written request, and
shall be under no obligation to compensate any such seller for any lost
income, interest or other opportunity foregone, or any liability incurred,
as a result of the Company's decision to exclude such seller.
(o) The Company shall enter into such customary agreements (including,
if requested, an underwriting agreement in customary form) and take all
such other action, if any, as any Holder of the Securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant
to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter (collectively, the
"Inspectors") all relevant financial and other records, pertinent corporate
documents and properties of the Company and (ii) cause the Company's
officers, directors, employees, accountants and auditors to supply all
relevant information reasonably requested by the Holders of the Securities
or any such underwriter, attorney, accountant or agent in connection with
the Shelf Registration Statement, in each case, as shall be reasonably
necessary to enable such persons, to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided, however,
that the foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers by you and on
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<PAGE>
behalf of the other parties, by one counsel designated by and on behalf of
such other parties as described in Section 4 hereof. Records which the
Company reasonably determines, in good faith, to be confidential and any
records which they notify the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such records is
necessary to avoid or correct a material misstatement or omission in such
Registration Statement after a failure by the Company to make such
disclosure for a period of 5 business days after receiving written notice
from any Inspector of the need to make such disclosure, (ii) the release of
such records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) the information in such records has been
made generally available to the public. Each selling Holder of such
Registrable Securities and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless
and until such is made generally available to the public. Each selling
Holder of such Registrable Securities and each such Participating Broker-
Dealer will be required to further agree that it will, upon learning that
disclosure of such records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company at its expense to
undertake appropriate action to prevent disclosure of the records deemed
confidential.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel to
deliver an opinion and updates thereof relating to the Securities in
customary form addressed to such Holders and the managing underwriters, if
any, thereof and dated, in the case of the initial opinion, the effective
date of such Shelf Registration Statement (it being agreed that the matters
to be covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(o) hereof; the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the applicable Securities; the absence of material legal
or governmental proceedings involving the Company and its subsidiaries; the
absence of governmental approvals required to be obtained in connection
with the Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in Section
3(o) hereof; the compliance as to form of such Shelf Registration Statement
and any documents incorporated by reference therein and of the Indenture
with the requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended
or supplemented, and from any documents incorporated by reference therein
of an untrue statement of a material fact or the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in
the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act); (ii) its officers
to execute and deliver all customary documents and certificates and updates
thereof requested by any underwriters of the applicable Securities and
(iii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Shelf Registration Statement to provide to
the selling Holders of the applicable Securities and any underwriter
therefor a comfort letter in
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customary form and covering matters of the type customarily covered in
comfort letters in connection with primary underwritten offerings, subject
to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the forms set forth in
Section 6(c)-(h) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Registration Statement to deliver to such
Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Section 6(a) of the Purchase Agreement, with appropriate date
changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Company will use its best efforts to (i) if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by a
Registration Statement, or (ii) if the Initial Securities were not
previously rated, cause the Securities covered by a Registration Statement
to be rated with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company will
assist such broker-dealer in complying with the requirements of such Rules,
including, without limitation, by (i) if such Rules, including Rule 2720,
shall so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the Registration
Statement relating to such Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 5
hereof and (iii) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of
the Rules.
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(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Initial Purchasers,
incurred in connection with the Registered Exchange Offer), whether or not the
Registered Exchange Offer or a Shelf Registration is filed or becomes effective,
and, in the event of a Shelf Registration, shall bear or reimburse the Holders
of the Securities covered thereby for the reasonable fees and disbursements of
one firm of counsel designated by the Holders of a majority in principal amount
of the Securities covered thereby to act as counsel for the Holders of the
Securities in connection therewith. Except as provided in the preceding
sentence, each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions, and transfer taxes, if any, relating to the sale or
disposition of such Holder's Transfer Restricted Securities pursuant to a Shelf
Registration Statement.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder of
the Securities, any Participating Broker-Dealer and each person, if any,
who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities)
to which each Indemnified Party may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration,
or arise out of, or are based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action in respect thereof;
provided, however, that (i) the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises out of
or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in a Registration Statement or prospectus
or in any amendment or supplement thereto or in any preliminary prospectus
relating to a Shelf Registration in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company
by or on behalf of such Holder specifically for inclusion therein and (ii)
with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus relating to a
Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or
Participating Broker-Dealer from whom the person asserting any such losses,
claims, damages or liabilities purchased the Securities concerned, to the
extent that a prospectus relating to such Securities was required
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<PAGE>
to be delivered by such Holder or Participating Broker-Dealer under the
Securities Act in connection with such purchase and any such loss, claim,
damage or liability of such Holder or Participating Broker-Dealer results
from the fact that there was not sent or given to such person, at or prior
to the written confirmation of the sale of such Securities to such person,
a copy of the final prospectus if the Company had previously furnished
copies thereof to such Holder or Participating Broker-Dealer; provided
further, however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party.
The Company shall also indemnify underwriters, their officers and directors
and each person who controls such underwriters within the meaning of the
Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act from and against any losses, claims, damages or liabilities or
any actions in respect thereof, to which the Company or any such
controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity
with written information pertaining to such Holder and furnished to the
Company by or on behalf of such Holder specifically for inclusion therein;
and, subject to the limitation set forth immediately preceding this clause,
shall reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any such controlling person in
connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be
in addition to any liability which such Holder may otherwise have to the
Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 5, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party (a) other than to the extent such indemnifying party is materially
prejudiced by such omission and (b) other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof the indemnifying party will not be liable to such indemnified party
under this Section 5 for any legal or other expenses, other than
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<PAGE>
reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. In no event shall
an indemnifying party be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other
from the exchange of the Securities, pursuant to the Registered Exchange
Offer, or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party or parties on the one
hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party on the one hand or such indemnified party, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 5(d), the Holders of
the Securities shall not be required to contribute any amount in excess of
the amount by which the net proceeds received by such Holders from the sale
or other disposition of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. For purposes of this paragraph (d), each
person, if any, who controls an indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to
contribution as such indemnified party.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of
this Agreement or any investigation made by or on behalf of any indemnified
party.
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6. Additional Interest Under Certain Circumstances.
(a) Additional interest (the "Additional Interest") with respect to
the Initial Securities and the Private Exchange Securities shall be
assessed as follows if any of the following events occur (each such event
in clauses (i) through (iii) below a "Registration Default":
(i) If by October 8 , 1999 (or if such day is not a business
day, the first business day thereafter), neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed
with the Commission;
(ii) If by January 6, 2000 (or if such day is not a business
day, the first business day thereafter), neither the Registered Exchange
Offer is consummated nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective (A)
such Registration Statement thereafter ceases to be effective or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Securities during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial Securities and the Private
Exchange Securities at a rate of 0.50% per annum over and above the
interest set forth in the title of the Securities from and including the
date on which any such Registration Default shall occur to but excluding
the date on which all such Registration Defaults have been cured, at which
time Additional Interest shall cease to accrue (but any accrued amount
shall be payable) and the interest rate on the Notes will revert to the
original rate.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a
Shelf Registration Statement or the related prospectus if (i) such
Registration Default has occurred solely as a result of (x) the filing of a
post-effective amendment to such Shelf Registration Statement to
incorporate annual audited financial information with respect to the
Company where such post-effective amendment is not yet effective and needs
to be declared effective to permit Holders to use the related prospectus or
(y) other material events, with respect to the Company that would need to
be described in such Shelf Registration Statement or the related prospectus
and (ii) in the case of clause (y), the Company is proceeding promptly and
in good faith to amend or supplement such Shelf Registration Statement and
related prospectus to describe such events; provided, however, that in any
case if such Registration Default occurs for a continuous period in excess
of 30 days, Additional Interest shall be payable in accordance with the
above
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<PAGE>
paragraph from the day such Registration Default occurs until such
Registration Default is cured, at which time Additional Interest shall
cease to accrue (but any accrued amount shall be payable) and the interest
rate on the Notes will revert to the original rate.
(c) Any amounts of Additional Interest due pursuant to clause (i),
(ii) or (iii) of Section 6(a) above will be payable in cash on the regular
interest payment dates with respect to the Securities. The amount of
Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the Initial Securities
or Private Exchange Securities, as the case may be, multiplied by a
fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the basis
of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of an Initial Security for an Exchange Security,
the date on which such Exchange Security is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a
copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement, (iv) the date on which such Security is
distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act (or other
substantially similar resale exemption promulgated in the future under the
Securities Act, but not Rule 144A under the Securities Act), (v) the date
such Security or Private Exchange Security, as the case may be, shall have
been otherwise transferred by the holder thereof and a new Security not
bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of such Security shall not require
registration or qualification under, and shall not otherwise be restricted
under, the Securities Act or any similar state law then in force or (vi)
such Security or Private Exchange Security, as the case may be, ceases to
be outstanding.
7. Rules 144 and 144A. The Company 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 the Company is not required to file
such reports, it will, upon the request of any Holder of Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities or Private Exchange
Securities identified to the Company by the Initial Purchasers upon request.
Upon the request of any Holder of Initial Securities or Private Exchange
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
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<PAGE>
8. Underwritten Registrations. If any of the Transfer Restricted
Securities 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 ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities 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 reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Company and the
written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
(2) if to the Initial Purchasers;
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Fax No.: (212) 272-2849
Attention: Ofer Warshavsky
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Fax No.: (212) 735-2000
Attention: Mark C. Smith, Esq.
(3) if to the Company, at its address as follows:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
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<PAGE>
Valley Forge, Pennsylvania 19482
Fax No.: (610) 630-3385
Attention: Chief Financial Officer
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: Robert Friedel, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if
mailed; when receipt is acknowledged by recipient's facsimile machine
operator, if sent by facsimile transmission; and on the day delivered, if
sent by overnight air courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company hereby agrees that any
Registration Statement shall, unless otherwise agreed upon by the Initial
Purchasers, include only those Securities required to be included
thereunder pursuant to the terms of this Agreement. The Company has not,
as of the date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other
than subsequent Holders of Securities
18
<PAGE>
if such subsequent Holders are deemed to be affiliates solely by reason of
their holdings of such Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(j) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Company
(i) acknowledges that it has, by separate written instrument, irrevocably
designated and appointed Integrated Circuit Systems, Inc. (and any
successor entity), as its authorized agent upon which process may be served
in any suit or proceeding arising out of or relating to this Agreement that
may be instituted in any federal or state court in the State of New York or
brought under federal or state securities laws, and acknowledges that
Integrated Circuit Systems, Inc. has accepted such designation, (ii)
submits to the nonexclusive jurisdiction of any such court in any such suit
or proceeding, and (iii) agrees that service of process upon Integrated
Circuit Systems, Inc. and written notice of said service to the Company
shall be deemed in every respect effective service of process upon it in
any such suit or proceeding. The Company further agrees to take any and
all action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such designation
and appointment of Integrated Circuit Systems, Inc. in full force and
effect so long as any of the Securities shall be outstanding. To the
extent that the Company may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service of notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, it hereby irrevocably
waives such immunity in respect of this Agreement, to the fullest extent
permitted by law.
19
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers and the Issuer and the Guarantors in accordance
with its terms.
Very truly yours,
Very truly yours,
INTEGRATED CIRCUIT SYSTEMS, INC.
by: /s/ Rudolf S. Gassner
--------------------------------------------------
Name: Rudolf S. Gassner
Title: Chairman of the Board
ICS TECHNOLOGIES, INC.
by: /s/ Hock E. Tan
--------------------------------------------------
Name: Hock E. Tan
Title: President
ICST INC.
by: /s/ Henry I. Boreen
--------------------------------------------------
Name: Henry I. Boreen
Title: President
MICROCLOCK, INC.
by: /s/ Henry I. Boreen
--------------------------------------------------
Name: Henry I. Boreen
Title: President
20
<PAGE>
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
By: Bear, Stearns & Co. Inc.
/s/illegible
- -----------------------------------------------
Name:
Title:
By: Credit Suisse First Boston Corporation
/s/illegible
- -----------------------------------------------
Name:
Title:
21
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such broker-
dealer as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
22
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Initial Securities, where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
23
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 199 , all
dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus./1/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- -----------------------------
/1/ In addition, the legend required by item 502(b) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
24
<PAGE>
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
25
<PAGE>
EXHIBIT 10.3
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into as of
---------
May 11, 1999, between Integrated Circuit Systems, Inc., a Pennsylvania
corporation (the "Company") and Henry I. Boreen ("Consultant"). The Company and
------- ----------
Consultant are sometimes collectively referred to herein as the "Parties" and
individually as a "Party".
Consultant has been an employee, officer, director and stockholder of the
Company, and as such, possesses special knowledge, abilities and experience
regarding the business of the Company. The Company and ICS Merger Corp., a
Pennsylvania corporation ("ICS"), are parties to an Agreement and Plan of
---
Merger, dated as of January 20, 1999 (as amended, the "Merger Agreement"),
----------------
whereby ICS shall merge with and into the Company and the Company shall be the
surviving corporation in the merger (the "Merger"). Upon the Merger becoming
------
effective, the Company desires to obtain the services of Consultant to consult
with and perform services as an independent contractor for the Company with
respect to its businesses, and Consultant desires to provide services to the
Company upon the terms and conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth herein,
the Parties agree as follows:
1. Consulting Services. The Company hereby engages Consultant as an
-------------------
independent contractor, and not as an employee, to render consulting services to
the Company as hereinafter provided, and Consultant hereby accepts such
engagement, for a period commencing on the Closing Date (as defined in the
Merger Agreement) and terminating on the third anniversary of the Closing Date
(the "Consulting Period") unless terminated earlier by the Company or Consultant
-----------------
pursuant to paragraph 3 hereof. Consultant shall not have any authority to bind
or act on behalf of the Company. During the Consulting Period, Consultant
agrees to make himself reasonably available (to the extent conducive with
Consultant's schedule) to render such advice and services to the Company as may
be reasonably required by the Company and as are consistent with the type of
duties and services he rendered to the Company prior to the date hereof;
provided that in no event shall Consultant be required to be available to the
- --------
Company for more than twelve (12) days in any one-year period during the
Consulting Period. During the Consulting Period, Consultant shall be furnished
with such office space, secretarial assistance and other facilities (including
computers (and access to Company computer networks), cellular phones and
cellular phone service) at the Company's office facilities in Valley Forge, PA
that are no less favorable to Consultant than those currently provided to him by
the Company and shall be entitled to reimbursement for out-of-pocket travel and
other expenses reasonably incurred on the Company's business in providing
services hereunder.
2. Compensation. In consideration of Consultant's consulting services
------------
set forth in paragraph 1 above, the Company shall pay to Consultant $350,000 per
year in cash in monthly installment payments in arrears over time (the
"Consulting Payment"). Consultant shall not be entitled any fringe benefits or
------------------
perquisites from the Company.
<PAGE>
3. Termination. This Agreement and Consultant's retention hereunder may
-----------
be terminated at any time by either the Company or Consultant upon thirty (30)
days prior written notice to the other. In the event of such a termination by
the Company for any reason, Consultant shall be entitled to receive the full
amount of the Consulting Payments payable for the remainder of the Consulting
Period as of such date in a lump sum payment within thirty (30) days following
the date of termination by the Company.
4. Confidential Information. Consultant acknowledges that the
------------------------
information, observations and data (including without limitation trade secrets,
know-how, research and product plans, customer lists, software, inventions,
processes, formulas, technology, designs, drawings, specifications, marketing
and advertising materials, distribution and sales methods and systems, sales and
profit figures and other technical or business information) disclosed or
otherwise revealed to him, or discovered or otherwise obtained by him, directly
or indirectly, as an employee, officer, director and stockholder of the Company
and its subsidiaries (including those obtained by him while employed by the
Company prior to the Closing Date) or during the course of his association with
the Company and its subsidiaries and his performance under this Agreement
("Confidential Information") are the property of the Company and its
------------------------
subsidiaries. Therefore, Consultant agrees that he shall not disclose to any
unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Consultant's or Company management's acts
or omissions. Consultant shall deliver to the Company at the termination of the
Consulting Period, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined below) or the business of the Company or
any subsidiary which he may then possess or have under his control. Consultant
further agrees that he will not, during the Consulting Period, improperly use or
disclose any proprietary or confidential information or trade secrets of any
former employer or other person or entity with which he has an agreement or duty
to keep such information or trade secrets in confidence, if any, and that he
will not bring onto the premises of the Company or any subsidiary any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
5. Inventions and Intellectual Property Rights.
-------------------------------------------
(a) Consultant agrees that he will promptly make full written disclosure
to the Board and will hold in trust for the sole right and benefit of the
Company and its subsidiaries, and Consultant hereby assigns to the Company or
its designee, his entire right, title and interest in and to, any and all
inventions, innovations, improvements, original works of authorship,
developments, concepts, methods, trade secrets, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable or
registrable under copyright or similar laws) which are solely or jointly
conceived, developed, made or reduced to practice, or caused to be conceived,
developed, made or reduced to practice, by Consultant while employed by the
Company and its subsidiaries or during the course of his association with the
Company and its subsidiaries and his performance under this Agreement
(collectively "Work Product"); provided, however, that Consultant shall not be
------------ -------- -------
required to assign to the Company Work Product that he may develop entirely on
his own time without using the Company's or any subsidiary's equipment,
supplies, facilities or Confidential Information, except
-2-
<PAGE>
for Work Product which either (i) relates at the time of its conception or
reduction to practice to the Company's business, or actual or demonstrably
anticipated research or development of the Company, or (ii) results from any
work performed by Consultant for the Company.
(b) Consultant represents to the Company that there are no inventions,
original works of authorship, developments, improvements or trade secrets which
were made by him prior to his employment by or rendering of consulting services
to the Company or any subsidiary, which are owned by him or in which he has an
interest, which may relate to the Company's or its subsidiaries' proposed
business, products or research and development and which are not assigned to the
Company hereunder.
(c) Consultant further agrees to assist the Company, or its designee, at
the Company's expense, during the Consulting Period or thereafter, in every
proper way to secure the Company's rights in the Work Product and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto in any and all countries, including the disclosure to the
Company of all pertinent information and data with respect thereto, the
execution of all applications, specifications, oaths, assignments, powers of
attorney and all other instruments which the Company shall deem necessary or
appropriate in order to apply for and obtain such rights and in order to assign
and convey to the Company, its successors, assigns and nominees the sole and
exclusive rights, title and interest in and to such Work Product, and any
copyrights, patents, mask work right or other intellectual property rights
relating thereto.
6. Enforcement. If, at the time of enforcement of paragraph 4 or 5 of
-----------
this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Because Consultant's services are unique and because Consultant has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would not be an adequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security).
7. Tax Returns. Consultant shall file all tax returns and reports
-----------
required to be filed by him on the basis that Consultant is an independent
contractor, rather than an employee, as defined in Treasury Regulation
(S)31.3121(d)-1(c)(2), and Consultant shall indemnify the Company for the amount
of any employment taxes paid by the Company as the result of Consultant not
withholding employment taxes from the Consulting Payment.
8. Consultant's Representations. Consultant hereby represents and
----------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Consultant do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Consultant is a party or by which he is bound, (ii) Consultant
is not a party to or bound by any employment agreement, consulting agreement,
noncompete agreement or confidentiality agreement with any other person or
entity and (iii) upon
-3-
<PAGE>
the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Consultant, enforceable in
accordance with its terms. Consultant hereby acknowledges and represents that he
has consulted with independent legal counsel regarding his rights and
obligations under this Agreement and that he fully understands the terms and
conditions contained herein.
9. Survival. Paragraphs 4 through 8 shall survive and continue in full
--------
force in accordance with their terms notwithstanding any termination of the
Consulting Period.
10. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail
(return receipt requested), or sent by overnight courier service, to the
recipient at the address indicated below:
Notices to Consultant:
---------------------
Henry I. Boreen
1182 Wrack Road
Meadowbrook, PA 19046
Notices to the Company:
----------------------
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chief Executive Officer
With copies to:
---------------
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and to:
------
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Facsimile: (617) 572-3274
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
-4-
<PAGE>
and to:
------
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. No Strict Construction. The language used in this Agreement shall be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and inure
----------------------
to the benefit of and be enforceable by Consultant, the Company and their
respective heirs, successors and assigns, except that Consultant may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. Choice of Law. All issues and questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Pennsylvania, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the Commonwealth of
Pennsylvania or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the Commonwealth of Pennsylvania.
-5-
<PAGE>
17. Amendment and Waiver. The provisions of this Agreement may be amended
--------------------
or waived only with the prior written consent of the Company (with Board
approval) and Consultant, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
* * * * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
---------------------
Name: Hock E. Tan
Its: President
/s/ Henry I. Boreen
------------------------
HENRY I. BOREEN
-7-
<PAGE>
EXHIBIT 10.4
INTEGRATED CIRCUIT SYSTEMS, INC.
1999 STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
The 1999 Stock Option Plan (the "Plan") of Integrated Circuit Systems,
----
Inc. (the "Company"), adopted by the Board of Directors and shareholders of the
-------
Company effective as of May 11, 1999, is intended to advance the best interests
of the Company by providing executives and other key employees of the Company or
any Subsidiary (as defined below) who have substantial responsibility for the
management and growth of the Company or any Subsidiary with additional
incentives by allowing such employees to acquire an ownership interest in the
Company. The Plan is a compensatory benefit plan within the meaning of Rule 701
under the Securities Act of 1933, as amended (the "Securities Act") and, unless
--------------
and until the Class A Common (as defined below) is publicly traded, the issuance
of stock purchase options ("Options") for shares of Class A Common pursuant to
-------
the Plan and the issuance of shares of Class A Common pursuant to such Options
is, to the extent permitted by applicable federal securities laws, intended to
qualify for the exemption from registration under the Securities Act provided by
Rule 701.
ARTICLE II
Definitions
For purposes of the Plan the following terms have the indicated
meanings:
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). With respect to any Person who is an individual, "Affiliates" shall
also include, without limitation, any member of such individual's Family Group.
It is understood and agreed that any portfolio company in which a Bain
Stockholder or other Affiliate thereof which is a private equity fund holds in
excess of 30% of the outstanding capital stock is an "Affiliate" of such Bain
Stockholder for purposes of this Plan and that any portfolio company in which a
Bear Stearns Stockholder or any other Affiliate thereof that invests primarily
in equity securities holds in excess of 30% of the outstanding capital stock is
an "Affiliate" of such Bear Stearns Stockholder for purposes of this Plan.
<PAGE>
"Bain Exit" means (i) a sale of all or substantially all of the
---------
consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates or (ii) the transfer or other disposition of at
least 95% of the outstanding shares of capital stock of the Company for cash or
marketable securities (in each case whether by merger, consolidation, sale of
the Company's capital stock or otherwise).
"Bain Sale of the Company" means (i) a sale of all or substantially
------------------------
all of the consolidated assets of the Company to one or more of the Bain
Stockholders or their Affiliates, or (ii) the transfer or other disposition to
the Bain Stockholders or their Affiliates of outstanding shares of capital stock
of the Company (in each case, whether by merger, consolidation, sale of the
Company's capital stock or otherwise) such that after giving effect to such
transfer the Bain Stockholders and their Affiliates own all or substantially all
of the outstanding shares of the Company's capital stock (in each case, whether
by merger, consolidation, sale of the Company's capital stock or otherwise).
"Bain Stockholders" means each of the Persons listed on Schedule I
-----------------
hereto.
"Bear Stearns Stockholders" means each of the Persons listed on
-------------------------
Schedule II hereto.
"Board" means the Company's Board of Directors.
-----
"Class A Common" means the Company's Class A Common Stock, par value
--------------
$.01 per share.
"Class B Common" means the Company's Class B Common Stock, par value
--------------
$.01 per share.
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"Committee" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"Common Stock" means, collectively, the Class A Common, the Class B
------------
Common and any other common stock authorized by the Company.
"Fair Market Value" means, unless otherwise stated in an Option
-----------------
Agreement, the fair value of such Common Stock determined in good faith by the
Board based on such factors as the members thereof, in the exercise of their
business judgment, consider relevant.
"Family Group" means a Participant's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of such Participant
and/or such Participant's spouse and/or descendants (natural or adopted) of
Participant and any corporation, limited liability company,
-2-
<PAGE>
partnership or other entity the equity holders of which solely include such
Participant, his or her spouse or descendants (natural or adopted) or any trust
for the benefit of such Participant, his or her spouse or descendants (natural
or adopted).
"Issued Stock" shall mean (i) all shares of Common Stock issued upon
------------
the proper exercise of an Option and (ii) all shares of Common Stock issued with
respect to the Common Stock referred to in clause (i) above by way of stock
dividend or stock split or in connection with any conversion, merger,
consolidation or recapitalization or other reorganization affecting the Common
Stock. Unless provided otherwise herein or in the Participant's Option
Agreement, Issued Stock will continue to be Issued Stock in the hands of any
holder other than the Participant (except for the Company), and each such
transferee thereof will succeed to the rights and obligations of a holder of
Issued Stock hereunder.
"Option Shares" shall mean (i) all shares of Class A Common issuable
-------------
upon the exercise of an Option and (ii) all shares of any other class of Common
Stock issuable upon the exercise of an Option as a result of an adjustment to
such Option pursuant to any provision hereof.
"Participant" means any executive or other key employee of the Company
-----------
or any Subsidiary who has been selected to participate in the Plan by the
Committee or the Board.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Public Offering" means a public offering and sale of the Common Stock
---------------
pursuant to an effective registration statement under the Securities Act;
provided that a Public Offering shall not include an offering made in connection
with a business acquisition or combination or an employee benefit plan.
"Qualified Initial Public Offering" means the initial sale by the
---------------------------------
Company of any class or classes of the Common Stock in an offering registered
under the Securities Act, other than an offering made solely in connection with
a business acquisition or combination or an employee benefit plan, but only if
the aggregate gross proceeds received by the Company and/or its stockholders in
such initial sale or series of such sales in the aggregate are in excess of $50
million.
"Sale of the Company" means (i) a Bain Sale of the Company, or (ii) an
-------------------
Unaffiliated Sale of the Company.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or
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(ii) if a partnership, limited liability company, association or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association or
other business entity if such Person or Persons shall be allocated a majority of
partnership, limited liability company, association or other business entity
gains or losses or shall be or control the managing director, managing member,
manager or a general partner of such partnership, limited liability company,
association or other business entity.
"Termination Date" shall mean, with respect to any Participant, the
----------------
date that such Participant ceases to be employed by the Company or any of its
Subsidiaries for any reason.
"Unaffiliated Sale of the Company" means (i) a sale of all or
--------------------------------
substantially all of the consolidated assets of the Company to any Person other
than the Bain Stockholders or their Affiliates, or (ii) the transfer or other
disposition to any Person other than the Bain Stockholders or their Affiliates
of more than 50% of the outstanding shares of capital stock of the Company (in
each case, whether by merger, consolidation, sale of the Company's capital stock
or otherwise).
ARTICLE III
Administration
The Plan shall be administered by the Committee. Subject to the
limitations of the Plan, the Committee shall have the sole and complete
authority to: (i) select Participants, (ii) grant Options to Participants in
such forms and amounts and with such exercise price as it shall determine, (iii)
impose such limitations, restrictions and conditions upon such Options as it
shall deem appropriate, (iv) interpret the Plan and adopt, amend and rescind
administrative guidelines and other rules, procedures and regulations relating
to the Plan, (v) correct any defect or omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan and (vi) make all other
determinations and take all other actions necessary or advisable for the
implementation and administration of the Plan. Except as otherwise set forth in
any Option Agreement, the Committee's determinations on matters within its
authority shall be conclusive and binding upon the Participants, the Company and
all other Persons. All expenses associated with the administration of the Plan
shall be borne by the Company. The Committee may, as approved by the Board and
to the extent permissible by law, delegate any of its authority hereunder to
such Persons as it deems appropriate.
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ARTICLE IV
Limitation on Aggregate Shares
The number of shares of Class A Common with respect to which Options
may be granted under the Plan shall not exceed, in the aggregate, 4,500,000
shares, subject to adjustment in accordance with Section 6.4 and 6.5. To the
extent any Options expire unexercised or are canceled, terminated or forfeited
in any manner without the issuance of Class A Common thereunder, the shares with
respect to which such Options were granted shall again be available under the
Plan. Similarly, if any shares of Class A Common issued hereunder upon exercise
of the Options are repurchased hereunder, such shares shall again be available
under the Plan for reissuance as Options. The shares of Class A Common
available under the Plan may be either authorized and unissued shares, treasury
shares or a combination thereof, as the Committee shall determine.
ARTICLE V
Awards
5.1 Grant of Options. The Committee may grant Options to Participants
from time to time in accordance with this Article V. Options granted under the
Plan may be nonqualified stock options or "incentive stock options" within the
meaning of Section 422 of the Code or any successor provision as specified by
the Committee; provided, however, that no incentive stock option may be granted
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to any Participant who, at the time of grant, owns stock of the Company (or any
Subsidiary) representing more than 10% of the total combined voting power of all
classes of capital stock of the Company (or any Subsidiary), unless such
incentive stock option shall at the time of grant (a) have a termination date
not later than the fifth anniversary of the issuance date and (b) have an
exercise price per share equal to at least 110% of the Fair Market Value of a
share of Class A Common on the date of grant. The exercise price per share of
Class A Common under each Option shall be determined by the Committee or the
Board at the time of grant; provided, however, that the exercise price per share
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of Class A Common under each nonqualified stock option shall equal at least 85%
of the Fair Market Value of a share of Class A Common on the date of grant
(except that the exercise price per share shall be at least 110% of the Fair
Market Value in the case of any Person who owns stock representing more than 10%
of the total combined voting power of all classes of capital stock of the
Company (or a Subsidiary)) and the exercise price per share of Class A Common
under each incentive stock option shall be fixed by the Committee at the time of
grant of the Option and shall equal at least 100% of the Fair Market Value of a
share of Class A Common on the date of grant, but not less than the par value
per share (as adjusted pursuant to Section 6.4 or 6.5). Subject to Section 5.6,
Options shall be exercisable at such time or times as the Committee shall
determine; provided, however, that any Option intended to be an incentive stock
-------- -------
option shall be treated as an incentive stock option only to the extent that the
aggregate Fair Market Value of the Class A Common (determined as of the date of
Option grant) with respect to which incentive stock options (but not
nonqualified options) are exercisable for the first time by any Participant
during any calendar year (under all stock option plans of the Company and its
Subsidiaries) does not exceed
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$100,000. The Committee shall determine the term of each Option, which term
shall not exceed ten years from the date of grant of the Option. Each
Participant shall be entitled to receive financial statements of the Company to
the extent required by applicable law until such time as such Participant no
longer holds Options or Issued Stock.
5.2 Exercise Procedure. Options shall be exercisable, to the extent they
are vested, by written notice to the Company (to the attention of the Company's
Secretary) accompanied by payment in full of the applicable exercise price and,
if a resident of a community property jurisdiction, an executed consent from
Participant's spouse in the form of Annex B hereto. Payment of such exercise
price shall be made in cash (including check, bank draft, money order or wire
transfer of immediately available funds), but, at the option of the Participant,
may also be made (i) by surrendering shares of Class A Common Stock that have
been owned by the holder for at least six months and that have an aggregate fair
market value (as determined by the Committee in its sole discretion) equal to
the exercise price, (ii) by delivery of an irrevocable undertaking by a broker
to deliver promptly to the Company sufficient funds to pay the exercise price,
or (iii) any combination of the foregoing.
5.3 Withholding Tax Requirements.
(a) Amount of Withholding. It shall be a condition of the exercise of
any Option that the Participant exercising the Option make appropriate payment
or other provision acceptable to the Company with respect to any withholding tax
requirement arising from such exercise. The amount of withholding tax required,
if any, with respect to any Option exercise (the "Withholding Amount") shall be
------------------
determined by the Treasurer or other appropriate officer of the Company, and the
Participant shall furnish such information and make such representations as such
officer requires to make such determination.
(b) Withholding Procedure. If the Company determines that withholding
tax is required with respect to any Option exercise, the Company shall notify
the Participant of the Withholding Amount, and the Participant shall pay to the
Company an amount not less than the Withholding Amount. All amounts paid to the
Company pursuant to this Section 5.3 shall be deposited in accordance with
applicable law by the Company as withholding tax for the Participant's account.
If the Treasurer or other appropriate officer of the Company determines that no
withholding tax is required with respect to the exercise of any Option (because
such option is an incentive stock option or otherwise), but subsequently it is
determined that the exercise resulted in taxable income as to which withholding
is required (as a result of a disposition of shares or otherwise), the
Participant shall promptly, upon being notified of the withholding requirement,
pay to the Company, by means acceptable to the Company, the amount required to
be withheld; and at its election the Company may condition the transfer of any
shares issued upon exercise of an incentive stock option upon receipt of such
payment. Payment of withholding taxes by any Participant shall be made in cash
(including check, bankdraft, money order or wire transfer of immediately
available funds), and at the option of the Participant, may also be made (i) by
surrendering shares of Class A Common Stock that have been owned by the holder
for at least six months and that have an aggregate fair market value (as
determined by the Committee in its sole discretion) equal to the amount of
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withholding taxes, (ii) by delivery of an irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the withholding taxes,
(iii) by requesting in the notice of exercise that the Company not issue a
number of shares of Class A Common Stock issuable upon such exercise whose
aggregate fair market value (as determined by the Committee in its sole
discretion) equals the minimum amount of withholding tax, or (iv) any
combination of the foregoing.
5.4 Notification of Inquiries and Agreements. Each Participant and each
Permitted Transferee shall notify the Company in writing within 20 days after
the date such Participant or Permitted Transferee (i) first obtains actual
knowledge of any Internal Revenue Service inquiry, audit, assertion,
determination, investigation, or question in writing relating in any manner to
the value of Options granted hereunder; (ii) includes or agrees (including,
without limitation, in any settlement, closing or other similar agreement) to
include in gross income with respect to any Option granted under this Plan (A)
any amount in excess of the amount reported on Form 1099 or Form W-2 to such
Participant by the Company, or (B) if no such Form was received, any amount;
and/or (iii) sells, disposes of, or otherwise transfers an Option acquired
pursuant to this Plan. Upon request, a Participant or Permitted Transferee
shall provide to the Company any information or document relating to any event
described in the preceding sentence which the Company (in its sole discretion)
reasonably requires in order to calculate and substantiate any change in the
Company's tax liability as a result of such event.
5.5 Conditions and Limitations on Exercise. At the discretion of the
Committee, exercised at the time of grant, Options may vest, in one or more
installments, upon (i) the fulfilment of certain conditions, (ii) the passage of
a specified period of time, and/or (iii) the achievement by the Company or any
Subsidiary of certain performance goals; provided that the Options shall vest
and become exercisable with respect to the unvested shares of Common Stock
subject to the Option upon a Bain Exit, if and only if the Participant remains
continuously employed (other than for permitted leaves of absence) by the
Company beginning from the date of grant of such Option and ending on the date
of the Bain Exit. In the event of a proposed Sale of the Company or Organic
Change, the Committee may provide, in its discretion, by at least twenty-five
(25) days written notice to each applicable Participant, that any or all Options
shall become immediately vested and that any or all Options shall terminate if
not exercised as of the date of such Sale of the Company, Organic Change or any
other designated date following such Sale of the Company (the "Designated Date")
---------------
or that any such Options shall after such Sale of the Company represent only the
right to receive such consideration as the Committee shall deem equitable in the
circumstances.
5.6 Expiration of Options.
(a) Normal Expiration. In no event shall any part of any Option be
exercisable after the stated date of expiration thereof.
(b) Early Expiration upon Termination of Employment. Any part of any
Option that was not vested on a Participant's Termination Date shall expire and
be forfeited on such date, and any part of any Option that was vested on the
Termination Date shall also expire and be forfeited to the extent not
theretofore exercised on the sixty-fifth (65th) day following the Termination
Date (180
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days if the Termination Date occurs as a result of the death or disability (as
determined in the good faith discretion of the Board) of a Participant, but in
no event after (i) the stated date of expiration thereof, or (ii) a Bain Exit.
The Committee shall provide each Participant at least twenty-five (25) days
prior written notice of a Bain Exit.
(c) Consequences of Expiration of Options. Notwithstanding any other
provision contained herein or any Option Agreement to the contrary, the Company
shall have no liability or obligations for any Options that expire and are
forfeited pursuant to the provisions of Section 5(b) hereof.
5.7 Right to Purchase Issued Stock Upon Termination of Employment.
(a) Repurchase Right. If a Participant ceases to be employed by the
Company or any of its Subsidiaries for any reason, then such Participant's
Issued Stock (whether held by such Participant or one or more transferees and
including any shares of Issued Stock acquired subsequent to such termination of
employment) will be subject to repurchase by the Bain Stockholders, the Bear
Stearns Stockholders and the Company pursuant to the terms and conditions set
forth in this Section 5.7 (the "Repurchase Option") at a price per share equal
-----------------
to the Fair Market Value per share of such Issued Stock determined as of the
Termination Date.
(b) Repurchase Procedures. The Company may elect or decline to
exercise the Repurchase Option by delivering written notice (the "Company
-------
Repurchase Notice") to the holder or holders of the applicable Issued Stock, the
- -----------------
Bain Stockholders and the Bear Stearns Stockholders within 30 days after (i) the
applicable Termination Date or (ii) if later, the date which is 30 days after
the date that Participant exercises additional Options in accordance with
Section 5.6(b) hereof. To the extent that after giving effect to the Company's
option pursuant to the immediately preceding sentence any portion of the Issued
Stock is not being repurchased by the Company, the Bain Stockholders and the
Bear Stearns Stockholders may elect or decline to exercise the Repurchase Option
to purchase up to their pro rata share (determined based upon the number of
shares of Class A Common and Class B Common held by each) by delivering written
notice (the "Initial Repurchase Notice") to the Company, the holder or holders
-------------------------
of Issued Stock and the other within 10 days after receipt of the Company
Repurchase Notice. To the extent that the Bain Stockholders or the Bear Stearns
Stockholders do not elect to repurchase their full allotment of the remaining
Issued Stock, the other party shall be entitled to purchase all or any portion
of the remaining Issued Stock by providing notice (the "Supplemental Repurchase
-----------------------
Notice" and together with the Initial Repurchase Notice and Company Repurchase
- ------
Notice, a "Repurchase Notice") to each of the parties receiving the Initial
-----------------
Repurchase Notice within 5 days after receipt of the Initial Repurchase Notice.
Each Repurchase Notice will set forth the number of shares of Issued Stock to be
acquired from such holder(s), an estimate of the aggregate consideration to be
paid for such holder's shares of Issued Stock and the time and place for the
closing of the transaction. If any shares of Issued Stock are held by any
transferees of the applicable Participant, the Bain Stockholders, the Bear
Stearns Stockholders and the Company will purchase such shares of Issued Stock
elected to be purchased from such holder(s), pro rata according to the number of
shares of Issued Stock held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
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(c) Closing of Repurchase. Each closing of a repurchase transaction
will take place on the date designated by the Bain Stockholders, the Bear
Stearns Stockholders or the Company, as the case may be, in the latest
Repurchase Notice, which date will not be more than 90 days after the
Termination Date (or, if later, the date which is 90 days after a Participant
exercises additional Options in accordance with Section 5.6(b) hereof), and no
earlier than any date set forth in an earlier Repurchase Notice or the final
determination of Fair Market Value per share of Issued Stock as of the
Termination Date (the "Scheduled Closing Date"). The Company will pay for any
----------------------
shares of Issued Stock to be purchased pursuant to a Repurchase Option by cash
or a cashier's check payable to the holder(s) of such shares of Issued Stock in
an aggregate amount equal to their share of the aggregate repurchase price (the
"Repurchase Price") for such shares of Issued Stock; provided that any purchase
---------------- -------- ----
of shares of Issued Stock that occurs after the Scheduled Closing Date by the
Company as a result of the Financing Circumstances (as defined below) shall
include simple interest calculated from the Scheduled Closing Date to the date
of such payment at the rate of 6% per annum on the Repurchase Price attributable
to such shares of Issued Stock. The Bain Stockholders and the Bear Stearns
Stockholders will pay for any shares of Issued Stock to be purchased pursuant to
a Repurchase Option by delivery of cash or a cashier's check payable to the
holder(s) of such shares of Issued Stock in an aggregate amount equal to their
share of the aggregate unpaid Repurchase Price for such shares of Issued Stock.
Notwithstanding anything to the contrary contained in this Plan, all repurchases
of shares of Issued Stock will be subject to applicable restrictions and
covenants contained in the Pennsylvania Business Corporation Law of 1988 and in
the Company's and its Subsidiaries' debt financing agreements. If (i) any such
restrictions or covenants prohibit the repurchase of Issued Stock hereunder
which the Company is otherwise entitled to make, or (ii) the Company does not
have cash availability, including availability under its revolver, of at least
$15 million on a projected basis for the next six month period (collectively,
the "Financing Circumstances"), then the Company will not be required to make
-----------------------
such repurchase (and may defer making such repurchase) until it is permitted to
do so under such restrictions and covenants and until its projected cash
availability is greater than $15 million (with it being understood that the
Company will make the maximum amount of repurchase permitted and may defer
making the remainder of such repurchases until permitted to do so and it being
further understood that any closing of any such repurchase shall not occur on a
date which is later than the second anniversary of the Scheduled Closing Date).
The Bain Stockholders, the Bear Stearns Stockholders and the Company will
receive customary representations and warranties from each seller solely with
respect to such Seller's ownership and title to the Issued Stock and capacity to
transfer the Issued Stock.
(d) Termination. Notwithstanding anything contained herein to the
contrary, Repurchase Option granted to the Bain Stockholders, the Bear Stearns
Stockholders and the Company shall terminate (to the extent not previously
exercised) with respect to any Issued Stock issued to or on behalf of a
Participant who ceases to be employed by the Company or any of its Subsidiaries
after the first to occur of (i) a Bain Exit, (ii) a Public Offering, or (iii) to
the extent required by applicable law, the date which is the later of (A) 90
days after the Termination Date or (B) the date which is 90 days after
Participant exercises additional options in accordance with Section 5.6(b)
hereof.
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5.8 Restrictions on Transfer of Issued Stock.
(a) Transfer of Issued Stock. No Participant will sell, pledge,
transfer or otherwise dispose of (a "Transfer") any interest in any shares of
--------
Issued Stock, except (i) pursuant to the provisions of Sections 5.7, 5.10 or
5.11 hereof, (ii) pursuant to applicable laws of descent and distribution, or
(iii) among such Participant's Family Group; provided, that the restrictions
--------
contained in this Section 5.8 will continue to be applicable to shares of Issued
Stock after any Transfer of the type referred to in clause (ii) or (iii) above
and, as a condition to any such Transfer, the transferees of such shares of
Issued Stock must agree in writing to be bound by the provisions of this Plan.
In the case of a transfer by a Participant to a member of his Family Group,
after such transfer the Participant must continue to own at least 50% of his
shares of Issued Stock originally held by him on a fully diluted basis. Any
transferee of shares of Issued Stock pursuant to a Transfer in accordance with
clause (ii) or (iii) above is herein referred to as a "Permitted Transferee."
--------------------
Upon the Proposed Transfer of any shares of Issued Stock pursuant to clause
(ii) or (iii) above, such Participant or such Permitted Transferee Transferring
such shares of Issued Stock will deliver a written notice (a "Transfer Notice")
---------------
to the Company, which discloses in reasonable detail the identity of the
Permitted Transferee(s).
(b) Termination of Transfer Restrictions. The provisions of this
Section 5.8 will terminate upon a Qualified Initial Public Offering.
5.9 Additional Restrictions on Transfer.
(a) Legend. The certificates representing shares of Issued Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN THE
ISSUER'S 1999 STOCK OPTION PLAN, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
The legend set forth above regarding the Plan shall be removed from the
certificates evidencing any securities which cease to be Issued Stock.
(b) Transfer Requirement. No holder of Issued Stock may Transfer any
shares of Issued Stock (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel will be reasonably acceptable to the Company) that registration
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under the Securities Act is not required in connection with such Transfer. If
such opinion of counsel reasonably acceptable in form and substance to the
Company further states that no subsequent Transfer of such Issued Stock will
require registration under the Securities Act, the Company will promptly upon
such Transfer deliver new certificates for such securities which do not bear the
Securities Act legend set forth in Section 5.9(a).
5.10 Unaffiliated Sale of the Company
(a) If the Board approves an Unaffiliated Sale of the Company (each
such sale, an "Approved Sale"), then each holder of Issued Stock will vote for,
-------------
consent to and raise no objections against such Approved Sale. Each holder of
Issued Stock will, to the maximum extent permitted by applicable law, waive any
dissenters' rights, appraisal rights or similar rights in connection with such
Approved Sale, and in the event that the Approved Sale is a sale of stock, each
holder of Issued Stock will agree to sell (including, without limitation, by
executing and delivering definitive agreements with respect thereto) up to all
of his or her Issued Stock on the terms and conditions approved by the Board.
Each holder of Options and Issued Stock will take all necessary or desirable
actions in connection with the consummation of the Approved Sale as requested by
the Board or the Company.
(b) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities and Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Issued Stock will, at the
request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Issued Stock appoints a purchaser representative designated by the Company, the
Company will pay the fees of such purchaser representative, but if any holder of
Issued Stock declines to appoint the purchaser representative designated by the
Company, such holder will appoint another purchaser representative, and such
holder will be responsible for the fees of the purchaser representative so
appointed.
(c) Each holder of Issued Stock will bear their pro-rata share (based
upon the number of shares of Class A Common sold) of the costs of any sale of
Issued Stock pursuant to an Approved Sale to the extent such costs are incurred
for the benefit of all holders of Common Stock and are not otherwise paid by the
Company or the acquiring party. Costs incurred by any holder of Issued Stock on
his or her own behalf will not be considered costs of the transaction hereunder.
(d) The provisions of this Section 5.10 shall terminate upon a
Qualified Initial Public Offering.
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5.11 Bain Sale of the Company
(a) If a majority of the members of the Board (which shall include
for purposes of this Section 5.11 any director appointed by the Bear Stearns
Stockholders pursuant to the Voting Agreement, dated as of the date hereof, by
and among the Company and its Stockholders) which are not Affiliates of or
designees of the Bain Stockholders (the "Non-Bain Directors") approve a Bain
------------------
Sale of the Company (an "Approved Bain Sale"), then each holder of Issued Stock
------------------
that is not affiliated with the Bain Stockholders will vote for, consent to and
raise no objections against such Approved Bain Sale. Each such holder of Issued
Stock will waive, to the maximum extent permitted by applicable law, any
dissenters' rights, appraisal rights or similar rights in connection with such
Approved Bain Sale, and in the event that such Approved Bain Sale is a sale of
stock, each such holder of Issued Stock will agree to sell (including, without
limitation, by executing and delivering definitive agreements with respect
thereto) up to all of his or her Issued Stock on the terms and conditions
approved by the Non-Bain Directors. Each such holder of Options and Issued
Stock will take all necessary or desirable actions in connection with the
consummation of the Approved Bain Sale as requested by the Non-Bain Directors or
the Company.
(b) If, in relation to an Approved Bain Sale, the Company or the
holders of the Company's securities enter into any negotiation or transaction
for which Rule 506 (or any similar rule then in effect) promulgated by the
Securities and Exchange Commission may be available with respect to such
negotiation or transaction (including a merger, consolidation or other
reorganization), the holders of Issued Stock will, at the request of the Company
or the Bain Stockholders appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company and the Bain
Stockholders. If any holder of Issued Stock appoints a purchaser representative
designated by the Company or the Bain Stockholders, the Company will pay the
fees of such purchaser representative, but if any holder of Issued Stock
declines to appoint the purchaser representative designated by the Company or
the Bain Stockholders, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(c) Each holder of Issued Stock will bear their pro-rata share (based
upon the number of shares of Class A Common sold by stockholders) of the costs
of any sale of Issued Stock pursuant to an Approved Bain Sale, to the extent
such costs are incurred for the benefit of all holders of Common Stock and are
not otherwise paid by the Company or the acquiring party. Costs incurred by any
holder of Issued Stock on his or her own behalf will not be considered costs of
the transaction hereunder.
(d) The provisions of this Section 5.11 shall terminate upon a
Qualified Initial Public Offering.
5.12 Holdback Agreement. Before and after the effective date of any
underwritten Public Offering, no holder of Issued Stock will effect any sale or
distribution of Common Stock during the period designated by the underwriters
managing such underwritten Public Offering with respect to such holder of Issued
Stock.
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ARTICLE VI
General Provisions
6.1 Written Agreement. Each Option granted hereunder shall be embodied
in a written agreement (the "Option Agreement") which shall be signed by the
----------------
Participant to whom the Option is granted and shall be subject to the terms and
conditions set forth herein.
6.2 Listing, Registration and Legal Compliance. Subject to Section 6.16,
if at any time the Committee determines, in its discretion, that the listing,
registration or qualification of the shares subject to Options upon any
securities exchange or under any state or federal securities or other law or
regulation, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition to or in connection with the granting of
Options or the purchase or issuance of shares thereunder, no Options may be
granted or exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee. The holders of such Options
will supply the Company with such certificates, representations and information
as the Company shall request and shall otherwise cooperate with the Company in
obtaining such listing, registration, qualification, consent or approval.
6.3 Options Not Transferrable. Options may not be Transferred or
assigned by the Participant to whom they were granted, other than by will or the
laws of descent and distribution and, during the lifetime of such Participant,
Options may be exercised only by such Participant (or, if such Participant is
incapacitated, by such Participant's legal guardian or legal representative).
In the event of the death of a Participant, Options which are not vested on the
date of death shall terminate; and the exercise of Options granted hereunder to
such Participant, which are vested as of the date of death, may be made only by
the executor or administrator of such Participant's estate or the Person or
Persons to whom such Participant's rights under the Options pass by will or the
laws of descent and distribution.
6.4 Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Except
--------------
as otherwise provided in a Sale of the Company or otherwise provided herein,
after the consummation of any Organic Change, each Option shall thereafter be
exercisable for, rather than the applicable Option Shares immediately
theretofore acquirable and receivable upon exercise of such Option, such shares
of stock, securities or assets (including cash) as may be issued or payable with
respect to or in exchange for the number and class of Option Shares immediately
theretofore acquirable and receivable upon exercise of such Option had such
Organic Change not taken place.
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6.5 Adjustment for Change in Common Stock. In the event of a
recapitalization, reorganization, stock split, stock dividend, combination of
shares, consolidation, merger or other change in any class of Common Stock, the
Board or the Committee may, in order to prevent the dilution or enlargement of
rights under the Plan or outstanding Options, adjust (1) the number and type of
shares or other consideration as to which options may be granted under the Plan,
(2) the number and type of shares covered by outstanding Options, (3) the
exercise prices specified therein and (4) other provisions of this Plan which
specify a number of shares, all as appropriate and equitable under the
circumstances.
6.6 Rights of Participants. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or any Subsidiary to terminate any
Participant's employment at any time (with or without cause), or confer upon any
Participant any right to continue in the employ of the Company or any Subsidiary
for any period of time or to continue to receive such Participant's current (or
other) rate of compensation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a Participant.
6.7 Amendment, Suspension and Termination of Plan. The Board or the
Committee may suspend or terminate the Plan or any portion thereof at any time
and may amend it from time to time as the Board or the Committee may deem
advisable; provided, however, that no such amendment shall be made without
-------- -------
shareholder approval to the extent such approval is required by law, agreement
or the rules of any exchange upon which the Common Stock is listed, and no such
amendment, suspension or termination shall materially and adversely impair the
rights of Participants under outstanding Options without the consent of the
Participants affected thereby, except as provided below; provided further that
-------- -------
Sections 5.7, 5.11 and 6.14 are for the express benefit of the Bain Stockholders
and/or the Bear Stearns Stockholders and that there shall be no amendment to (or
other amendment to this Plan or the Option Agreement which has the effect of
amending) any of Sections 5.7, 5.11 and 6.14 or this Section 6.7 in a manner
adverse to the Bain Stockholders without first obtaining the consent of the Bain
Stockholders or in a manner adverse to the Bear Stearns Stockholders without
first obtaining the written consent of the Bear Stearns Stockholders. No
Options shall be granted hereunder after the tenth anniversary of the adoption
of the Plan.
6.8 Amendment of Outstanding Options. The Committee may amend or modify
any Option in any manner to the extent that the Committee would have had the
authority under the Plan initially to grant such Option; provided that, except
as expressly contemplated elsewhere herein or in any agreement evidencing such
Option, no such amendment or modification shall materially and adversely impair
the rights of any Participant under any outstanding Option without the consent
of such Participant.
6.9 Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board or the Committee, the members of the
Board and Committee shall be indemnified by the Company against (i) all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted under the Plan, and (ii) all amounts paid by them in settlement thereof
(provided such settlement is
-14-
<PAGE>
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding; provided,
--------
however, that any such Board or Committee member shall be entitled to the
- -------
indemnification rights set forth in this Section 6.9 only if such member (1)
acted in good faith and in a manner that such member reasonably believed to be
in, and not opposed to, the best interests of the Company, and (2) with respect
to any criminal action or proceeding, (A) had no reasonable cause to believe
that such conduct was unlawful, and (B) upon the institution of any such action,
suit or proceeding a Board or Committee member shall give the Company written
notice thereof and an opportunity to handle and defend the same before such
Board or Committee member undertakes to handle and defend it on his own behalf.
6.10 Restricted Securities. All Common Stock issued upon the exercise of
any Options issued pursuant to the terms of this Plan shall constitute
"restricted securities," as that term is defined in Rule 144 promulgated by the
Securities and Exchange Commission pursuant to the Securities Act, and may not
be Transferred except in compliance with the registration requirements of the
Securities Act or an exemption therefrom.
6.11 Stock Certificates. All certificates evidencing shares of Issued
Stock shall be held by the Company for the benefit of each Participant and the
other holder(s) of Issued Stock. Upon the date that the provisions of Sections
5.7, 5.10 and 5.11 are no longer effective, the Company will return the
certificates for the Issued Stock to the record holders thereof.
6.12 Stock Powers. Concurrently with the exercise of an Option pursuant
to an Option Agreement or at such other times as reasonably requested by the
Board, each Participant shall execute in blank ten stock transfer powers with
respect to each class of Issued Stock in the form of Annex A attached hereto
-------
(the "Stock Powers") with respect to the Issued Stock and shall deliver such
------------
Stock Powers to the Company. The Stock Powers shall be used by the Company to
assign, transfer and deliver the shares of Issued Stock to the appropriate
acquirer thereof pursuant to 5.7, 5.10 and 5.11 below and under no other
circumstances.
6.13 No Pledge or Security Interest. The purpose of the Company's
retention of each Participants's stock certificates and executed stock powers
with respect to the repurchase and transfer provisions set forth in Sections
5.7, 5.10 and 5.11 herein is solely to facilitate such repurchases and transfers
and does not constitute a pledge by a Participant of, or the granting of a
security interest in, the underlying stock.
6.14 Rights Granted to the Bain Stockholders, the Bear Stearns
Stockholders and their Affiliates. Any rights granted to the Bain Stockholders,
the Bear Stearns Stockholders and their Affiliates hereunder may also be
exercised (in whole or in part) by their designees (which may be Affiliates).
6.15 Further Assurances. In connection with any Sale of the Company
structured to achieve pooling of interest accounting treatment, each holder of
Options and Issued Stock shall take such actions as reasonably requested by the
Board in order to achieve and maintain pooling of interest accounting treatment.
-15-
<PAGE>
6.16 Manner and Effect of Exercise. Notwithstanding anything herein to
the contrary, any exercise of an option shall be effective upon the satisfaction
of the terms and conditions set forth herein and a Participant's Option
Agreement. Any holder shall be considered a stockholder for all purposes with
respect to any shares issuable upon exercise of an option from and after the
effective time of exercise, notwithstanding that no certificates may have been
issued in respect of such shares at such time.
6.17 Construction. References herein to any agreement shall be
references to such agreement as amended, modified, supplemented or waived from
time to time.
* * * * *
-16-
<PAGE>
Annex A
-------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _____________ does hereby sell, assign and
transfer unto ____________, a ________________________, ___________ shares of
the ___________ Stock, par value $.01 per share of Integrated Circuit Systems,
Inc., a Pennsylvania corporation (the "Company"), standing in the undersigned's
-------
name on the books of the Company represented by Certificate Nos. ________
herewith and does hereby irrevocably constitute and appoint any person
designated by the Board as attorney to transfer the said stock on the books of
the Company with full power of substitution in the premises.
Dated ____________, _____
___________________________________
[Participant]
<PAGE>
Annex B
-------
CONSENT
The undersigned spouse hereby acknowledges that I have read the
following agreements to which my spouse is a party:
_____ 1999 Stock Option Plan
_____ Agreement Evidencing Grant of Non-Qualified Stock Option
and that I understand their contents. I am aware that the such agreements
provide for the repurchase of my spouse's shares of Common Stock of Integrated
Circuit Systems, Inc. (the "Company") under certain circumstances and impose
other restrictions on such Common Stock. I agree that my spouse's interest in
the Common Stock is subject to the agreements referred to above and the other
agreements referred to therein and any interest I may have in such Common Stock
shall be irrevocably bound by these agreements and the other agreements referred
to therein and further that my community property interest (if any) shall be
similarly bound by these agreements.
The undersigned spouse irrevocably constitutes and appoints
_____________, who is the spouse of the undersigned spouse (the "Shareholder")
as the undersigned's true and lawful attorney and proxy in the undersigned's
name, place and stead to sign, make, execute, acknowledge, deliver, file and
record all documents which may be required, and to manage, vote, act and make
all decisions with respect to (whether necessary, incidental, convenient or
otherwise), any and all shares of Common Stock of the Company in which the
undersigned now has or hereafter acquires any interest and in any and all shares
of the Company now or hereafter held of record by the Shareholder (including but
not limited to the right, without further signature, consent or knowledge of the
undersigned spouse, to exercise or not to exercise any and all options under any
appropriate agreements and to exercise amendments and modifications of and to
terminate the foregoing agreements and to dispose of any and all such shares of
Common Stock and options), with all powers the undersigned spouse would possess
if personally present, it being expressly understood and intended by the
undersigned that the foregoing power of attorney and proxy is coupled with an
interest; and this power of attorney is a durable power of attorney and will not
be affected by disability, incapacity or death of the Shareholder, or
dissolution of marriage and this proxy will not terminate without consent of the
Shareholder and the Company:
Shareholder: Spouse of Shareholder:
- ----------- ---------------------
___________________________ _________________________________
Signature Signature
___________________________ _________________________________
Printed Name Printed Name
-18-
<PAGE>
Schedule I
----------
BAIN STOCKHOLDERS
Bain Capital Fund VI, L.P.
BCIP Trust Associates II
BCIP Trust Associates II-B
BCIP Associates II
BCIP Associates II-B
BCIP Associates II-C
PEP Investments PTY Ltd.
Randolph Street Partners II
Randolph Street Partners 1998 DIF, L.L.C.
-19-
<PAGE>
Schedule II
-----------
BEAR STEARNS STOCKHOLDERS
ICST Acquisition Corporation
-20-
<PAGE>
EXHIBIT 10.5
CREDIT AGREEMENT
DATED AS OF MAY 11, 1999
AMONG
INTEGRATED CIRCUIT SYSTEMS, INC.,
THE LENDERS LISTED HEREIN,
as Lenders,
AND
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Sole Lead Arranger and Collateral Agent
<PAGE>
TABLE OF CONTENTS
=================
<TABLE>
<CAPTION>
PAGE
----
<C> <S>
SECTION 1.
DEFINITIONS..................................................................1
1.1 Certain Defined Terms ..................................................1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement........................................................38
1.3 Other Definitional Provisions..........................................38
1.4 Changes in GAAP........................................................39
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS..................................39
2.1 Commitments; Loans.....................................................39
2.2 Interest on the Loans..................................................46
2.3 Fees...................................................................50
2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments..........................................51
2.5 Use of Proceeds........................................................61
2.6 Special Provisions Governing Eurodollar Rate Loans.....................62
2.7 Increased Costs; Taxes; Capital Adequacy...............................64
2.8 Obligation of Lenders and Issuing Bank to Mitigate.....................69
SECTION 3.
LETTERS OF CREDIT...........................................................70
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein................................................................70
3.2 Letter of Credit Fees..................................................72
3.3 Drawings and Payments and Reimbursement of Amounts Drawn or
Paid Under Letters of Credit...........................................72
3.4 Obligations Absolute...................................................75
3.5 Indemnification; Nature of Issuing Lenders' Duties.....................76
3.6 Increased Costs and Taxes Relating to Letters of Credit................77
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT...................................78
4.1 Conditions to Term Loans; Initial Revolving Loans......................78
4.2 Conditions to All Loans................................................83
4.3 Conditions to Letters of Credit........................................84
SECTION 5.
REPRESENTATIONS AND WARRANTIES..............................................85
</TABLE>
i
<PAGE>
<TABLE>
PAGE
----
<C> <S>
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries..........................................................85
5.2 Authorization of Borrowing, etc.......................................86
5.3 Financial Condition; Projections......................................87
5.4 No Material Adverse Change............................................88
5.5 Title to Properties; Liens; Real Property; Intellectual Property......88
5.6 Litigation; Adverse Facts.............................................89
5.7 Payment of Taxes......................................................89
5.8 Performance of Agreements.............................................89
5.9 Governmental Regulation...............................................90
5.10 Securities Activities.................................................90
5.11 Employee Benefit Plans................................................90
5.12 Certain Fees..........................................................90
5.13 Environmental Matters.................................................91
5.14 Employee Matters......................................................91
5.15 Solvency..............................................................92
5.16 Disclosure............................................................92
5.17 Year 2000 Matters.....................................................92
SECTION 6.
AFFIRMATIVE COVENANTS.......................................................93
6.1 Financial Statements and Other Reports................................93
6.2 Corporate Existence...................................................97
6.3 Payment of Taxes and Claims; Tax Consolidation........................97
6.4 Maintenance of Properties; Insurance..................................98
6.5 Inspection; Lender Meeting............................................98
6.6 Compliance with Laws, etc.............................................99
6.7 Environmental Disclosure and Inspection...............................99
6.8 Company's Remedial Action Regarding Hazardous Materials..............100
6.9 Execution of Guaranty and Collateral Documents by Future
Subsidiaries.........................................................100
6.10 Interest Rate Protection.............................................101
6.11 Further Assurances...................................................102
6.12 Conforming Leasehold Interests; Matters Relating to Additional and
Closing Real Property Collateral.....................................102
6.13 Year 2000 Matters....................................................105
SECTION 7.
NEGATIVE COVENANTS.........................................................106
7.1 Indebtedness.........................................................106
7.2 Liens and Related Matters............................................108
7.3 Investments; Joint Ventures..........................................110
</TABLE>
ii
<PAGE>
<TABLE>
PAGE
----
<C> <S>
7.4 Contingent Obligations...............................................111
7.5 Restricted Payments..................................................112
7.6 Financial Covenants..................................................113
7.7 Restriction on Fundamental Changes; Asset Sales......................118
7.8 Sales and Lease-Backs................................................119
7.9 Transactions with Shareholders and Affiliates........................119
7.10 Ownership of Subsidiary Stock........................................120
7.11 Amendments or Waivers of Certain Agreements..........................120
7.12 Fiscal Year..........................................................121
7.13 Conduct of Business..................................................121
SECTION 8.
EVENTS OF DEFAULT..........................................................121
8.1 Failure to Make Payments When Due....................................121
8.2 Default in Other Agreements..........................................121
8.3 Breach of Certain Covenants..........................................122
8.4 Breach of Warranty...................................................122
8.5 Other Defaults Under Loan Documents..................................122
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.................123
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc...................123
8.8 Judgments and Attachments............................................123
8.9 Dissolution..........................................................124
8.10 Employee Benefit Plans...............................................124
8.11 Change in Control....................................................124
8.12 Invalidity of Guaranties.............................................124
8.13 Failure of Security..................................................124
SECTION 9.
AGENTS.....................................................................126
9.1 Appointment..........................................................126
9.2 Powers; General Immunity.............................................127
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.....................................................129
9.4 Right to Indemnity...................................................129
9.5 Successor Administrative Agent and Swing Line Lender.................129
9.6 Collateral Documents; Successor Collateral Agent.....................130
SECTION 10.
MISCELLANEOUS..............................................................131
10.1 Assignments and Participations in Loans, Letters of Credit...........131
10.2 Expenses.............................................................134
</TABLE>
iii
<PAGE>
<TABLE>
PAGE
----
<C> <S>
10.3 Indemnity...........................................................134
10.4 Set-Off; Security Interest in Deposit Accounts......................135
10.5 Ratable Sharing.....................................................136
10.6 Amendments and Waivers..............................................136
10.7 Independence of Covenants...........................................138
10.8 Notices.............................................................138
10.9 Survival of Representations, Warranties and Agreements..............138
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative...............139
10.11 Marshalling; Payments Set Aside.....................................139
10.12 Severability........................................................139
10.13 Obligations Several; Independent Nature of the Lenders' Rights......139
10.14 Maximum Amount......................................................140
10.15 Headings............................................................140
10.16 Applicable Law......................................................141
10.17 Successors and Assigns..............................................141
10.18 Consent to Jurisdiction and Service of Process......................141
10.19 Waiver of Jury Trial................................................142
10.20 Confidentiality.....................................................142
10.21 Counterparts; Effectiveness.........................................143
</TABLE>
iv
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV-A FORM OF TERM A NOTE
IV-B FORM OF TERM B NOTE
V-A FORM OF REVOLVING NOTE
V-B FORM OF SWING LINE NOTE
VI FORM OF SUBSIDIARY GUARANTY
VII FORM OF PLEDGE AGREEMENT
VIII FORM OF SECURITY AGREEMENT
IX FORM OF COMPLIANCE CERTIFICATE
X FORMS OF OPINIONS OF COUNSEL TO LOAN PARTIES
XI FORM OF OPINION OF SASMF
XII FORM OF ASSIGNMENT AGREEMENT
XIII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIV FORM OF CERTIFICATE OF NON-BANK STATUS
XV FORM OF MORTGAGE
XVI FORM OF PERMITTED SELLER PAPER SUBORDINATION PROVISIONS
XVII FORM OF LANDLORD CONSENT AND ESTOPPEL
v
<PAGE>
SCHEDULES
1.1(i) CERTAIN ADJUSTMENTS TO EBITDA/CONSOLIDATED INTEREST EXPENSE
1.1(ii) EXISTING INVESTORS
1.1(iii) OTHER INVESTORS
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1Q CORPORATE STRUCTURE; CAPITAL STRUCTURE; OWNERSHIP
5.1 SUBSIDIARIES OF COMPANY
5.5B CERTAIN REAL PROPERTY MATTERS
5.5C CERTAIN INTELLECTUAL PROPERTY MATTERS
5.12 CERTAIN FEES
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2A CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.8 CERTAIN SALES AND LEASE-BACKS
vi
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of May 11, 1999 and entered into by
and among INTEGRATED CIRCUIT SYSTEMS, INC., a Pennsylvania corporation
("Company"), THE BANKS, FINANCIAL INSTITUTIONS AND OTHER ENTITIES LISTED ON THE
- ---------
SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and
------
collectively as "Lenders"), CREDIT SUISSE FIRST BOSTON ("CSFB"), as
------- ----
administrative agent for the Lenders (in such capacity, the "Administrative
--------------
Agent"), as sole lead arranger (in such capacity, the "Sole Lead Arranger"),
- ----- ------------------
and as collateral agent for the Administrative Agent and the Lenders (in such
capacity, the "Collateral Agent").
----------------
R E C I T A L S
---------------
WHEREAS, Bain (capitalized terms used herein having the meanings
assigned to those terms in subsection 1.1), the Other Investors and the Existing
Investors propose to engage in a series of Recapitalization Transactions,
whereby Company will be acquired on the Closing Date;
WHEREAS, Company has requested Lenders to extend, and Lenders have
agreed to extend, certain credit facilities in an aggregate principal amount of
up to $145,000,000 to Company, the proceeds of which will be used, together with
approximately $50,000,000 from the Equity Contribution and not less than
$47,500,000 in gross cash proceeds from the issuance and sale of Subordinated
Debt, to permit the consummation of the Recapitalization Transactions, to pay
related fees and expenses and to provide financing for working capital and other
general corporate purposes of Company and its Subsidiaries; and
WHEREAS, the Lenders are willing to make such credit facilities
available upon and subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 18.
DEFINITIONS
18.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement shall have the following
meanings:
<PAGE>
"Additional Mortgage" has the meaning assigned to that term in
-------------------
subsection 6.12C.
"Additional Mortgaged Property" has the meaning assigned to that term
-----------------------------
in subsection 6.12C.
"Administrative Agent" has the meaning assigned to that term in the
--------------------
Preamble to this Agreement and shall include any successor Administrative
Agent appointed pursuant to subsection 9.5.
"Affected Class" has the meaning assigned to that term in subsection
--------------
10.6A.
"Affected Lender" has the meaning assigned to that term in subsection
---------------
2.6C.
"Affected Loans" has the meaning assigned to that term in subsection
--------------
2.6C.
"Affiliate" means, as applied to any Person, any other Person directly
---------
or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and
"under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through
the ownership of voting securities or by contract or otherwise.
"Agents" means, collectively, the Administrative Agent, the Collateral
------
Agent and the Sole Lead Arranger.
"Agreement" means this Credit Agreement dated as of May 11, 1999, as
---------
it may be amended, restated, supplemented or otherwise modified from time
to time.
"Anniversary" means a date that is an anniversary of the Closing Date.
-----------
"Applicable Base Rate Margin" means a percentage per annum determined
---------------------------
by reference to the Applicable Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
Applicable Base
Rate Margin for Applicable Base
Applicable Term A Loans and Rate Margin for
Leverage Ratio Revolving Loans Term B Loans
=====================================================================
<S> <C> <C>
greater than 4.00:1.0 2.00% 2.50%
- ---------------------------------------------------------------------
less than
or equal to 4.00:1.0 1.75% 2.25%
- ---------------------------------------------------------------------
less than 3.50:1.0 1.50% 2.00%
- ---------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Applicable Base
Rate Margin for Applicable Base
Applicable Term A Loans and Rate Margin for
Leverage Ratio Revolving Loans Term B Loans
=====================================================================
<S> <C> <C>
less than 3.00:1.0 1.25% 2.00%
- ---------------------------------------------------------------------
less than 2.50:1.0 1.00% 2.00%
- ---------------------------------------------------------------------
less than 2.00:1.0 0.75% 2.00%
=====================================================================
</TABLE>
; provided, however, that the Applicable Base Rate Margin shall be 2.00% in
-------- -------
the case of Term A Loans and Revolving Loans and 2.50% in the case of Term
B Loans, in each case for so long (but only for so long) as an Event of
Default has occurred and is continuing or Company has not submitted to the
Administrative Agent the information as and when required under subsection
6.1(ii) or (iii), as applicable.
"Applicable Commitment Fee Percentage" means a percentage per annum
------------------------------------
determined by reference to the Applicable Leverage Ratio as set forth
below:
<TABLE>
<CAPTION>
Applicable
Commitment
Leverage Ratio Fee Percentage
===================================================
<S> <C>
greater than 4.00:1.0 0.500%
- ---------------------------------------------------
less than or
equal to 4.00:1.0 0.500%
- ---------------------------------------------------
less than 3.50:1.0 0.500%
- ---------------------------------------------------
less than 3.00:1.0 0.375%
- ---------------------------------------------------
less than 2.50:1.0 0.375%
- ---------------------------------------------------
less than 2.00:1.0 0.375%
===================================================
</TABLE>
; provided, however, that the Applicable Commitment Fee Percentage shall be
-------- -------
0.500% for so long (but only for so long) as an Event of Default has
occurred and is continuing or Company has not submitted to the
Administrative Agent the information as and when required under subsection
6.1(ii) or (iii), as applicable.
"Applicable Eurodollar Rate Margin" means a percentage per annum
---------------------------------
determined by reference to the Applicable Leverage Ratio as set forth
below:
-3-
<PAGE>
<TABLE>
<CAPTION>
Applicable
Eurodollar Applicable
Rate Margin for Eurodollar
Term A Loans and Rate margin for
Leverage Ratio Revolving Loans Term B Loans
==========================================================
<S> <C> <C>
greater than 4.00:1.0 3.00% 3.50%
- ----------------------------------------------------------
less than or
equal to 4.00:1.0 2.75% 3.25%
- ----------------------------------------------------------
less than 3.50:1.0 2.50% 3.00%
- ----------------------------------------------------------
less than 3.00:1.0 2.25% 3.00%
- ----------------------------------------------------------
less than 2.50:1.0 2.00% 3.00%
- ----------------------------------------------------------
less than 2.00:1.0 1.75% 3.00%
==========================================================
</TABLE>
; provided, however, that the Applicable Eurodollar Rate Margin shall be
-------- -------
3.00% in the case of Term A Loans and Revolving Loans and 3.50% in the case
of Term B Loans, in each case for so long (but only for so long) as an
Event of Default has occurred and is continuing or Company has not
submitted to the Administrative Agent the information as and when required
under subsection 6.1(ii) or (iii), as applicable.
"Applicable Excess Subordinated Debt Amount" means (i)) with respect
------------------------------------------
to the Term A Loan Commitments 40% of the Excess Subordinated Debt Amount
and (ii) with respect to the Term B Loan Commitments, 60% of the Excess
Subordinated Debt Amount.
"Applicable Laws" means, collectively, all statutes, laws, rules,
---------------
regulations, ordinances, decisions, writs, judgments, decrees, and
injunctions of any Governmental Authority affecting Company or any of its
Subsidiaries or any Collateral or any of their other assets, whether now or
hereafter enacted and in force, and all Governmental Authorizations
relating thereto.
"Applicable Leverage Ratio" means, with respect to any date of
-------------------------
determination, the Leverage Ratio set forth in the Pricing Certificate (as
defined below) in effect for the Pricing Period (as defined below) in which
such date of determination occurs. For purposes of this definition, (i)
"Pricing Certificate" means an Officer's Certificate of Company certifying
--------------------
as to the Leverage Ratio as of the last day of any Fiscal Quarter and
setting forth the calculation of such Leverage Ratio in reasonable detail,
which Officer's Certificate may be delivered to Administrative Agent at any
time on or after the date of delivery by Company of the Compliance
Certificate (the "Related Compliance Certificate") with respect to the
-------------------------------
period ending on the last day of such Fiscal Quarter pursuant to subsection
6.1(iv), and (ii) "Pricing Period" means each period commencing on the
--------------
first Business Day after the delivery to Administrative Agent of a Pricing
Certificate and ending on the first Business Day after the next Pricing
Certificate is delivered to Administrative Agent; provided that, anything
contained in this definition to the contrary notwithstanding, (a) the
Applicable Leverage Ratio for the period from the Closing Date to but
excluding the First Adjustment Date shall be deemed to be greater than
4.0:1.00 for purposes of making the relevant calculation referred to
above, and (b) in the event that, after the First Adjustment Date, (X)
Company fails to deliver a Pricing Certificate to Administrative Agent
setting forth the Leverage Ratio as of the last day of any Fiscal Quarter
on or before the last day on which Company is required to deliver the
Related Compliance Certificate (such last day being the "Cutoff Date") and
-----------
(Y) Administrative Agent determines
-4-
<PAGE>
(each such determination being an "Agent Determination") on or after the
-------------------
Cutoff Date (on the basis of the Related Compliance Certificate or a
Pricing Certifi cate delivered after the Cutoff Date) that the Applicable
Leverage Ratio that would have been in effect if Company had delivered a
Pricing Certificate on the Cutoff Date is greater than the Leverage Ratio
set forth in the most recent Pricing Certificate actually delivered by
Company, then (1) the Applicable Leverage Ratio in effect for purposes of
making the relevant calculation referred to above for the period from the
Cutoff Date to the date of delivery by Company of the next Pricing
Certificate (or, if earlier, the next date on which an Agent Determination
is made) shall be the Leverage Ratio determined pursuant to the Agent
Determination and (2) on the first Business Day after Administrative Agent
delivers written notice to Company of any Agent Determination, Company
shall pay to Administrative Agent, for distribution (as appropriate) to
Lenders, an aggregate amount equal to the additional interest, letter of
credit fees and commitment fees Company would have been required to pay in
respect of all applicable Loans, Letters of Credit or Commitments in
respect of which any interest or fees have been paid by Company during the
period from the Cutoff Date to the date such notice is given by
Administrative Agent to Company if the amount of such interest and fees had
been calculated using the Applicable Leverage Ratio based on such Agent
Determination.
"Approved Fund" with respect to any Lender that is a fund that invests
-------------
in bank loans, any other fund or trust or entity that invests in bank loans
and is advised or managed by the same investment advisor as such Lender or
by an Affiliate of such investment advisor property.
"Asset Sale" means the sale, lease, sale and leaseback, assignment,
----------
conveyance, transfer or other disposition by Company or any of its
Subsidiaries to any Person (other than Company or any of its wholly-owned
Subsidiaries) of any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock (including,
without limitation, of any of Company's Subsidiaries), but excluding (a)
sales of assets in a single transaction or a series of related transactions
equal to $1,000,000 or less (b) sales or other disposals of obsolete,
uneconomical, negligible, worn out or surplus equipment or other assets,
and (c) sales and other disposals of assets in the ordinary course of
business, including sales or discounts of accounts receivable in connection
with the collection or compromise thereof, the sale or exchange of
equipment or other personal property, including intellectual
-5-
<PAGE>
property, for the functional equivalent thereof, and leasing or licensing
of real or personal property (including intellectual property).
"Assignment Agreement" means an assignment agreement in substantially
--------------------
the form of Exhibit XII annexed hereto or in such other form as may be
-----------
approved by the Administrative Agent.
"Assignment of Rents and Leases" means each Assignment of Rents and
------------------------------
Leases executed and delivered by any Loan Party in favor of the Collateral
Agent for the benefit of the Agents and the Lenders in such form as shall
be approved by the Collateral Agent in its reasonable discretion, in each
case with such changes thereto as may be reasonably recommended by the
Collateral Agent's local counsel based on local laws or customary practice,
as any such Assignment of Rents and Leases may heretofore have been or
hereafter may be amended, restated, supplemented, consolidated, extended or
otherwise modified from time to time in accordance with the terms thereof
and hereof.
"Bain" means Bain Capital, Inc. and/or one or more of its Affiliates.
----
"Bain Advisory Services Agreement" means that certain Advisory
--------------------------------
Services Agreement by and between Company and Bain, dated on or about the
Closing Date, in form delivered to the Administrative Agent on or prior to
the Closing Date, as the same may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.11A.
"Bain Management Fees" means the fees (including one-time fees payable
--------------------
in connection with acquisitions, divestitures and financings) and expenses
payable to Bain pursuant to the Bain Advisory Services Agreement.
"Bankruptcy Code" means Title 11 of the United States Code entitled
---------------
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or
---------
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
---------------
reference to the Base Rate as provided in subsection 2.2A.
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks in New York City are authorized or required by
law to close; provided that, with respect to matters relating to Eurodollar
--------
Rate Loans, the term "Business Day" shall mean a day other than a Saturday,
------------
Sunday or other day on which commercial banks in New York City or London,
England, are authorized or required by law to close.
-6-
<PAGE>
"Calculation Date" has the meaning assigned to that term in subsection
----------------
7.6B.
"Calculation Period" has the meaning assigned to that term in
------------------
subsection 7.6A.
"Capital Lease" means, as applied to any Person, any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"Capital Stock" means any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation), including, without limitation, partnership interests and
membership interests, and any and all warrants, rights or options to
purchase or other arrangements or rights to acquire any of the foregoing.
"Carryforward" has the meaning assigned to that term in subsection
------------
7.6D.
"Cash" means money, currency or a credit balance in a Deposit Account.
----
"Cash Equivalents" means (i) marketable securities issued or directly
----------------
and unconditionally guaranteed by the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable from either S&P or Moody's; (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof
and, at the time of acquisition, having a rating of at least A-1 from S&P
or at least P-1 from Moody's, issued by any Lender or any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia, any member of the European Economic
Community or any U.S. branch of a foreign bank having combined capital and
surplus of not less than $250,000,000 (each Lender and each such commercial
bank being herein called a "Cash Equivalent Bank"); (v) Eurodollar time
--------------------
deposits having a maturity of less than one year purchased directly from
any Cash Equivalent Bank (provided such deposit is with such Cash
Equivalent Bank or any other Cash Equivalent Bank); and (vi) repurchase
obligations for underlying securities of the types described in clauses (i)
through (v) and (vii) investments in money market funds which invest their
assets in the types of Cash Equivalents described in clauses (i) through
(v) above.
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
-------------
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note
-7-
<PAGE>
receivable or otherwise (other than the portion of such deferred payment
constituting interest), but only as and when so received) received from
such Asset Sale.
"Certificate of Non-Bank Status" means a certificate substantially in
------------------------------
the form of Exhibit XIV annexed hereto delivered by a Lender to the
-----------
Administrative Agent pursuant to subsection 2.7B(iii).
"Class" means each of the following classes of the Lenders: (i) the
-----
Lenders having Term A Loan Exposure, (ii) the Lenders having Term B Loan
Exposure, and (iii) the Lenders having Revolving Loan Exposure.
"Cleanup" means all actions required to: (1) cleanup, remove, treat or
-------
remediate Hazardous Materials in the indoor or outdoor environment; (2)
prevent the Release of Hazardous Materials so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (3) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
"Closing Date" means the date on which the Term Loans are made, but in
------------
any event not later June 30, 1999.
"Collateral" means all of the properties and assets (including Capital
----------
Stock) in which Liens are purported to be granted by the Collateral
Documents as security for the Obligations.
"Collateral Account" has the meaning assigned to that term in the
------------------
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
----------------------------
executed and delivered by Company and the Collateral Agent as of the
Closing Date, substantially in the form of Exhibit XIII annexed hereto, as
------------
such Collateral Account Agreement may be amended, restated, supplemented or
otherwise modified from time to time.
"Collateral Agent" means CSFB, in its capacity as collateral agent
----------------
hereunder and under the Collateral Documents, and any successor in such
capacity.
"Collateral Documents" means the Pledge Agreement, the Security
--------------------
Agreement, the Collateral Account Agreement, the Mortgages, if any, and any
other documents, instruments or agreements delivered by any Loan Party
pursuant to this Agreement or any of the other Loan Documents in order to
grant to Collateral Agent, on behalf of the Lenders, Liens and to perfect
such Liens on any assets of such Loan Party as security for all or any of
the Obligations.
-8-
<PAGE>
"Commercial Letter of Credit" means any letter of credit or similar
---------------------------
instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or
services by Company or any of its Subsidiaries in the ordinary course of
business of Company or such Subsidiary.
"Commitments" means the commitments of the Lenders to make Loans as
-----------
set forth in subsection 2.1A of this Agreement.
"Company" has the meaning assigned to that term in the Preamble to
-------
this Agreement.
"Compliance Certificate" means a certificate substantially in the form
----------------------
of Exhibit IX annexed hereto delivered to the Administrative Agent by
----------
Company pursuant to subsection 6.1(iv).
"Conforming Leasehold Interest" means any Recorded Leasehold Interest
-----------------------------
as to which the lessor has substantially agreed in writing for the benefit
of the Collateral Agent (which writing has been delivered to the Collateral
Agent), whether under the terms of the applicable lease, under the terms of
a Landlord Consent and Estoppel, or otherwise, to the grant of a Mortgage
on the lessee's interest in such Recorded Leasehold Interest and such other
matters requested by the Collateral Agent, which interest, if a
subleasehold or sub-subleasehold interest, is not subject to any contrary
restrictions contained in a superior lease or sublease.
"Condemnation Proceeds" has the meaning assigned to that term in
---------------------
subsection 2.4B(iii)(d).
"Consolidated Adjusted EBITDA" means, for any period, without
----------------------------
duplication, the sum of the amounts for such period (as determined for
Company and its Subsidiaries on a consolidated basis) of (i) Consolidated
Net Income, (ii) Consolidated Interest Expense, (excluding the cash portion
of any payments made pursuant to subsection 2.3 to the Agent or Lenders on
or before the Closing Date, but including the non-cash amortization of
such amounts after the Closing Date), (iii) provisions for taxes based on
income (including, without duplication, foreign withholding taxes and any
state single business, unitary or similar taxes), (iv) total depreciation
expense, (v) total amortization expense, (vi) to the extent deducted in
determining Consolidated Net Income, those items de scribed in subdivision
A of Schedule 1.1(i) annexed hereto, and (vii) other non-cash items
reducing Consolidated Net Income (excluding accruals of expenses and
establishment of reserves in the ordinary course of business) to the
extent reflected as a charge or otherwise deducted from the determination
of Consolidated Net Income, less non-cash items increasing Consolidated Net
----
Income (other than accruals of revenue or reversals of reserves), all of
the foregoing (except as otherwise provided in the definition of any term
used herein) as determined on a consolidated basis in conformity with GAAP;
provided
--------
-9-
<PAGE>
that, for purposes of determining Consolidated Adjusted EBITDA for any
period (or portion thereof) including the second and/or third Fiscal
Quarters of Fiscal Year 1999, Consolidated Adjusted EBITDA shall be
determined pursuant to the methodology set forth in subdivision B of
Schedule 1.1(i).
"Consolidated Capital Expenditures" means, for any period, the
---------------------------------
aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability (including that portion of Capital Leases which
is capitalized on a consolidated balance sheet in accordance with GAAP), by
Company and its Subsidiaries during that period that, in conformity with
GAAP, are or should be included in "purchases of property, plant or
equipment" or comparable items reflected in the consolidated statement of
cash flows of Company and its Subsidiaries; provided, however, that the
-------- -------
following shall in any event be excluded from the definition of
Consolidated Capital Expenditures: (a) any such expenditures made with, or
subsequently reimbursed out of, the proceeds of insurance, condemnation
awards (or payments in lieu thereof), indemnity payments or payments in
respect of judgments or settlements received from third parties for
purposes of replacing or repairing the assets in respect of which such
proceeds, awards or payments were received, so long as such expenditures
are commenced (or are contractually committed to commence) within 365 days
of the later of the occurrence of the damage to or loss of the assets being
replaced or repaired and the receipt of such proceeds, awards or payments
in respect thereof and (b) any such expenditures constituting the
reinvestment of proceeds from the sales of assets in equipment or other
productive assets of Company and its Subsidiaries, so long as such
expenditures are commenced (or are contractually committed to commence)
within 365 days of the receipt of such proceeds; and provided further,
-------- -------
however, that Consolidated Capital Expenditures shall not include any
-------
expenditures made by Company or any of its Subsidiaries to acquire in a
Permitted Acquisition the business, property or assets of any Person, or
the stock or other evidence of beneficial ownership of any Person that, as
a result of such acquisition, becomes a Subsidiary of Company.
"Consolidated Current Assets" means, as at any date of determination,
---------------------------
the total assets of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current assets in conformity with GAAP,
excluding Cash, Cash Equivalents and deferred income taxes to the extent
otherwise included in current assets.
"Consolidated Current Liabilities" means, as at any date of
--------------------------------
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities
in conformity with GAAP, other than (i) any liabilities that are the
current portion of Indebtedness classified as long term liabilities in
conformity with GAAP (including accrued but unpaid interest) and (ii)
deferred income taxes to the extent otherwise included in current
liabilities.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
-----------------------------
positive) equal to (i) the sum, without duplication, of the amounts for
such period of (a)
-10-
<PAGE>
Consolidated Adjusted EBITDA and (b) the Consolidated Working Capital
Adjustment (which may be a negative number) minus (ii) the sum, without
-----
duplication, of the amounts for such period of (a) voluntary and scheduled
cash principal repayments made in respect of Consolidated Total Debt
(excluding repayments of Revolving Loans except to the extent the Revolving
Loan Commitments are permanently reduced in connection with such
repayments), (b) Consolidated Capital Expenditures (net of any proceeds of
any related financings with respect to such Capital Expenditures) plus (or
----
minus, if negative) the Carryforward for such period to be carried forward
-----
to the next period less the Carryforward (if any) for the preceding period
----
carried forward to the current period, (c) Consolidated Interest Expense
paid in cash during such period and (d) the provision for taxes (including,
without duplication, foreign withholding taxes and any single business,
unitary or similar taxes) based on income of Company and its Subsidiaries
and paid in cash with respect to such period (including taxes payable in
cash within 90 days following such period), (e) any cash payments made
during such period with respect to items set forth in subdivision A of
Schedule 1.1(i) annexed hereto, (f) non-cash charges added in calculating
---------------
Consolidated Adjusted EBITDA in a prior period to the extent such non-cash
charges are paid in cash in the current period, (g) fees and expenses
associated with any exchange of Subordinated Debt contemplated under the
terms of the Subordinated Debt Documents, (h) to the extent not otherwise
deducted in determining Consolidated Excess Cash Flow, cash payments made
during such period with respect to non-current liabilities and cash
payments made during such period with respect to restructuring reserves and
expenditures with respect to Permitted Acquisitions, and (i) to the extent
not otherwise deducted in determining Consolidated Net Income, Restricted
Payments and Investments made pursuant to subsections 7.3 or 7.5 made
during such period.
"Consolidated Interest Expense" means, for any period (as determined
-----------------------------
for Company and its Subsidiaries on a consolidated basis), total cash or
non-cash interest expense (including that portion attributable to capital
leases in accordance with GAAP), including, without limitation, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under
Interest Rate Agreements and other Hedge Agreements, commitment fees
accrued under subsection 2.3A and any Administrative Agent's fees payable
to Administrative Agent, provided that Consolidated Interest Expense for
the second, third, and fourth Fiscal Quarters of Fiscal year 1999 shall be
determined in accordance with subdivision B of Schedule 1.1(i).
---------------
"Consolidated Net Income" means, for any period, the net income (or
-----------------------
loss) of Company and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded therefrom (i) the income (or
--------
loss) of any Person other than a Subsidiary of Company in which any other
person (other than Company or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to Company or any Subsidiary of Company by such
Person during such
-11-
<PAGE>
period, (ii) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary of Company or is merged into or consolidated with
Company or any Subsidiary of Company or that Person's assets are acquired
by Company or any Subsidiary of Company, (iii) the amount of income of any
Subsidiary of Company only to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of such amount of
income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to Asset Sales, (v) Transaction
Costs, and (vi) to the extent not included in clauses (i) through (v)
above, any net extraordinary unusual or nonrecurring gains or net unusual
or nonrecurring extraordinary losses and any write-offs of deferred
financing costs associated with Indebtedness of Company repaid on the
Closing Date.
"Consolidated Total Debt" means, as at any date of determination, the
-----------------------
aggregate amount of all outstanding Indebtedness of Company and its
Subsidiaries on a consolidated basis; provided that the term
--------
"Consolidated Total Debt" shall exclude any Indebtedness with respect to
outstanding Permitted Seller Paper so long as the terms and conditions of
such Permitted Seller Paper do not require any cash payments to be made to
the holder of such Permitted Seller Paper prior to the payment in full of
all Obligations.
"Consolidated Working Capital" means, as at any date of determination,
----------------------------
the excess of Consolidated Current Assets over Consolidated Current
Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
---------------------------------------
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or
is less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another
if the primary purpose or intent thereof by the Person incurring the
Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, or (iii) under Interest
Rate Agreements or other Hedge Agreements. Contingent Obligations shall
include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to
make take-or-pay or similar payments if required regardless of non-
performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of
-12-
<PAGE>
another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor,
or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the
case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal
to (A) the amount of the obligation so guaranteed or otherwise supported
or, if less, the amount to which such Contingent Obligation is specifically
limited (including netting of Interest Rate Agreements of Hedge Agreements)
or (B) if neither amount in clause (A) is stated or determinable, the
maximum reasonably anticipated liability in respect there of (assuming such
Person is required to perform) as determined by such Person in good faith.
Contingent Obligations shall not include standard contractual indemnities
entered into in the ordinary course of business.
"Continuing Director" shall mean, as of any date of determination, any
-------------------
member of the Board of Directors of Company who (i) was a member of such
Board of Directors on the Closing Date or (ii) was nominated for election
or elected to such Board of Directors with the affirmative vote (directly
or indirectly) of Bain and the Other Investors.
"Contractual Obligation" means, as applied to any Person, any
----------------------
provision of any material indenture, mortgage, deed of trust, contract,
undertaking or other material agreement or instrument to which such Person
is a party or to which such Person or any of its assets is subject.
"CSFB" means Credit Suisse First Boston.
----
"CSM" means Chartered Semiconductor Manufacturing LTD, a Singapore
---
company.
"CSM Deposit Agreements" means (i) the Deposit Agreement, dated
----------------------
November 8, 1995, and as amended though the Closing Date between Company
and CSM, and (ii) the Second Deposit Agreement, dated October 7, 1998, and
as amended through the Closing Date, between Company and CSM, in each case
as delivered to the Administrative Agent on or prior to the Closing Date,
and as the same may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.13A.
"CSM Deposits" means the aggregate deposits made by Company to CSM
------------
pursuant to the CSM Deposit Agreements.
"Default" means a condition or event that, after notice or after any
-------
applicable grace period has lapsed, or both, would constitute an Event of
Default.
-13-
<PAGE>
"Defaulting Lender" means any Lender with respect to which a Lender
-----------------
Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or like
---------------
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
"Dollars" and the sign "$" mean the lawful money of the United States
------- -
of America.
"Domestic Subsidiary" means any Subsidiary of Company which is
-------------------
organized under the laws of the United States or any state thereof.
"Eligible Assignee" means (A) (i) a commercial bank organized under
-----------------
the laws of the United States or any state thereof; (ii) a commercial bank
organized under the laws of any other country or a political subdivision
thereof; provided that (x) such bank is acting through a branch or agency
--------
located in the United States or (y) such bank is organized under the laws
of a country that is a member of the Organization for Economic Cooperation
and Development or a political subdivision of such country; and (iii) any
other financial institution or entity which is an "accredited investor" (as
defined in Regulation D under the Securities Act) which extends credit or
buys loans as one of its businesses including, but not limited to,
insurance companies, mutual funds and lease financing companies; (B) any
Lender and any Affiliate of any Lender; provided that neither Company nor
--------
any Affiliate of Company shall be an Eligible Assignee (other than by
assignment within three weeks of the Closing Date to an investment fund
controlled by or under common control with Bain) and (C) an Approved Fund.
"Employee Benefit Plan" means any "employee benefit plan" as defined
---------------------
in Section 3(3) of ERISA which is subject to ERISA and which is maintained
or contributed to by Company or any of its ERISA Affiliates.
"Environmental Claim" means any written claim, action, or notice by
-------------------
any Person alleging potential liability (including, without limitation,
potential liability for investigatory costs, Cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (a) the
presence, or Release of any Hazardous Materials at any location owned,
leased or operated by Company or any of its Subsidiaries, or (b) any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign laws
------------------
and regulations relating to pollution or protection of the environment,
including, without limitation, laws relating to Releases or threatened
Releases of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
-14-
<PAGE>
Release, disposal, transport or handling of Hazardous Materials, laws and
regulations with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Materials and laws relating to
the management or use of natural resources.
"Environmental Liabilities" means all liabilities, obligations to
--------------------------
conduct Cleanup, and all Environmental Claims finally determined (by a
court or governmental agency) against any Loan Party or its Subsidiaries or
against any Person whose liability for any Environmental Claim any Loan
Party or its Subsidiaries may have retained or assumed contractually
arising from (a) the presence, Release or threatened Release of Hazardous
Materials at any location, whether or not owned, leased or operated by
Company or its Subsidiaries, or (b) any violation, or alleged violation, of
any Environmental Law.
"Equity Contribution" means, collectively, (i) the contribution by the
-------------------
Bain and the Other Investors to ICS Merger Corp. of cash in exchange for
all of the outstanding common stock of ICS Merger Corp. and (ii) the
rollover equity contribution (and related loans) by the Existing Investors,
all as contemplated by the Recapitalization Transactions in the aggregate
amount valued at not less than $50,000,000 fair value.
"Equity Proceeds" means the cash proceeds (net of underwriting
---------------
discounts and commissions and other costs and expenses (including legal
costs) associated therewith) from the issuance of any Capital Stock or
other equity Securities of, or the making of any capital contribution to,
Company or any of its Subsidiaries after the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any successor statute, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
---------------
which is a member of a controlled group of corporations within the meaning
of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person
is a member; and (iii) solely for purposes of obligations under Section 412
of the Internal Revenue Code or under the applicable sections set forth in
Section 414(t)(2) of the Internal Revenue Code, any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which that Person, any corporation described in clause (i)
above or any trade or business described in clause (ii) above is a member.
"ERISA Event" means (i) a "reportable event" within the meaning of
-----------
Section 4043(c) of ERISA and the regulations issued thereunder with respect
to any Pension Plan
-15-
<PAGE>
(excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation or with respect to which no penalty will be
assessed by the PBGC for failure to satisfy such notice requirements); (ii)
the failure to meet the minimum funding standard of Section 412 of the
Internal Revenue Code with respect to any Pension Plan (whether or not
waived in accordance with Section 412(d) of the Internal Revenue Code) or
the failure to make by its due date a required installment under Section
412(m) of the Internal Revenue Code with respect to any Pension Plan or the
failure to make any required contribution to a Multiemployer Plan; (iii)
the provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Company or any of its ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such
Pension Plan resulting, in either case, in liability pursuant to Section
4063 or 4064 of ERISA, respectively; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan pursuant to Section 4042 of
ERISA; (vi) the imposition of liability on Company or any of its ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal by Company or
any of its ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan
resulting in withdrawal liability pursuant to Section 4201 of ERISA, or the
receipt by Company or any of its ERISA Affiliates of written notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4042 of ERISA or under Section 4041A of ERISA if
such termination would result in liability to Company or any of its ERISA
Affiliates; (viii) the imposition on Company or any of its ERISA Affiliates
of fines, penalties or taxes under Chapter 43 of the Internal Revenue Code
or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the disqualification by the Internal
Revenue Service of any Pension Plan (or any other Employee Benefit Plan
intended to be qualified under Section 401(a) of the Internal Revenue Code)
under Section 401(a) of the Internal Revenue Code, or the determination by
the Internal Revenue Service that any trust forming part of any Pension
Plan fails to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (x) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to
ERISA with respect to any Pension Plan.
"Eurocurrency Reserve Requirements" means, for each Interest Period
---------------------------------
for each Eurodollar Rate Loan, the highest reserve percentage applicable to
any Lender during such Interest Period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System or any
successor for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement), with respect to liabilities or assets consisting of or
including Eurocurrency liabilities having a term equal to such Interest
Period.
-16-
<PAGE>
"Eurodollar Base Rate" means the rate per annum determined by the
--------------------
Administrative Agent at approximately 11:00 A.M. (London time) on the date
which is two (2) Business Days prior to the beginning of the relevant
Interest Period (as specified in the applicable Notice of Borrowing) by
reference to the British Bankers' Association Interest Settlement Rates for
deposits in Dollars (as set forth by any service selected by the
Administrative Agent which has been nominated by the British Bankers'
Association as an authorized information vendor for the purpose of
displaying such rates) for a period equal to such Interest Period; provided
--------
that, to the extent that an interest rate is not ascertainable pursuant to
the foregoing provisions of this definition, the "Eurodollar Base Rate"
shall be the interest rate per annum determined by the Administrative Agent
to be the average of the rates per annum at which deposits in Dollars are
offered for such relevant Interest Period to major banks in the London
interbank market in London, England by the Reference Lenders at
approximately 11:00 A.M. (London time) on the date which is two Business
Days prior to the beginning of such Interest Period. If any of the
Reference Lenders shall be unable or shall otherwise fail to supply such
rates to the Administrative Agent upon its request, the rate of interest
shall be determined on the basis of the quotations of the remaining
Reference Lender.
"Eurodollar Rate Loans" means Loans bearing interest at rates
---------------------
determined by reference to the Reserve Adjusted Eurodollar Rate as provided
in subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
----------------
"Excess Proceeds Amount" means, initially, $0, which amount shall be
----------------------
(i) increased (a) on the date of delivery in any Fiscal Year of an
---------
Officer's Certificate setting forth the calculation of Consolidated Excess
Cash Flow for the preceding Fiscal Year pursuant to subsection 2.4B(iii)(e)
(each such date being an "Excess Cash Payment Date"), so long as any
------------------------
prepayment required pursuant to subsection 2.4B(iii)(e) has been made, by
an amount equal to the amount of such Consolidated Excess Cash Flow which
is not so prepaid, and (b) on the date of the receipt by Company of any
Equity Proceeds, so long as any prepayment required pursuant to subsection
2.4B(iii)(c) has been made, by an amount equal to such Equity Proceeds and
such other proceeds which are not so prepaid, and (ii) reduced (a) on each
-------
Excess Cash Payment Date where Consolidated Excess Cash Flow for the
immediately preceding Fiscal Year is a negative number, by such amount, (b)
at the time any Consolidated Capital Expenditures are made pursuant to
subsection 7.6D(ii), by the amount of such Consolidated Capital
Expenditure, (c) at the time any time a Permitted Acquisition is funded
pursuant to subsection 7.7(v)(Z) with an amount attributable to the Excess
Proceeds Amount, by the portion of the purchase price paid with the Excess
Proceeds Amount, and (d) at the time Investments are made pursuant to
subsection 7.3(xii), by the amount of such Investments in excess of
$5,000,000, it being understood that the Excess Proceeds Amount may be
reduced to an amount below $0 after giving effect to the reductions
enumerated in clause (ii)(a) above.
-17-
<PAGE>
"Excess Subordinated Debt Amount" means that portion, if any, of the
-------------------------------
net proceeds of the Subordinated Debt in excess of $50,000,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute.
"Excluded Leased Asset" has the meaning assigned to that term in
---------------------
subsection 6.12C.
"Existing Credit Agreement" means that certain Revolving Credit
-------------------------
Agreement, dated as of June 5, 1995, and as amended through the Closing
Date, among Company, ICS Technologies, Inc. and Mellon Bank, N.A.
"Existing Investors" means certain existing shareholders, management
------------------
officers and employees of Company and other investors identified in
Schedule 1.1(ii) annexed hereto as Existing Investors.
----------------
"Facilities" means any and all real property (including, without
----------
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or (for purposes of Section 5.13 only) heretofore owned,
leased, operated or used by Company or any of its Subsidiaries (but only as
to portions thereof actually owned, leased, operated or used) or any of
their respective predecessors or any of their respective Affiliates that
are directly or indirectly controlled by Company.
"Federal Funds Effective Rate" means, 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 Administrative
Agent from three Federal funds brokers of recognized standing selected by
the Administrative Agent.
"First Adjustment Date" means the date on which the financial
---------------------
statements for the Fiscal Quarter ending on the Saturday closest to June
30, 1999 are delivered as required pursuant to subsection 6.1(ii).
"First Priority" means, with respect to any Lien purported to be
--------------
created in any Collateral pursuant to any Collateral Document, that such
Lien is the most senior Lien (other than Permitted Encumbrances and other
Liens permitted pursuant to subsection 7.2A to the extent not perfected by
filing of any UCC financing statements) to which such Collateral is
subject.
-18-
<PAGE>
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
--------------
"Fiscal Year" means the fiscal year of Company and its Subsidiaries
-----------
ending on the Saturday occurring closest to June 30 of each calendar year.
For purposes of this Agreement, any particular Fiscal Year shall be
designated by reference to the calendar year in which such Fiscal Year
ends.
"Flood Hazard Property" means a Mortgaged Property located in an area
---------------------
designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards.
"Foreign Subsidiary" means any Subsidiary of Company other than a
------------------
Domestic Subsidiary.
"Funding and Payment Office" means the office of the Administrative
--------------------------
Agent located at 11 Madison Avenue, New York, NY 10010 (or such office of
the Administrative Agent or any successor Administrative Agent specified by
the Administrative Agent or such successor Administrative Agent in a
written notice to the Loan Parties and the Lenders).
"Funding Date" means the date of the funding of a Loan, which, in the
------------
case of the Term Loans, shall be the Closing Date.
"GAAP" means, subject to the limitations on the application thereof
----
set forth in subsection 1.2, generally accepted accounting principles set
forth in 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 may be approved by a significant segment
of the accounting profession, in each case as the same are applicable to
the circumstances as of the date of determination and specifically, terms
used herein applicable to Company and its Subsidiaries defined by reference
to GAAP shall give effect to the subtraction of minority interests.
"Governmental Acts" has the meaning assigned to that term in
-----------------
subsection 3.5A.
"Governmental Authority" means any nation or government, any state or
----------------------
any political subdivision of any of the foregoing and any entity exercising
executive, legislative, judicial or regulatory functions of or pertaining
to government.
"Governmental Authorization" means any permit, license, authorization,
--------------------------
plan, directive, consent order or consent decree of or from any
Governmental Authority.
"Granting Bank" has the meaning assigned to that term in subsection
-------------
10.1F.
-19-
<PAGE>
"Guaranty" means, individually, the Subsidiary Guaranty, or any other
--------
guaranty of the Obligations, and "Guaranties" means, collectively, the
----------
Subsidiary Guaranty, and each other guaranty of the Obligations.
"Guarantor" means, individually, the Subsidiary Guarantors, or any
---------
other guarantor of the Obligations, and "Guarantors" means, collectively,
----------
the Subsidiary Guarantors and each other guarantor of the Obligations.
"Hazardous Materials" means all substances defined as Hazardous
-------------------
Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
"Hedge Agreements" means all swaps, caps or collar agreements or
----------------
similar arrangements entered into by Company or any of its Subsidiaries
providing for protection against fluctuations in currency exchange rates or
the exchange of nominal interest obligations, either generally or under
specific contingencies.
"Immaterial Subsidiaries" means one or more Subsidiaries of Company,
-----------------------
designated in writing to the Administrative Agent from time to time;
provided, that, (x) the assets of all such designated Subsidiaries
--------
constitute, in the aggregate, less than or equal to 5% of the total assets
of Company and its Subsidiaries on a consolidated basis, (y) the revenues
of such designated Subsidiaries account for less than or equal to 5% of the
total revenues of Company and its Subsidiaries on a consolidated basis or
(z) all such designated Subsidiaries contribute, individually or in the
aggregate, less than or equal to 5% of Consolidated Adjusted EBITDA.
"Improvements" means all buildings, structures, fixtures, tenant
------------
improvements, and other improvements of any kind and description now or
hereafter located in or on or attached to any land that is a Real Property
Asset, including all building materials, water sanitary and storm sewers,
drainage, electricity, steam, gas, telephone and other utility, facilities,
parking areas, roads, driveways, walks and other site improvements; and all
additions and betterments thereto and all renewals, substitutions and
replacements thereof.
"Indebtedness" means, as applied to any Person, (i) all indebtedness
------------
for borrowed money, (ii) that portion of obligations with respect to
Capital Leases that is properly classified as a liability on a balance
sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations
for borrowed money (other than current accounts payable incurred in the
ordinary course of business and accrued expenses incurred in the ordinary
course of business), (iv) any obligation owed for all or any part of the
deferred purchase price of property or services (excluding any such
obligations incurred under ERISA, any
-20-
<PAGE>
obligation under employment or consulting agreements of Company or its
subsidiaries and current trade payables incurred in the ordinary course of
business) which obligation in accordance with GAAP would be shown as a
liability on the balance sheet of such Person, (v) all indebtedness created
or arising under any conditional sale or other title retention agreement
with respect to any property or assets acquired by such Person (unless the
rights and remedies of the seller or the lender under such agreement in the
event of default are limited to repossession or sale of such property or
assets), (vi) all obligations, contingent or otherwise, as an account party
under any Letter of Credit or under acceptance, letter of credit or similar
facilities to the extent not reflected as trade liabilities on the balance
sheet of such Person in accordance with GAAP, and (vii) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person. The
amount of Indebtedness which is non-recourse to the obligor thereunder or
to any other obligor and for which recourse is limited to an identified
asset or assets shall be equal to the lesser of (1) the stated amount of
such obligation and (2) the fair market value of such asset or assets.
Obligations under Interest Rate Agreements and Hedge Agreements constitute
(X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all
other cases, Investments, and in neither case constitute Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
----------
"Information Memorandum" means the Confidential Information Memorandum
----------------------
dated February 1999, that was used in connection with the syndication of
the credit facilities set forth herein.
"Initial Period" means the period commencing on and including the
--------------
Closing Date and ending on the earlier of (i) the date on which the Sole
Lead Arranger notifies Company that it has concluded its primary
syndication of the Loans and the Commitments, and (ii) thirty (30) days
after the Closing Date.
"Insurance Proceeds" has the meaning assigned to that term in
------------------
subsection 2.4B(iii)(d).
"Intellectual Property" has the meaning assigned to that term in
---------------------
subsection 5.5C.
"Interest Coverage Ratio" has the meaning assigned to that term in
-----------------------
subsection 7.6.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
---------------------
the last Business Day in each of March, June, September and December of
each year, commencing June, 1999, and (ii) with respect to any Eurodollar
Rate Loan, the last day
-21-
<PAGE>
of each Interest Period applicable to such Loan; provided that in the case
--------
of each Interest Period of longer than three months, "Interest Payment
Date" shall also include the date that is three months or integral multiple
thereof after the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection
---------------
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
-----------------------
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to hedge Company or any of its
Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the
--------------------------------
Reserve Adjusted Eurodollar Rate, for purposes of determining the interest
rate in respect of an Interest Period. The Interest Rate Determination
Date for purposes of calculating the Reserve Adjusted Eurodollar Rate shall
be the second Business Day prior to the first day of the related Interest
Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter and any
successor statute and the regulations promulgated by the Internal Revenue
Service thereunder.
"Investment" means (i) any direct or indirect purchase or other
----------
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, stock or other Securities of any other Person, (ii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable acquired from that other Person that
are not current assets or did not arise from sales to that other Person in
the ordinary course of business or (iii) Interest Rate Agreements;
provided, however, that the term "Investment" shall not include (a) current
-------- -------
trade and customer accounts receivable for goods furnished or services
rendered in the ordinary course of business and payable in accordance with
customary trade terms, (b) advances and prepayments to suppliers for goods
and services in the ordinary course of business, (c) stock or other
securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claims due or owing to Company or any of its Subsidiaries
(whether in bankruptcy of customers or suppliers or otherwise) or as
security for any such Indebtedness or claims, (d) Cash, and (e) deposits to
secure the performance of leases. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment
"Investors" means Bain, the Other Investors and the Existing
---------
Investors.
-22-
<PAGE>
"IP Collateral" has the meaning assigned to the term "Intellectual
-------------
Property Collateral" in the Security Agreement.
"Issuing Bank" means, with respect to any Letter of Credit, CSFB, in
------------
its capacity as issuer of Letters of Credit, and, any other Lender that is
a New York based commercial bank, reasonably acceptable to Company, having
a Letter of Credit Subfacility Commitment.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
-----------------------------
Property, a letter, certificate or other instrument in writing from the
lessor under the related lease, in form and substance reasonably acceptable
to the Collateral Agent and containing the provisions set forth on Exhibit
-------
XVII hereto.
-----------
"Leasehold Property" means any leasehold interest of any Loan Party as
------------------
lessee under any lease of real property, other than any such leasehold
interest designated from time to time by the Collateral Agent in its
reasonable discretion as not being required to be included in the
Collateral.
"Lender" and "Lenders" means the Persons identified as "Lenders" and
------ -------
listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1, and the term
"Lenders" shall include the Swing Line Lender unless the context otherwise
requires; provided that the term "Lenders", when used in the context of a
--------
particular Commitment, shall mean the Lenders having that Commitment.
"Lender Default" means (i) the refusal (which has not been retracted)
--------------
of a Lender to make available its portion of any Loans (including any
Revolving Loans made to pay Refunded Swing Line Loans or to reimburse
drawings under Letters of Credit) in accordance with subsection 2.1A or its
portion of any unreimbursed drawing or payment under a Letter of Credit in
accordance with subsection 3.3C or (ii) a Lender having notified Company
and/or the Administrative Agent in writing that it does not intend to
comply with its obligations under subsection 2.1 or subsections 3.1C, 3.3B
or 3.3C.
"Lending Office" means, as to any Lender, the office or offices of
--------------
such Lender specified as the "Lending Office" on Schedule 2.1, or such
------------
other office or offices as such Lender may from time to time notify Company
and the Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
---------------- -----------------
Credit and Standby Letters of Credit issued or to be issued by the Issuing
Bank for the account of Company or any Subsidiary Guarantor that is a
Domestic Subsidiary pursuant to subsection 3.1.
-23-
<PAGE>
"Letter of Credit Issuing Office" means, as to any Issuing Bank, the
-------------------------------
address from time to time specified by such Issuing Bank to Company and the
Administrative Agent as its letter of credit issuing office. The initial
"Letter of Credit Issuing Office" for CSFB shall be 5 World Trade Center,
8/th/ Floor, New York, New York, 10048.
"Letter of Credit Subfacility Commitment" means, with respect to any
---------------------------------------
Issuing Bank at any time, the commitment of such Issuing Bank to issue
Letters of Credit pursuant to subsection 3.1A; provided, that the aggregate
--------
amount the Letter Credit Subfacility Commitments shall in no event exceed
$15,000,000; provided, further, that any reduction in the Revolving Loan
-------- -------
Commitments to a level that is below the then aggregate amount of the
Letter of Credit Subfacility Commitments shall result in the pro rata
reduction of the aggregate Letter of Credit Subfacility Commitments pro
rata to each Issuing Bank.
"Letter of Credit Usage" means, as at any date of determination, the
----------------------
sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then
outstanding plus (ii) the aggregate amount of all drawings under Letters of
----
Credit honored by the Issuing Bank and not theretofore reimbursed by
Company (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B).
"Leverage Ratio" has the meaning assigned to that term in subsection
--------------
7.6.
"Lien" means any lien, mortgage, pledge, assignment, security
----
interest, fixed or floating charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest) and any
option, trust or deposit or other preferential arrangement having the
practical effect of any of the foregoing.
"Loan" or "Loans" means, as the context requires, one or more of the
---- -----
Term Loans, Revolving Loans, Swing Line Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of
--------------
Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of the Issuing Bank
relating to, the Letters of Credit), the Guaranties and the Collateral
Documents.
"Loan Parties" means Company and each Subsidiary Guarantor.
------------
"Margin Stock" has the meaning assigned to that term in Regulation U
------------
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
-24-
<PAGE>
"Material Adverse Effect" means a material adverse effect upon (i) the
-----------------------
business, results of operations, financial condition or prospects of
Company and its Subsidiaries, taken as a whole, or (ii) the ability of (a)
any Loan Party (other than Immaterial Subsidiaries) to fully and timely
perform the Obligations or (b) the Administrative Agent, Collateral Agent
or Lenders to enforce the Obligations.
"Material Contracts" means any indenture, mortgage, deed of trust,
------------------
contract, undertaking, agreement or other instrument to which Company or
any of its Subsidiaries is a party for which breach, nonperformance,
cancellation or failure to renew would reasonably be expected to have a
Material Adverse Effect.
"Merger Agreement" means the Agreement and Plan of Merger, as in
----------------
effect on the Closing Date, entered into between Merger Corp and Company,
that is in the form delivered to the Administrative Agent on or prior to
the Closing Date, as the same may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.11A.
"Merger Corp" means ICS Merger Corp., a Pennsylvania corporation.
-----------
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgage" means (i) a security instrument (whether designated as a
--------
deed of trust or a mortgage or by any similar title) executed and delivered
by any Loan Party, substantially in the form of Exhibit XV annexed hereto
----------
(in the case of any security instrument in respect of Leasehold Property,
with such changes as shall be appropriate to reflect a security interest in
Leasehold Property) or in such other form as may be approved by the
Collateral Agent in its reasonable discretion, in each case with such
changes thereto as may be reasonably recommended by the Collateral Agent's
local counsel based on local laws or customary local mortgage or deed of
trust practices, or (ii) at the Collateral Agent's option, in the case of
an Additional Mortgaged Property, an amendment to an existing Mortgage, in
form reasonably satisfactory to the Collateral Agent, adding such
Additional Mortgaged Property to the assets encumbered by such existing
Mortgage, in either case as such security instrument or amendment may
heretofore have been or hereafter may be amended, supplemented or otherwise
modified from time to time. "Mortgages" means all such instruments,
---------
including the Closing Date Mortgages and any Additional Mortgages,
collectively.
"Multiemployer Plan" means a "multiemployer plan", as defined in
------------------
Section 4001(a)(3) of ERISA which is subject to Title IV of ERISA, to which
Company or any of its ERISA Affiliates is contributing or to which Company
or any of its ERISA Affiliates has an obligation to contribute.
-25-
<PAGE>
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash
-----------------
Proceeds of such Asset Sale net of costs of sale including, without
limitation, (i) income taxes estimated to be payable as a result of such
Asset Sale within two years of the date of receipt of such Cash Proceeds,
(ii) transfer, sales, use and other taxes payable in connection with such
Asset Sale, (iii) payment of the outstanding principal amount of, premium
or penalty, if any, and interest on any Indebtedness (other than the Loans)
that is secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset
Sale, and (iv) financial advisor's commissions and fees and expenses of
counsel and other advisors in connection with such Asset Sale.
"Non-Defaulting Lender" means and includes each Lender other than a
---------------------
Defaulting Lender.
"Non-US Lender" has the meaning assigned to that term in subsection
-------------
2.7B(iii).
"Notes" means one or more of the Term Notes, Revolving Notes, Swing
-----
Line Notes or any combination thereof.
"Notice of Borrowing" means a notice in the form of Exhibit I annexed
------------------- ---------
hereto delivered by Company to the Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
---------------------------------
the form of Exhibit II annexed hereto delivered by Company to the
----------
Administrative Agent pursuant to subsection 2.2D with respect to a proposed
conversion or continuation of the applicable basis for determining the
interest rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice in the form of
--------------------------------------
Exhibit III annexed hereto delivered by Company to the Administrative Agent
-----------
pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"Obligations" means all obligations of every nature of each Loan Party
-----------
from time to time owed to the Agents, the Lenders or any of them or their
respective Affiliates under the Loan Documents, whether for principal,
interest, reimbursement of amounts drawn under Letters of Credit or
payments for early termination of Interest Rate Agreements, fees, expenses,
indemnification or otherwise.
"Officer's Certificate" means, with respect to any Person, a
---------------------
certificate executed on behalf of such Person (x) if such Person is a
partnership or limited liability company, by its chairman of the Board (if
an officer) or chief executive officer or by the chief financial officer or
treasurer of its general partner or managing member or other Person
authorized to do so by its Organizational Documents, (y) if such Person is
a corporation,
-26-
<PAGE>
on behalf of such corporation by its chairman of the board (if an officer)
or chief executive officer or its chief financial officer or vice president
or treasurer, and (z) if such person is Company or a Subsidiary of Company,
a Responsible Officer; provided that every Officer's Certificate with
--------
respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officer's Certificate have read such condition and
any definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that, in the opinion of the signer or signers,
they have made or have caused to be made such examination or investigation
as is necessary to enable them to express an informed opinion as to whether
or not such condition has been complied with, and (iii) a statement as to
whether, in the opinion of the signer or signers, such condition has been
complied with.
"Operating Lease" means, as applied to any Person, any lease
---------------
(including, without limitation, leases that may be terminated by the lessee
at any time) of any property (whether real, personal or mixed) that is not
a Capital Lease other than any such lease under which that Person is the
lessor.
"Organizational Authorizations" means, with respect to any Person,
-----------------------------
resolutions of its Board of Directors, general partners or members of such
Person, and such other Persons, groups or committees (including, without
limitation, managers and managing committees), if any, required by the
Organizational Certificate or Organization Documents of such Person to
authorize or approve the taking of any action or the entering into of any
transaction.
"Organizational Certificate" means, with respect to any Person, the
--------------------------
certificate or articles of incorporation, partnership or limited liability
company or any other similar or equivalent organizational, charter or
constitutional certificate or document filed with the applicable
Governmental Authority in the jurisdiction of its incorporation,
organization or formation.
"Organizational Documents" means, with respect to any Person, the by-
------------------------
laws, partnership agreement, limited liability company agreement, operating
agreement, management agreement or other similar or equivalent
organizational, charter or constitutional agreement or arrangement.
"Other Investors" means certain persons identified on Schedule
--------------- --------
1.1(iii) annexed hereto as Other Investors.
--------
"PBGC" means the Pension Benefit Guaranty Corporation established
----
pursuant to Section 4002 of ERISA (or any successor thereto).
-27-
<PAGE>
"Pension Plan" means any Employee Benefit Plan, other than a
------------
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"Permitted Acquisitions" means an acquisition made pursuant to
----------------------
subsection 7.7(v).
"Permitted Encumbrances" means the following types of Liens:
----------------------
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by subsection
6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of setoff, statutory Liens of carriers, warehousemen, mechanics and
materialmen and other Liens imposed by law (other than any such Lien
imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue
Code or by ERISA) incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith pursuant to appropriate
proceedings, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive, in each case, of
obligations for the payment of borrowed money or other Indebtedness);
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to others (in the ordinary course
of business consistent with past practices) not interfering in any material
respect with the ordinary conduct of the business or operations of Company
or any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries and
encumbrances set forth on the title reports delivered to the Administrative
Agent;
-28-
<PAGE>
(vii) Any (a) interest or title of a lessor or sublessor
under any Capital Lease permitted by subsection 7.1(v) or any operating
lease not prohibited by this Agreement, (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) Deposits in the ordinary course of business to secure
liabilities to insurance carriers, lessors, utilities and other service
providers;
(xi) Bankers liens and rights of setoff with respect to customary
depository arrangements entered into in the ordinary course of business;
(x) Any zoning or similar law or right reserved to or vested in
any governmental office or agency to control or regulate the use of
any real property; and
(xii) Licenses of patents, trademarks and other intellectual
property rights granted by Company or any of its Subsidiaries in the
ordinary course of business and not interfering in any material
respect with the ordinary conduct of the business of Company or such
Subsidiary.
"Permitted Seller Paper" means any unsecured Indebtedness of Company
----------------------
or its Subsidiaries that is not guaranteed by any Subsidiary and that is
incurred in connection with any acquisition consummated in accordance with
the provisions of subsection 7.7(v) and payable to the seller in connection
therewith and containing the subordination provisions set forth on Exhibit
-------
XVI hereto.
----------
"Person" means and includes natural persons, corporations, limited
------
partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof and any other entities of whatever nature.
"Pledge Agreement" means that certain Pledge Agreement entered into by
----------------
and among Company, the Subsidiary Guarantors and the Collateral Agent as of
the Closing
-29-
<PAGE>
Date, or pursuant to subsection 6.9, substantially in the form of
Exhibit VII annexed hereto, as such Pledge Agreement may hereafter be
-----------
amended, restated, supplemented or otherwise modified from time to time.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by CSFB as its prime commercial lending rate in effect at
its principal office in New York City. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged
to any customer. CSFB or any other Lender may make commercial loans or
other loans at rates of interest at, above or below the Prime Rate.
"Pro Forma Basis" means, with respect to compliance with any test or
---------------
covenant hereunder, compliance with such covenant or test after giving
effect to any proposed acquisition or other action which requires
compliance on a pro forma basis (including pro forma adjustments arising
out of events which are directly attributable to a specific transaction,
are factually supportable and are expected to have a continuing impact, in
each case determined on a basis consistent with Article 11 of Regulation S-
X of the Securities Act and as interpreted by the Staff of the Securities
and Exchange Commission which (to the extent consistent therewith) may
include cost savings resulting from head count reductions, closure of
facilities and similar restructuring charges or integration activities or
other adjustments certified by a financial officer of Company, together
with such other pro forma adjustments as may be reasonably acceptable to
the Administrative Agent) using, for purposes of determining such
compliance, the historical financial statements of all entities or assets
so acquired or to be acquired and the consolidated financial statements of
Company and its Subsidiaries which shall be reformulated as if such
acquisition or other action, and any other acquisitions which have been
consummated during the period, and any Indebtedness or other liabilities
incurred in connection with any such acquisition had been consummated at
the beginning of such period and assuming that such Indebtedness bears
interest during any portion of the applicable measurement period prior to
the relevant acquisition at the weighted average of the interest rates
applicable to outstanding Loans during such period, and otherwise in
conformity with such procedures as may be agreed upon between the
Administrative Agent and Company, all such calculations to be in form and
substance reasonably satisfactory to the Administrative Agent.
"Pro Forma Compliance" means, at any date of determination, Company
--------------------
shall be in pro forma compliance with the covenants set forth in
--- -----
subsections 7.6A, B, C and D as of the last day of the most recent Fiscal
Quarter end (computed on the basis of (i) balance sheet amounts as of the
most recently completed Fiscal Quarter, and (ii) income statement amounts
for the most recently completed period of four consecutive Fiscal Quarters,
in each case, for which financial statements shall have been delivered to
the Administrative Agent and calculated on a Pro Forma Basis in respect of
the event giving
-30-
<PAGE>
rise to such determination), and Company shall have demonstrated such
compliance to the reasonable satisfaction of the Administrative Agent.
"Pro Rata Share" means (i) with respect to all payments, computations
--------------
and other matters relating to the Term A Loan Commitment or the Term A
Loans of any Lender, the percentage obtained by dividing (x) the Term A
--------
Loan Exposure of that Lender by (y) the aggregate Term A Loan Exposure of
--
all the Lenders; (ii) with respect to all payments, computations and other
matters relating to the Term B Loan Commitment or the Term B Loans of any
Lender, the percentage obtained by dividing (x) the Term B Loan Exposure of
--------
that Lender by (y) the aggregate Term B Loan Exposure of all the Lenders;
--
(iii) with respect to all payments, computations and other matters relating
to the Revolving Loan Commitment or the Revolving Loans of any Lender or
any Letters of Credit issued by any Lender or any participations purchased
by any Lender therein or in any Swing Line Loans, the percentage obtained
by dividing (x) the Revolving Loan Exposure of that Lender by (y) the
-------- --
aggregate Revolving Loan Exposure of all the Lenders; and (iv) for all
other purposes with respect to each Lender, the percentage obtained by
dividing (x) the sum of the Term Loan Exposure of that Lender and the
--------
Revolving Loan Exposure of that Lender by (y) the sum of the aggregate Term
--
Loan Exposure of all the Lenders and the aggregate Revolving Loan Exposure
of all the Lenders; in any such case as the applicable percentage may be
adjusted by assignments permitted pursuant to subsection 10.1. The initial
Pro Rata Share of each Lender for purposes of each of clauses (i), (ii) and
(iii) of the preceding sentence is set forth opposite the name of that
Lender in Schedule 2.1 annexed hereto.
------------
"Projections" has the meaning assigned to that term in subsection
-----------
5.3B.
"PTO" means the United States Patent and Trademark Office.
---
"Real Property Asset" means, at any time of determination, any
-------------------
interest (fee, leasehold or otherwise) then owned by any Loan Party in any
real property.
"Recapitalization Transactions" means the transactions contemplated by
-----------------------------
the Merger Agreement, the repayment of Indebtedness under the Existing
Credit Agreement and the payment of Transaction Costs , in each case
occurring on or about the Closing Date.
"Recovery Event" has the meaning assigned to that term in subsection
--------------
2.4B(iii)(d).
"Reference Lenders" means (i) CSFB and (ii) another Lender determined
-----------------
by the Administrative Agent with the consent of Company.
-31-
<PAGE>
"Refunded Swing Line Loans" has the meaning assigned to that term in
-------------------------
subsection 2.1A(iv).
"Register" has the meaning assigned to that term in subsection 2.1D.
--------
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
------------------
subsection 3.3B.
"Reinvestment Assets" means, in the case of any Reinvestment Event,
-------------------
any assets which are either (i) in replacement of the assets subject to the
Reinvestment Event, or (ii) long term assets (including Capital Stock)
useful in the business of Company or its Subsidiary whose assets were
subject to the Reinvestment Event.
"Reinvestment Deferred Amount" means, with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds, Insurance Proceeds or Condemnation
Proceeds, as the case may be, received by Company or any of its
Subsidiaries in connection therewith which are not applied to prepay the
Loans (and/or reduce the Revolving Loan Commitments) in accordance with
subsection 2.4B(iii)(a) or (d) as a result of the delivery of a
Reinvestment Notice.
"Reinvestment Event" means any Asset Sale or Recovery Event in respect
------------------
of which Company has delivered a Reinvestment Notice.
"Reinvestment Notice" means a written notice executed by a Responsible
-------------------
Officer stating that no Default or Event of Default has occurred and is
continuing and that Company (directly or indirectly through a Subsidiary)
intends and expects to use all or a specified portion of the Net Cash
Proceeds, Insurance Proceeds or Condemnation Proceeds, as the case may be,
of an Asset Sale or Recovery Event to acquire Reinvestment Assets within
three hundred sixty five (365) days of the receipt of such Net Cash
Proceeds, Insurance Proceeds or Condemnation Proceeds, as the case may be.
"Reinvestment Prepayment Amount" means, with respect to any
------------------------------
Reinvestment Event, the Reinvestment Deferred Amount, if any, relating
thereto less any amount expended prior to the relevant Reinvestment
Prepayment Date to acquire Reinvestment Assets.
"Reinvestment Prepayment Date" means, with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring three hundred sixty five (365)
days after such Reinvestment Event and (b) the date on which Company shall
have determined not to, or
-32-
<PAGE>
shall have otherwise ceased to, acquire Reinvestment Assets with all or any
portion of the relevant Reinvestment Deferred Amount.
"Release" means any release, spill, emission, leaking, pumping,
-------
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the environment.
"Requisite Class Lenders" means, at any time of determination (i) for
-----------------------
the Class of the Lenders having Term A Loan Exposure, Non-Defaulting
Lenders having or holding more than 50% of the aggregate Term A Loan
Exposure of all Non-Defaulting Lenders, (ii) for the Class of Lenders
having Term B Loan Exposure, Non-Defaulting Lenders having or holding more
than 50% of the aggregate Term B Loan Exposure of all Non-Defaulting
Lenders, and (iii) for the Class of Lenders having Revolving Loan Exposure,
Non-Defaulting Lenders having or holding more than 50% of the aggregate
Revolving Loan Exposure of all Non-Defaulting Lenders.
"Requisite Lenders" means Non-Defaulting Lenders having or holding
-----------------
more than 50% of the sum of the aggregate Term Loan Exposure of all Non-
Defaulting Lenders and the aggregate Revolving Loan Exposure of all Non-
Defaulting Lenders.
"Reserve Adjusted Eurodollar Rate" means, with respect to each day
--------------------------------
during each Interest Period pertaining to a Eurodollar Rate Loan, a rate
per annum determined for such day in accordance with the following formula:
Eurodollar Base Rate
---------------------------------
1.00 - Eurocurrency Reserve Requirements
"Responsible Officer" means the chairman of the board of directors (if
-------------------
an officer) chief executive officer, president, executive vice president,
general counsel, chief financial officer, assistant treasurer, assistant
secretary, principal financial or accounting officer or the secretary of
Company, or as applicable, Subsidiary of Company or other officer
designated by the board of Company of any of its Subsidiaries but, in any
event, with respect to financial reporting matters, the chief executive
officer or chief financial officer of Company.
"Restricted Payment" means (i) any dividend or other distribution,
------------------
direct or indirect, on account of any shares of any class of stock (or of
any other Capital Stock) of Company or any of its Subsidiaries now or
hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of stock (or of
any other Capital Stock) of Company or any of its Subsidiaries now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other
-33-
<PAGE>
rights to acquire shares of any class of stock (or of any other Capital
Stock) of Company or any of its Subsidiaries now or hereafter outstanding,
and (iv) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance (including in
substance or legal defeasance), sinking fund or similar payment with
respect to, Subordinated Debt.
"Revolving Loan Commitment" means the commitment of a Lender to make
-------------------------
Revolving Loans to Company pursuant to subsection 2.1A(iii), and "Revolving
---------
Loan Commitments" means such commitments of all Lenders in the aggregate.
----------------
"Revolving Loan Commitment Termination Date" means the fifth
------------------------------------------
Anniversary of the Closing Date.
"Revolving Loan Exposure" means, with respect to any Lender as of any
-----------------------
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender plus (b)
----
in the event that Lender is an Issuing Bank, the aggregate Letter of Credit
Usage in respect of all Letters of Credit issued by that Lender (net of any
participations purchased by other Lenders in such Letters of Credit) plus
----
(c) the aggregate amount of all participations purchased by that Lender in
any outstanding Letters of Credit or any unreimbursed drawings under any
Letters of Credit plus (d) the aggregate amount of all participations
----
purchased by that Lender in any outstanding Swing Line Loans plus (e) in
----
the case of the Swing Line Lender, the sum of the aggregate outstanding
principal amount of all Swing Line Loans (in each case net of any
participations therein purchased by other Lenders).
"Revolving Loans" means the Loans made by the Lenders to Company
---------------
pursuant to subsection 2.1A(iii).
"Revolving Notes" means (i) the promissory notes of Company issued
---------------
pursuant to subsection 2.1E(iii) on the Closing Date and (ii) any
promissory notes issued by Company pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Revolving Loan
Commitment and Revolving Loans of any Lender, in each case substantially in
the form of Exhibit V-A annexed hereto, as they may be amended, restated,
-----------
supplemented or otherwise modified from time to time.
"S&P" means Standard & Poor's, a division of the McGraw-Hill
---
Companies, Inc.
"Securities" means any stock, shares, partnership interests, voting
----------
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general
-34-
<PAGE>
any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates for
the purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.
"Security Agreement" means the Security Agreement entered into by and
------------------
among Company, the Subsidiary Guarantors and the Collateral Agent on and as
of the Closing Date, or pursuant to subsection 6.9, substantially in the
form of Exhibit VIII annexed hereto, as such Security Agreement may
------------
hereafter be amended, restated, supplemented or otherwise modified from
time to time.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, and any successor statute.
"Shareholders Agreement" means that certain Shareholders Agreement to
----------------------
be entered into on or prior to the Closing Date by and among Company and
certain shareholders of Company which Shareholders Agreement shall be in
the form delivered to the Administrative Agent on or prior to the Closing
Date and as such Shareholders Agreement may hereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.11A.
"Sole Lead Arranger" has the meaning assigned to that term in the
------------------
Preamble to this Agreement.
"Solvent" means, with respect to any Person, that as of the date of
-------
determination both (i) (a) the then fair saleable value of the property
sold as a going concern of such Person is (y) greater than the total amount
of liabilities (including contingent liabilities but excluding amounts
payable under intercompany promissory notes) of such Person and (z) not
less than the amount that will be required to pay the probable liabilities
on such Person's then existing debts as they become absolute and matured
considering all financing alternatives and potential asset sales reasonably
available to such Person; (b) such Person's capital is not unreasonably
small in relation to its business or any contemplated or undertaken
transaction; and (c) such Person does not intend to incur, or believe that
it will incur, debts beyond its ability to pay such debts as they become
due; and (ii) such Person is "solvent" within the meaning given that term
and similar terms under applicable laws relating to fraudulent transfers
and conveyances. For purposes of this definition, the amount of any
contingent liability at any time shall be computed as the amount that, in
light of all of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability.
"SPC" has the meaning assigned to that term in subsection 10.1F.
---
"Standby Letter of Credit" means any standby letter of credit or
------------------------
similar instrument, issued for the purpose of supporting obligations of
Company and its
-35-
<PAGE>
Subsidiaries incurred or arising in the ordinary course of business;
provided that Standby Letters of Credit may not be issued for the purpose
--------
of supporting trade payables.
"Subordinated Debt" means subordinated, unsecured Indebtedness of
-----------------
Company evidenced by the Subordinated Debt Documents and issued on the
Closing Date (and any Indebtedness issued in exchange for such Indebtedness
as contemplated by the Subordinated Debt Documents) in any aggregate
principal amount of not less than $47,500,000.
"Subordinated Debt Documents" means the documents pursuant to which
---------------------------
the Subordinated Debt is issued (or exchanged) in the form delivered to
Administrative Agent and Lenders on or prior to the Closing Date, as such
documents may be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under Subsection 7.11A.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association, joint venture or other business entity of which
more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the
management and policies thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" means any Subsidiary of Company that is a party
--------------------
to the Subsidiary Guaranty on the Closing Date (which shall be each
Domestic Subsidiary existing as of the Closing Date) or at any time after
the Closing Date pursuant to subsection 6.9.
"Subsidiary Guaranty" means the Subsidiary Guaranty, substantially in
-------------------
the form of Exhibit VI annexed hereto, executed and delivered by the
----------
Subsidiary Guarantors as of the Closing Date or by any additional
Subsidiary Guarantor from time to time thereafter pursuant to subsection
6.9, as such Subsidiary Guaranty may heretofore have been or hereafter may
be amended, restated, supplemented or otherwise modified from time to time.
"Swing Line Lender" means CSFB, or any Person serving as a successor
-----------------
Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan Commitment" means the commitment of the Swing Line
--------------------------
Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(iv).
-36-
<PAGE>
"Swing Line Loans" means the Loans made by the Swing Line Lender
----------------
pursuant to subsection 2.1A(iv).
"Swing Line Note" means (i) the promissory note of Company issued
---------------
pursuant to subsection 2.1E(iv) on the Closing Date and (ii) any promissory
note issued by Company to any successor Swing Line Lender pursuant to the
last sentence of subsection 9.5B, in each case substantially in the form of
Exhibit V-B annexed hereto, as it may be amended, restated, supplemented or
-----------
otherwise modified from time to time.
"Systems" has the meaning assigned to that term in the definition of
-------
Year 2000 Problems.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
--- -----
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld
or assessed; provided that "Tax on the overall net income" of a Person
-------- -----------------------------
shall be construed as a reference to a tax on all or part of the net
income, profits or gains of that Person (whether worldwide, or only insofar
as such income, profits or gains are considered to arise in or to relate to
a particular jurisdiction, or otherwise) including a franchise tax imposed
in lieu of a net income tax.
"Term A Loan Commitment" means the commitment of a Lender to make a
----------------------
Term A Loan to Company pursuant to subsection 2.1A(i), and "Term A Loan
-----------
Commitments" means such commitments of all Lenders in the aggregate.
-----------
"Term A Loan Exposure" means, with respect to any Lender, as of any
--------------------
date of determination (i) prior to the funding of the Term A Loans, that
Lender's Term A Loan Commitment and (ii) after the funding of the Term A
Loans, the outstanding principal amount of the Term A Loan of that Lender.
"Term A Loans" means the Loans made by the Lenders pursuant to
------------
subsection 2.1A(i).
"Term A Notes" means (i) the promissory notes of Company issued
------------
pursuant to subsection 2.1E(i) on the Closing Date and (ii) any promissory
notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Term A Loans of any Lender,
in each case substantially in the form of Exhibit IV-A annexed hereto, as
------------
they may be amended, restated, supplemented or otherwise modified from time
to time.
"Term B Loan Commitment" means the commitment of a Lender to make a
----------------------
Term B Loan to Company pursuant to subsection 2.1A(ii), and "Term B Loan
-----------
Commitments" means such commitments of all Lenders in the aggregate.
-----------
-37-
<PAGE>
"Term B Loan Exposure" means, with respect to any Lender, as of any
--------------------
date of determination (i) prior to the funding of the Term B Loans, that
Lender's Term B Loan Commitment and (ii) after the funding of the Term B
Loans, the outstanding principal amount of the Term B Loan of that Lender.
"Term B Loans" means the Loans made by the Lenders pursuant to
------------
subsection 2.1A(ii).
"Term B Notes" means (i) the promissory notes of Company issued
------------
pursuant to subsection 2.1E(ii) on the Closing Date and (ii) any promissory
notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Term B Loans of any Lender,
in each case substantially in the form of Exhibit IV-B annexed hereto, as
------------
they may be amended, restated, supplemented or otherwise modified from time
to time.
"Term Loan Commitment" means the Term A Loan Commitment or the Term B
--------------------
Loan Commitment of a Lender, and "Term Loan Commitments" means such
commitments of all Lenders in the aggregate.
"Term Loan Exposure" means, with respect to any Lender as of any date
------------------
of determination, the aggregate Term A Loan Exposure and Term B Loan
Exposure of that Lender.
"Term Loans" means the Term A Loans and the Term B Loans.
----------
"Term Notes" means the Term A Notes and the Term B Notes.
----------
"Total Utilization of Revolving Loan Commitments" means, as at any
-----------------------------------------------
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the
purpose of repaying any Refunded Swing Line Loans or reimbursing the
applicable Issuing Bank for any amount drawn under any Letter of Credit but
not yet so applied) plus (ii) the aggregate principal amount of all
----
outstanding Swing Line Loans plus (iii) the Letter of Credit Usage.
----
"Transaction Costs" means the fees, costs and expenses payable by
-----------------
Company and its Subsidiaries in connection with the transactions
contemplated by the Transaction Documents including, without limitation,
amounts payable to the Agents and the Lenders.
"Transaction Documents" means, collectively, (i) any documentation
---------------------
related to the Equity Contribution, (ii) the Merger Agreement, (iii) the
Shareholders Agreement, (iv) the Bain Advisory Services Agreement, (v) the
Subordinated Debt Documents, (vi) the Subordinated Debt, and (vii) and any
and all other documents, agreements,
-38-
<PAGE>
instruments and arrangements related to or in connection with the
Recapitalization Transactions.
"Unfunded Current Liability" means, with respect to any Pension Plan,
--------------------------
the amount, if any, by which the actuarial present value of the accumulated
plan benefits under such Pension Plan as of the close of its most recent
plan year exceeds the fair market value of the assets allocable thereto,
each determined in accordance with Statement of Financial Accounting
Standards No. 87, based upon the actuarial assumptions used by such Pension
Plan's actuary in the most recent annual valuation of such Pension Plan.
"Year 2000 Problems" means limitations in the capacity or readiness to
------------------
handle date information (including, without limitation, calculations based
on date information) for the Year 1999 or years beginning January 1, 2000
of any of the hardware, firmware or software systems ("SYSTEMS") associated
-------
with information processing and delivery, operations or services (e.g.,
security and alarms, elevators, communications, and HVAC), including,
without limitation, equipment containing embedded microchips, in each case
necessary to the business or operations of Company and its Subsidiaries
taken as a whole.
18.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
------------------------------------------------------------------------
Agreement.
---------
Except as otherwise expressly provided in this Agreement, (a) all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP; and (b) financial statements and other
information required to be delivered by Company to the Lenders pursuant to
clauses (i), (ii), (iii) and (xiii) of subsection 6.1 shall be prepared in
accordance with GAAP (except, with respect to interim financial statements,
normal year-end audit adjustments and the absence of explanatory footnotes) as
in effect at the time of such preparation (and delivered together with the
reconciliation statements provided for in subsection 6.1(v)). Notwithstanding
the foregoing, except as otherwise specifically provided herein, all
computations determining compliance with subsection 2.4 and Section 7, including
the definitions used therein, shall utilize accounting principles and policies
in effect at the time of preparation of the June 27, 1998 financial statements
but shall exclude impact of purchase accounting adjustments (APB 16 and 17) for
Permitted Acquisitions.
18.3 Other Definitional Provisions.
-----------------------------
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. The words "includes," "including" and similar forms used in any Loan
Document shall be construed as if followed by the words "without limitation."
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18.4 Changes in GAAP.
---------------
In the event that a change in GAAP or other accounting principles and
policies after the date hereof affects in any material respect the calculations
of the compliance by Company and its Subsidiaries with the covenants contained
herein, Lenders and Company agree to negotiate in good faith to amend the
affected covenants (and related definitions) to compensate for the effect of
such changes so that the restrictions, limitations and performance standards
effectively imposed by such covenants, as so amended, are substantially
identical to the restrictions, limitations and performance standards imposed by
such covenants as in effect on the date hereof; provided that if Requisite
--------
Lenders and Company fail to reach agreement with respect to such amendment
within a reasonable period of time following the date of effectiveness of any
such change, calculation of compliance by Company and its Subsidiaries with the
covenants contained herein shall be determined in accordance with GAAP as in
effect immediately prior to such change.
SECTION 19.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
19.1 Commitments; Loans.
------------------
A. Commitments. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Loan Parties set
forth herein and in the other Loan Documents, each Lender hereby severally
agrees to make the Loans described in subsections 2.1A(i), 2.1A(ii) and
2.1A(iii) and the Swing Line Lender hereby agrees to make the Swing Line Loans
as described in subsection 2.1A(iv).
(i) Term A Loans. Each Lender severally agrees to make Loans to
------------
Company on the Closing Date in an aggregate amount not exceeding its Pro
Rata Share of the aggregate amount of the Term A Loan Commitments less the
----
amount of any Applicable Excess Subordinated Debt Amount, to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Term A Loan Commitment is set forth opposite its name on Schedule 2.1
------------
annexed hereto; provided that the Term A Loan Commitments of the Lenders
--------
shall be adjusted to give effect to any assignments of the Term A Loan
Commitments pursuant to subsection 10.1B. Each Lender's Term A Loan
Commitment shall expire immediately and without further action on June 30,
1999 if the Term A Loans are not made on or before that date. Company may
make only one borrowing under the Term A Loan Commitments. Amounts
borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid
may not be reborrowed.
(ii) Term B Loans. Each Lender severally agrees to make Loans to
------------
Company on the Closing Date in an aggregate amount not exceeding its Pro
Rata Share of the aggregate amount of the Term B Loan Commitments less the
----
amount of any Applicable Excess Subordinated Debt Amount, to be used for
the purposes identified in subsection
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2.5A. The amount of each Lender's Term B Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto; provided that the Term B
------------ --------
Loan Commitments of the Lenders shall be adjusted to give effect to any
assignments of the Term Loan Commitments pursuant to subsection 10.1B. Each
Lender's Term B Loan Commitment shall expire immediately and without
further action on June 30, 1999 if the Term B Loans are not made on or
before that date. Company may make only one borrowing under the Term B Loan
Commitments. Amounts borrowed under this subsection 2.1A(ii) and
subsequently repaid or prepaid may not be reborrowed.
(iii) Revolving Loans. Each Lender severally agrees, subject to the
---------------
limitations set forth below with respect to the maximum amount of Revolving
Loans permitted to be outstanding from time to time, to lend to Company
from time to time during the period from the Closing Date to but excluding
the Revolving Loan Commitment Termination Date an aggregate amount not
exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan
Commitments, to be used for the purposes identified in subsection 2.5B.
The original amount of each Lender's Revolving Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate
------------
original amount of the Revolving Loan Commitments is $25,000,000; provided
--------
that the Revolving Loan Commitments of the Lenders shall be adjusted to
give effect to any assignments of the Revolving Loan Commitments pursuant
to subsection 10.1B; provided further that the amount of the Revolving Loan
-------- -------
Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsection 2.4B. Each Lender's
Revolving Loan Commitment shall expire on the Revolving Loan Commitment
Termination Date and all Revolving Loans and all other amounts owed
hereunder with respect to the Revolving Loans and the Revolving Loan
Commitments shall be paid in full no later than that date. Amounts
borrowed under this subsection 2.1A(iii) may be repaid and reborrowed,
subject to the limitations and conditions set forth herein, to but
excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, in no event
shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Revolving Loan Commitments then in effect.
(iv) Swing Line Loans. The Swing Line Lender hereby agrees, subject
----------------
to the limitations set forth below with respect to the maximum aggregate
amount of all Swing Line Loans outstanding from time to time, to make a
portion of the Revolving Loan Commitments available to Company from time to
time during the period from the Closing Date to but excluding the Revolving
Loan Commitment Termination Date by making Base Rate Loans as Swing Line
Loans to Company in an aggregate amount not to exceed the amount of the
Swing Line Loan Commitment, to be used for the purposes identified in
subsection 2.5B, notwithstanding the fact that such Swing Line Loans, when
aggregated with the sum of the Swing Line Lender's outstanding Revolving
Loans and the Swing Line Lender's Pro Rata Share of the Letter of Credit
Usage then in effect, may
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exceed the Swing Line Lender's Revolving Loan Commitment. The original
amount of the Swing Line Loan Commitment is $10,000,000; provided that the
--------
amounts of the Swing Line Loan Commitment are subject to reduction as
provided in clause (b) of the next paragraph. The Swing Line Loan
Commitment shall expire on the Revolving Loan Commitment Termination Date
and all Swing Line Loans and all other amounts owed hereunder with respect
to the Swing Line Loans shall be paid in full no later than that date.
Amounts borrowed under this subsection 2.1A(iv) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, the Swing
Line Loans and the Swing Line Loan Commitment shall be subject to the
following limitations:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect; and
(b) any reduction of the Revolving Loan Commitments made pursuant
to subsection 2.4B which reduces the aggregate Revolving Loan
Commitments to an amount less than the then current amount of the
Swing Line Loan Commitment shall result in an automatic corresponding
reduction of the Swing Line Loan Commitment such that the amount
thereof equals the amount of the Revolving Loan Commitments, as so
reduced, without any further action on the part of Company, the
Administrative Agent or the Swing Line Lender.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), the Swing Line Lender
may, at any time in its sole and absolute discretion, deliver to the
Administrative Agent (with a copy to Company), no later than 11:00 a.m.
(New York time) at least one (1) Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Company) requesting the Lenders to make Revolving Loans that are
Base Rate Loans to Company on such Funding Date in an amount equal to the
amount of such Swing Line Loans (the "Refunded Swing Line Loans")
-------------------------
outstanding on the date such notice is given which the Swing Line Lender
requests the Lenders to prepay. Anything contained in this Agreement to the
contrary notwithstanding, (i) the proceeds of such Revolving Loans made by
the Lenders other than the Swing Line Lender shall be immediately delivered
by the Administrative Agent to the Swing Line Lender (and not to Company)
and applied to repay a corresponding portion of the Refunded Swing Line
Loans and (ii) on the day such Revolving Loans are made, the Swing Line
Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to
be paid with the proceeds of a Revolving Loan made by the Swing Line Lender
to Company, and such portion of the Swing Line Loans deemed to be so paid
shall no longer be outstanding as Swing Line Loans and shall no longer be
due under the Swing Line Note of the Swing Line Lender but shall instead
constitute part of the Swing Line Lender's outstanding
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Revolving Loans to Company and shall be due under the Revolving Note issued
by Company to the Swing Line Lender. Company hereby authorizes the
Administrative Agent and the Swing Line Lender to charge Company's accounts
with the Administrative Agent and the Swing Line Lender (up to the amount
available in each such account) in order to immediately pay the Swing Line
Lender the amount of the Refunded Swing Line Loans to the extent the
proceeds of such Revolving Loans made by the Lenders, including the
Revolving Loan deemed to be made by the Swing Line Lender, are not
sufficient to repay in full the Refunded Swing Line Loans. If any portion
of any such amount paid (or deemed to be paid) to the Swing Line Lender
should be recovered by or on behalf of Company from the Swing Line Lender
in bankruptcy, by assignment for the benefit of creditors or otherwise, the
loss of the amount so recovered shall be ratably shared among all Lenders
in the manner contemplated by subsection 10.5.
If for any reason Revolving Loans are not made pursuant to this
subsection 2.1A(iv) in an amount sufficient to repay any amounts owed to
the Swing Line Lender in respect of any outstanding Swing Line Loans on or
before the third Business Day after demand for payment thereof by the Swing
Line Lender, each Lender shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans, and in an
amount equal to its Pro Rata Share of the applicable unpaid amount together
with accrued interest thereon. Upon one (1) Business Day's notice from the
Swing Line Lender, each Lender shall deliver to the Swing Line Lender an
amount equal to its respective participation in the applicable unpaid
amount in same day funds at the office of the Swing Line Lender located at
the Funding and Payment Office. In order to evidence such participation
each Lender agrees to enter into a participation agreement at the request
of the Swing Line Lender in form and substance satisfactory to the Swing
Line Lender. In the event any Lender fails to make available to the Swing
Line Lender the amount of such Lender's participation as provided in this
paragraph, the Swing Line Lender shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the rate
customarily used by the Swing Line Lender for the correction of errors
among banks for three Business Days and thereafter at the Base Rate, as
applicable.
Notwithstanding anything contained herein to the contrary, (i) each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including without limitation (a) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against the Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of a Default or Event of Default; (c) any
adverse change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company or any of its
Subsidiaries; (d) any breach of this Agreement or any other Loan Document
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by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that
--------
such obligations of each Lender are subject to the condition that the Swing
Line Lender believed in good faith that all conditions under Section 4 to
the making of the applicable Refunded Swing Line Loans or other unpaid
Swing Line Loans, were satisfied at the time such Refunded Swing Line Loans
or unpaid Swing Line Loans were made, or the satisfaction of any such
condition not satisfied had been waived by Requisite Lenders prior to or at
the time such Refunded Swing Line Loans or other unpaid Swing Line Loans
were made; and (ii) the Swing Line Lender shall not be obligated to make
any Swing Line Loans if it has elected not to do so after the occurrence
and during the continuation of a Default or Event of Default.
B. Borrowing Mechanics. Term Loans or Revolving Loans (including any
such Loans made as Eurodollar Rate Loans with a particular Interest Period) made
on any Funding Date (other than Revolving Loans made pursuant to a request by
the Swing Line Lender pursuant to subsection 2.1A(iv) for the purpose of
repaying any Refunded Swing Line Loans and Revolving Loans made pursuant to
subsection 3.3B for the purpose of reimbursing the Issuing Bank for the amount
of a drawing or payment under a Letter of Credit issued by it) shall be in an
aggregate minimum amount of $500,000 and integral multiples of $100,000 in
excess of that amount; provided that any Eurodollar Rate Loan shall be in a
--------
minimum amount of $1,000,000 and integral multiples of $100,000 in excess of
that amount. Swing Line Loans made on any Funding Date shall be in an aggregate
minimum amount of $100,000 and integral multiples of $50,000 in excess of that
amount. Whenever Company desires that the Lenders make Term Loans or Revolving
Loans it shall deliver to the Administrative Agent a Notice of Borrowing no
later than 12:00 p.m. (New York time), at least three (3) Business Days in
advance of the proposed Funding Date in the case of a Eurodollar Rate Loan, or
at least one (1) Business Day in advance of the proposed Funding Date in the
case of a Base Rate Loan. Whenever Company desires that the Swing Line Lender
make a Swing Line Loan, it shall deliver to Administrative Agent a Notice of
Borrowing no later than 12:00 p.m. (New York time) on the proposed Funding Date.
The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall
be a Business Day), (ii) the amount and type of Loans requested, (iii) in the
case of Swing Line Loans, that such Loans shall be Base Rate Loans, (iv) in the
case of any Loans other than Swing Line Loans, whether such Loans shall be Base
Rate Loans or Eurodollar Rate Loans, and (v) in the case of any Loans requested
to be made as Eurodollar Rate Loans, the initial Interest Period requested
therefor. Term Loans and Revolving Loans may be continued as or converted into
Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection
2.2D. In lieu of delivering the above-described Notice of Borrowing, Company
may give the Administrative Agent telephonic notice by the required time of any
proposed borrowing under this subsection 2.1B; provided that such notice shall
--------
be promptly confirmed in writing by delivery of a Notice of Borrowing to the
Administrative Agent on or before the applicable Funding Date.
Neither the Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that the
Administrative Agent believes in
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good faith to have been given by a duly authorized officer authorized to borrow
on behalf of Company or for otherwise acting in good faith under this subsection
2.1B, and upon funding of Loans by the Lenders in accordance with this Agreement
pursuant to any such telephonic notice, Company shall have effected Loans
hereunder.
Company shall notify the Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing are no longer true and correct
(with such materiality qualifications as is set forth in a particular matter to
which Company is required to certify) as of the applicable Funding Date, and the
acceptance by Company of the proceeds of any Loans shall constitute a re-
certification by Company, as of the applicable Funding Date, as to the matters
to which Company is required to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the Related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and all Revolving Loans under
this Agreement shall be made by the Lenders simultaneously and proportionately
to their respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by the
Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or
telephonic notice in lieu thereof), the Administrative Agent shall notify each
Lender or the Swing Line Lender, as the case may be, of the proposed borrowing
and of the amount of such Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to the
Administrative Agent not later than 1:00 pm (New York time) on the applicable
Funding Date and the Swing Line Lender shall make the amount of its Swing Line
Loan available to the Administrative Agent not later than 2:00 P.M. (New York
time) on the applicable Funding Date, in each case in same day funds, at the
Funding and Payment Office. Except as provided in subsection 2.1A(iv) or
subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing
Line Loans or to reimburse the Issuing Bank for the amount of an honored drawing
or payment under a Letter of Credit issued by it, upon satisfaction or waiver of
the conditions precedent specified in subsections 4.1 (in the case of Loans made
on the Closing Date) and 4.2 (in the case of all Loans), the Administrative
Agent shall make the proceeds of such Loans available to Company on the
applicable Funding Date by causing an amount of same day funds equal to the
proceeds of all such Loans received by the Administrative Agent from the Lenders
or the Swing Line Lender, as the case may be, to be credited to the account of
Company at the Funding and Payment Office.
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Unless the Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to the Administrative Agent the amount of such Lender's Loan requested
on such Funding Date, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such Funding Date and
the Administrative Agent may, in its sole discretion, but shall not be obligated
to, make available to Company a corresponding amount on such Funding Date. If
such corresponding amount is not in fact made available to the Administrative
Agent by such Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to the
Administrative Agent, at the customary rate set by the Administrative Agent for
the correction of errors among banks for three Business Days and thereafter at
the Base Rate. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent's demand therefor, the Administrative Agent shall
promptly notify Company and Company shall immediately pay such corresponding
amount to the Administrative Agent, together with interest thereon for each day
from such Funding Date until the date such amount is paid to the Administrative
Agent at the rate applicable to such Loan. Nothing in this subsection 2.1C
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Company may have against
any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) The Administrative Agent shall maintain, at its address referred
to in subsection 10.8, a register for the recordation of the names and
addresses of the Lenders and the Commitments and Loans of each Lender from
time to time (the "Register"). The Register shall be available for
--------
inspection by Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(ii) The Administrative Agent shall record in the Register the
Commitments and the outstanding Loans from time to time of each Lender and
each repayment or prepayment in respect of the principal amount of the
outstanding Loans of each Lender. Any such recordation shall be conclusive
and binding on Company and each Lender, absent manifest error; provided
--------
that failure to make any such recordation, or any error in such
recordation, shall not affect Company's Obligations in respect of the
applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each Loan
made by it and each payment in respect thereof. Any such recordation shall
be conclusive and binding on Company, absent manifest error; provided that
--------
failure to make any such recordation, or any error in such recordation,
shall not affect Company's Obligations in respect of the applicable Loans;
and provided, further that in the event of any inconsistency between the
-------- -------
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Register and any Lender's records, the recordations in the Register shall
govern absent manifest error with respect to the Register.
(iv) Company, the Administrative Agent and the Lenders shall deem and
treat the Persons listed as the Lenders in the Register as the holders and
owners of the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any Commitment or Loan
shall be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
the Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Company hereby designates CSFB and any financial institution
serving as a successor Administrative Agent to serve as Company's agent
solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Company hereby agrees that, to the extent CSFB serves
in such capacity, CSFB and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection
10.3.
E. Notes. Company shall execute and deliver on the Closing Date to each
Lender (or to the Administrative Agent for that Lender) (i) a Term A Note
substantially in the form of Exhibit IV-A annexed hereto, respectively, to
------------
evidence that Lender's Term A Loans in the principal amount of that Lender's
Term A Loans and with other appropriate insertions, and each Lender's Term A
Notes shall evidence such Lender's Pro Rata Share of such respective amounts,
(ii) a Term B Note substantially in the form of Exhibit IV-B annexed hereto,
------------
respectively, to evidence that Lender's Term B Loans in the principal amount of
that Lender's Term B Loans and with other appropriate insertions, and each
Lender's Term B Notes shall evidence such Lender's Pro Rata Share of such
respective amounts, (iii) a Revolving Note substantially in the form of Exhibit
-------
V-A annexed hereto to evidence that Lender's Revolving Loans, in the principal
- ---
amount of that Lender's Revolving Loan Commitment and with other appropriate
insertions and (iv) a Swing Line Note substantially in the form of Exhibit V-B
-----------
annexed hereto to evidence that Lender's Swing Line Loans, in the principal
amount of that Lender's Swing Line Loan Commitment and with other appropriate
insertions. The Notes and the Obligations evidenced thereby shall be governed
by, subject to and benefit from all of the terms and conditions of this
Agreement and the other Loan Documents and shall be secured by the Collateral.
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19.2 Interest on the Loans.
---------------------
A. Rate of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made to maturity (whether by acceleration
or otherwise) at a rate determined by reference to the Base Rate or the Reserve
Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of
subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal
amount thereof from the date made to maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate. The applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Company initially at the time a telephonic notice or Notice of
Borrowing is given with respect to such Loan pursuant to subsection 2.1B (so
long as Company delivers to Administrative Agent a Notice of Borrowing within
one Business Day prior thereto). The basis for determining the interest rate
with respect to any Term Loan or any Revolving Loan may be changed from time to
time pursuant to subsection 2.2D. If on any day any Term Loan or Revolving Loan
is outstanding with respect to which notice has not been delivered to the
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate. Subject
to the provisions of subsections 2.2E and 2.7, the Term Loans and the Revolving
Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus
----
the Applicable Base Rate Margin; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Reserve
Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
----
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans
shall bear interest to maturity at the sum of the Base Rate plus the Applicable
----
Base Rate Margin for Revolving Loans less the Applicable Commitment Fee
----
Percentage.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, on behalf of Company select an
interest period (each an "Interest Period") to be applicable to such Loan, which
---------------
Interest Period shall be, at Company's option, either a one, two, three or six
month period (or any other period available to all the Lenders in a particular
tranche for which an Interest Period is being selected or otherwise agreed to by
such Lenders and the Administrative Agent); provided that:
--------
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
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(ii) in the case of immediately successive Interest Periods applicable
to a Eurodollar Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on
the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that 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;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Term A Loans
shall extend beyond the fifth anniversary of the Closing Date, no Interest
Period with respect to any portion of the Term B Loans shall extend beyond
the seventh anniversary of the Closing Date, and no Interest Period with
respect to any portion of the Revolving Loans shall extend beyond the
Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term Loans
shall extend beyond a date on which Company is required to make a scheduled
payment of principal of the Term A Loans or the Term B Loans, as the case
may be, unless the aggregate principal amount of Term A Loans or Term B
Loans, as the case may be, that are Base Rate Loans plus the aggregate
----
principal amount of Term A Loans or Term B Loans, as the case may be, that
are Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the Term
A Loans or Term B Loans, as the case may be, on such date;
(vii) Company may not select an Interest Period of longer than one
month prior to the end of the Initial Period;
(viii) there shall be no more than one Interest Period outstanding at
any time during the Initial Period, and thereafter no more than fifteen
Interest Periods shall be outstanding at any time; and
(ix) in the event Company fails to specify an Interest Period for any
Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
-49-
<PAGE>
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity, by acceleration or otherwise); provided that in the event that any
--------
Swing Line Loans, Revolving Loans or any Term Loans that are Base Rate Loans are
prepaid pursuant to subsection 2.4B(i), interest accrued on such Loans through
the date of such prepayment shall be payable on the next succeeding Interest
Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Term Loans or Revolving Loans equal to $500,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis (provided that any Loan being
converted to a Eurodollar Rate Loan shall be in a minimum amount of $1,000,000
and integral multiples of $100,000 in excess of such amount) or (ii) upon the
expiration of any Interest Period applicable to a Eurodollar Rate Loan, to
continue all or any portion of such Loan equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount as a Eurodollar Rate Loan;
provided, however, that a Eurodollar Rate Loan may only be converted into a Base
- -------- -------
Rate Loan on the expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to the
Administrative Agent no later than 12:00 pm at least one Business Day in advance
of the proposed conversion date (in the case of a conversion to a Base Rate
Loan), and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, (iv) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and
(v) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, that no Default or Event of Default has occurred and is continuing. In
lieu of delivering the above-described Notice of Conversion/Continuation,
Company may give the Administrative Agent telephonic notice by the required time
of any proposed conversion/continuation under this subsection 2.2D; provided
--------
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Conversion/Continuation to the Administrative Agent within one Business Day
prior to the proposed conversion/continuation date.
Neither the Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that the
Administrative Agent believes in good faith to have been given by a duly
authorized officer authorized to act on behalf of Company or for otherwise
acting in good faith under this subsection 2.2D, and upon conversion or
continuation of the applicable basis for determining the interest rate with
respect to any Loans
-50-
<PAGE>
in accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected a conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. Post-Default Interest. At the written election of the Lenders, the
outstanding principal amount of Loans not paid when due and, to the extent
permitted by applicable law, any interest payments thereon not paid when due,
and any fees and other amounts then due and payable hereunder and not paid,
shall thereafter bear interest (including post-petition interest in any
proceeding under the Bankruptcy Code, or other applicable bankruptcy or
insolvency laws) payable upon demand at a rate that is 2% per annum in excess of
the interest rate otherwise payable under this Agreement with respect to the
applicable Loans (or, in the case of any such fees and other amounts, at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Revolving Loans); provided that, in the case of Eurodollar
--------
Rate Loans, upon the expiration of the Interest Period in effect at the time any
such increase in interest rate is effective such Eurodollar Rate Loans shall
thereupon become Base Rate Loans and shall thereafter bear interest payable upon
demand at a rate equal to 2% per annum in excess of the interest rates otherwise
payable under this Agreement for Base Rate Loans that are Term A Loans, Term B
Loans, or Revolving Loans, as applicable. Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of the
Administrative Agent or any Lender.
F. Computation of Interest. Interest on Loans shall be computed on the
basis of a 360-day year (a 365 or 366-day year, as applicable, in the case of
Base Rate Loans based on the Prime Rate) and for the actual number of days
elapsed in the period during which it accrues. In computing interest on any
Loan, the date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan
to such Base Rate Loan, as the case may be, shall be included, and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar
Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate
Loan, as the case may be, shall be excluded; provided that if a Loan is repaid
--------
on the same day on which it is made, one day's interest shall be paid on that
Loan.
19.3 Fees.
----
A. Commitment Fees.
-51-
<PAGE>
(i) Revolving Loan Commitments. Company agrees to pay to the
--------------------------
Administrative Agent, for distribution to each Lender in proportion to that
Lender's Pro Rata Share of the Revolving Loan Commitments, commitment fees
for the period from and including the date hereof to and excluding the
Revolving Loan Commitment Termination Date equal to the sum of (x) the
average of the daily excess of the Revolving Loan Commitments over the sum
of the aggregate principal amount of Revolving Loans outstanding (but not
any Swing Line Loans outstanding) plus (y) the Letter of Credit Usage
----
multiplied by the Applicable Commitment Fee Percentage.
-------------
(ii) Calculation and Payment. All of the foregoing commitment fees
-----------------------
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed and shall be payable quarterly in arrears on the last Business
Day in each of March, June, September and December of each year, commencing
in June 1999, and on the Revolving Loan Commitment Termination Date.
B. Other Fees. Company agrees to pay to Sole Lead Arranger and
Administrative Agent such fees in the amounts and at the times separately agreed
upon between Company, Sole Lead Arranger and Administrative Agent.
19. Repayments, Prepayments and Reductions in Commitments; General Provisions
-------------------------------------------------------------------------
Regarding Payments.
------------------
A. Scheduled Payments of Term Loans.
(i) Scheduled Payments of Term A Loans. Company shall make principal
----------------------------------
payments on the Term A Loans in installments on the dates set forth below,
each such installment to be in an amount equal to the corresponding
percentages set forth below of the principal amount of the Term A Loans as
of the Closing Date:
-52-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF
TERM A LOANS
==========================================
<S> <C>
September 30, 1999 0.50%
December 31, 1999 0.50%
March 31, 2000 0.50%
June 30, 2000 0.50%
- -------------------------------------------
September 30, 2000 3.50%
December 31, 2000 3.50%
March 31, 2001 3.50%
June 30, 2001 3.50%
- -------------------------------------------
September 30, 2001 5.00%
December 31, 2001 5.00%
March 31, 2002 5.00%
June 30, 2002 5.00%
- -------------------------------------------
September 30, 2002 7.00%
December 31, 2002 7.00%
March 31, 2003 7.00%
June 30, 2003 7.00%
- -------------------------------------------
September 30, 2003 9.00%
December 31, 2003 9.00%
Fifth Anniversary
of the Closing Date 18.00%
==========================================
</TABLE>
; provided that the scheduled installments of principal of the Term A Loans
--------
set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term A Loans in accordance with subsection
2.4C; and provided, further that the final installment specified above for
-------- -------
the repayment by Company of the Term A Loans shall be in an amount, if such
amount is different from that specified above, sufficient to repay all
amounts owing by Company under this Agreement with respect to the Term A
Loans.
(ii Scheduled Payments of Term B Loans. Company shall make principal
----------------------------------
payments on the Term B Loans in installments on the dates set forth below,
each such installment to be in an amount equal to the corresponding
percentages set forth below of the principal amount of the Term B Loans as
of the Closing Date:
-53-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF
TERM B LOANS
=========================================
<S> <C>
September 30, 1999 0.25%
December 31, 1999 0.25%
March 31, 2000 0.25%
June 30, 2000 0.25%
- -----------------------------------------
September 30, 2000 0.25%
December 31, 2000 0.25%
March 31, 2001 0.25%
June 30, 2001 0.25%
- -----------------------------------------
September 30, 2001 0.25%
December 31, 2001 0.25%
March 31, 2002 0.25%
June 30, 2002 0.25%
- -----------------------------------------
September 30, 2002 0.25%
December 31, 2002 0.25%
March 31, 2003 0.25%
June 30, 2003 0.25%
- -----------------------------------------
September 30, 2003 0.25%
December 31, 2003 0.25%
March 31, 2004 0.25%
June 30, 2004 0.25%
- -----------------------------------------
September 30, 2004 10.00%
December 31, 2004 10.00%
March 31, 2005 10.00%
June 30, 2005 10.00%
- -----------------------------------------
September 30, 2005 13.75%
December 31, 2005 13.75%
Seventh Anniversary
of the Closing Date 27.50%
=========================================
</TABLE>
; provided that the scheduled installments of principal of the Term B Loans
--------
set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term B Loans in accordance with subsection
2.4C; and provided, further that the final installment specified above for
-------- -------
the repayment by Company of the Term B Loans shall be in an amount, if such
amount is different from that specified above, sufficient to repay all
amounts owing by Company under this Agreement with respect to the Term B
Loans.
-54-
<PAGE>
B. Prepayments and Reductions in Commitments.
(i) Voluntary Prepayments. Company may, upon written or telephonic
---------------------
notice to the Administrative Agent on or prior to 1:00 pm (New York time)
on the date of prepayment, which notice, if telephonic, shall be promptly
confirmed in writing, at any time and from time to time prepay, without
premium or penalty, any Swing Line Loan on any Business Day in whole or in
part in an aggregate minimum amount of $100,000 and integral multiples of
$100,000 in excess of that amount. In addition, Company may, upon not less
than one (1) Business Days', in the case of Base Rate Loans, and upon less
than three (3) Business Days' in the case of Eurodollar Rate Loans, prior
written or telephonic notice, promptly confirmed in writing to the
Administrative Agent (which notice the Administrative Agent will promptly
transmit by facsimile or telephone to each Lender), at any time and from
time to time prepay, without premium or penalty, the Loans (other than
Swing Line Loans) on any Business Day in whole or in part in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of
that amount; provided, however, that in the event Company shall prepay a
-------- -------
Eurodollar Rate Loan other than on the expiration of the Interest Period
applicable thereto, Company shall, at the time of such prepayment, also pay
any amounts payable under subsection 2.6D hereof. Notice of prepayment
having been given as aforesaid, the Loans shall become due and payable on
the prepayment date specified in such notice and in the aggregate principal
amount specified therein. Any voluntary prepayments pursuant to this
subsection 2.4B(i) shall be applied as specified in subsection 2.4C.
(ii) Voluntary Reductions of Revolving Loan Commitments . Company
---------------------------------------------------
may, upon not less than three (3) Business Days' prior written or
telephonic notice, promptly confirmed in writing to the Administrative
Agent (which notice the Administrative Agent will promptly transmit by
facsimile or telephone to each Lender), at any time and from time to time
terminate in whole or permanently reduce in part, without premium or
penalty, the Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed termination or
reduction; provided that any such partial reduction of the Revolving Loan
--------
Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $100,000 in excess of that amount. Company's notice
to the Administrative Agent shall designate the date (which shall be a
Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in such notice and
shall reduce the Revolving Loan Commitment of each Lender proportionately
to its Pro Rata Share. Any such voluntary reduction of the Revolving Loan
Commitment shall be applied as specified in subsection 2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of Commitments.
-------------------------------------------------------------
The Loans shall be prepaid and/or the Revolving Loan Commitments shall be
reduced in
-55-
<PAGE>
the manner provided in subsection 2.4C upon the occurrence of the following
circumstances:
(a) Asset Sales. No later than the fifth (5/th/) Business Day
-----------
following the date of receipt by Company or any of its Subsidiaries of
Cash Proceeds of any Asset Sale, Company shall prepay the Loans
(and/or the Revolving Loan Commitments shall be reduced) in an amount
equal to the Net Cash Proceeds received with respect thereto; provided
--------
that, if Company shall have delivered a Reinvestment Notice to the
Administrative Agent no later than the fifth (5/th/) Business Day
following the consummation of such Asset Sale, Company shall not be
required to make any prepayment with the proceeds of such Asset Sale
to the extent that all or any portion of such proceeds are reinvested
(or a contract has been entered into to reinvest) in Reinvestment
Assets within three hundred sixth five (365) days from the date of
receipt of such proceeds; provided further that the aggregate amount
-------- -------
of Net Cash Proceeds that may be reinvested pursuant to the
immediately preceding proviso shall not exceed $5,000,000 in any
Fiscal Year (or $10,000,000 in any Fiscal Year at any time the
Leverage Ratio, determined on a Pro Forma Basis after giving effect to
such Asset Sale, is less than 3.50:1.00); and provided still further
-------- ----- -------
that, on each Reinvestment Prepayment Date, an amount equal to the
Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied to prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced). Concurrently with any
prepayment of Loans (and/or any reduction in the Revolving Loan
Commitments) pursuant to this subsection 2.4B(iii)(a), Company shall
deliver to the Administrative Agent an Officer's Certificate
demonstrating in detail reasonably satisfactory to the Administrative
Agent the derivation of the Net Cash Proceeds of the correlative Asset
Sale from the gross sales price thereof. In addition, in the event
that Company shall, at any time after receipt of proceeds of any
Reinvestment Event requiring a prepayment (and/or a reduction in the
Revolving Loan Commitments) pursuant to this subsection 2.4B(iii)(a),
determine that the prepayments (and/or a reduction in the Revolving
Loan Commitments) previously made in respect of such Reinvestment
Event were in an aggregate amount less than that required by the terms
of this subsection 2.4B(iii)(a), Company shall promptly cause to be
made an additional prepayment of the Loans (and/or reduction in the
Revolving Loan Commitments) in an amount equal to the amount of any
such deficit, and Company shall concurrently therewith deliver to the
Administrative Agent an Officer's Certificate demonstrating the
derivation of the additional proceeds resulting in such deficit. If
Company is otherwise required to apply any portion of Net Cash
Proceeds to prepay Indebtedness evidenced by the Subordinated Debt
then, notwithstanding anything contained in this Agreement to the
contrary, Company shall apply such Net Cash Proceeds to the prepayment
of the Loans so as to eliminate or minimize any obligation to prepay
the Subordinated Debt.
-56-
<PAGE>
(b) Issuances of Debt. On or prior to the first (1/st/) Business
-----------------
Day after receipt by Company or any of its Subsidiaries of any
proceeds (net of any payment of underwriting discounts, commission and
other costs and expenses associated therewith (including legal costs
and expenses) of any Indebtedness (other than the Loans, the
Subordinated Debt and any other Indebtedness permitted by this
Agreement), Company shall prepay the Loans (and/or the Revolving Loan
Commitments shall be reduced) in an amount equal to the amount of such
proceeds; provided that payment or acceptance of the amounts provided
--------
for in this subsection 2.4B(iii)(b) shall not constitute a waiver of
any Event of Default resulting from the incurrence of such
Indebtedness or otherwise prejudice any rights or remedies of the
Administrative Agent or any Lender. If Company is otherwise required
to apply any portion of such proceeds to prepay Indebtedness
evidenced by the Subordinated Debt then, notwithstanding anything
contained in this Agreement to the contrary, Company shall apply such
proceeds to the prepayment of the Loans so as to eliminate or minimize
any obligation to prepay the Subordinated Debt.
(c) Issuances of Equity Securities. If at any time the Leverage
------------------------------
Ratio is greater than or equal to 3.50:1.00, then on or prior to the
first (1/st/ ) Business Day after receipt by Company or any of its
Subsidiaries of any Equity Proceeds (net of any payment of
underwriting discounts, commission and other costs and expenses
associated therewith (including legal costs and expenses)) other than
(w) capital contributions made by Company or any of its Subsidiaries,
(x) Equity Proceeds received by Company or any of its Subsidiaries as
payment for any shares of Capital Stock purchased by, or of the
exercise price under any option for any shares of Capital Stock of
Company held by, any officer, director, employee or consultant of
Company or any of its Subsidiaries, (y) Equity Proceeds received from
the Investors, or their respective Affiliates, and (z) Equity Proceeds
received by Company or any of its Subsidiaries solely to the extent
that such Equity Proceeds are used to finance a Permitted
Acquisition), Company shall prepay the Loans (and/or the Revolving
Loan Commitments shall be reduced) in an amount equal to 50% of all
such Equity Proceeds. If Company is otherwise required to apply any
portion of such Equity Proceeds to prepay Indebtedness evidenced by
the Subordinated Debt then, notwithstanding anything contained in this
Agreement to the contrary, Company shall apply such Equity Proceeds to
the prepayment of the Loans so as to eliminate or minimize any
obligation to prepay the Subordinated Debt.
(d) Insurance and Condemnation Proceeds. No later than the fifth
-----------------------------------
(5/th/) Business Day following the date of receipt by Company or any
of its Subsidiaries of any cash payments under any insurance policy as
a result of any damage to or loss of all or any portion of the
Collateral or any other tangible asset (net of actual costs incurred
and any taxes paid or payable by Company or any of its
-57-
<PAGE>
Subsidiaries in connection with adjustment and settlement thereof,
"Insurance Proceeds") or any proceeds resulting from the taking of
------------------
assets by the power of eminent domain, condemnation or otherwise
(net of actual costs incurred and any taxes paid or payable by
Company or any of its Subsidiaries in connection with adjustment
and settlement thereof, "Condemnation Proceeds") (any such event
resulting in the recovery of Insurance Proceeds or Condemnation
Proceeds, a "Recovery Event"), Company shall prepay the Loans
--------------
(and/or the Revolving Loan Commitments shall be reduced) in an
amount equal to the Insurance Proceeds or Condemnation
Proceeds, as the case may be, received; provided, that, if Company
--------
shall have delivered a Reinvestment Notice to the Administrative Agent
no later than five (5) Business Days prior to the consummation of such
Recovery Event and no Event of Default exists at the time of such
consummation and the time of delivery of such notice, Company shall
not be required to make any prepayment (and/or reduction in the
Revolving Loan Commitments) with the proceeds of such Recovery Event
to the extent that (x) all or any portion of such proceeds are
reinvested (or a contract has been entered into to reinvest) in
Reinvestment Assets within three hundred sixty five (365) days from
the date of receipt of such proceeds, and (y) after giving effect
thereto, the aggregate amount of proceeds not used to make mandatory
prepayments of Loans (and/or reduce the Revolving Loan Commitments)
pursuant to this proviso does not exceed $7,500,000 during any Fiscal
Year; provided, further, that, on each Reinvestment Prepayment Date,
-------- -------
an amount equal to the Reinvestment Prepayment Amount with respect to
the relevant Reinvestment Event shall be applied to prepay the Loans
(and/or the Revolving Loan Commitments shall be reduced). In
addition, in the event that Company shall, at any time after receipt
of proceeds of any Reinvestment Event requiring a prepayment (and/or
reduction in the Revolving Loan Commitments) pursuant to this
subsection 2.4B(iii)(d), determine that the prepayments (and/or
reduction in the Revolving Loan Commitments) previously made in
respect of such Reinvestment Event were in an aggregate amount less
than that required by the terms of this subsection 2.4B(iii)(d),
Company shall promptly cause to be made an additional prepayment of
the Loans (and/or reduce the Revolving Loan Commitments) in an amount
equal to the amount of any such deficit, and Company shall
concurrently therewith deliver to the Administrative Agent an
Officer's Certificate demonstrating the derivation of the additional
proceeds resulting in such deficit.
(e) Consolidated Excess Cash Flow. If at any time the Leverage
-----------------------------
Ratio is greater than or equal to 3.00:1.00, then in the event that
there shall be Consolidated Excess Cash Flow for any Fiscal Year
(commencing with the Fiscal Year ending June 30, 2000), Company shall,
no later than ninety-five (95) days after the end of such Fiscal Year,
prepay the Loans (and/or the Revolving Loan Commitments shall be
reduced) in an aggregate amount equal to 50% of such Consolidated
Excess Cash Flow.
-58-
<PAGE>
(f) Refund of CSM Deposits. On or prior to the fifth (5/th/)
----------------------
Business Day after receipt by Company or any of its Subsidiaries of
any refund of the CSM Deposits (or any portion thereof), Company shall
prepay the Loans in an amount equal to the amount of such refund net
of any actual costs or expenses related thereto.
(g) Reductions or Restrictions of Revolving Loan Commitments.
--------------------------------------------------------
Company shall prepay the Swing Line Loans and/or Revolving Loans from
time to time to the extent necessary so that (1) the Total Utilization
of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect, and (2) the aggregate
principal amount of all outstanding Swing Line Loans shall not at any
time exceed the Swing Line Loan Commitment then in effect. All Swing
Line Loans shall be prepaid in full prior to the prepayment of any
Revolving Loans pursuant to this subsection 2.4B(iii)(g). If at any
time that there are no Revolving Loans and Swing Line Loans
outstanding (whether after giving effect to any prepayment thereof
pursuant to this subclause (g) or otherwise) the Total Utilization of
Revolving Loan Commitments exceeds the Revolving Loan Commitment,
Company shall deposit into the Collateral Account such amounts as are
necessary so that, after giving effect thereto, the amount on deposit
in the Collateral Account pursuant to this subclause (g) is at least
equal to such excess.
C. Application of Prepayments and Unscheduled Reductions of Commitments.
(i) Application of Prepayments by Type of Loans. Any voluntary
-------------------------------------------
prepayments pursuant to subsection 2.4B(i) shall be applied as specified by
Company in the applicable notice of prepayment; provided that in the event
--------
Company fails to specify the Loans to which any such prepayment shall be
applied, such prepayment shall be applied first to repay outstanding Swing
-----
Line Loans to the full extent thereof, second to repay outstanding
------
Revolving Loans to the full extent thereof, and third to repay outstanding
-----
Term Loans to the full extent thereof. Any amount required to be applied
as a prepayment of Loans or Revolving Loan Commitment reduction pursuant to
any of subsections 2.4B(iii)(a) through (f) or this subsection 2.4C(i)
shall be applied first, to repay Term Loans as selected by Company in an
-----
amount not in excess of an amount equal to the scheduled amortization
payments on such Term Loans selected for the immediately succeeding twelve-
month period, second, to further prepay the Term Loans ratably to the full
------
extent thereof, third, to prepay Swing Line Loans to the full extent
-----
thereof and to permanently reduce the Revolving Loan Commitments by the
amount of such prepayment, fourth, to prepay Revolving Loans to the full
------
extent thereof and to further permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, fifth, to prepay outstanding
-----
reimbursement obligations with respect to Letters of Credit, sixth, to cash
-----
collateralize Letters of Credit as provided in the Collateral Account
Agreement and seventh, to the extent of any remaining amount, to further
-------
reduce
-59-
<PAGE>
the Revolving Loan Commitments. Anything contained herein to the
contrary notwithstanding, so long as any Term A Loans are outstanding, in
the case of any voluntary or mandatory prepayments of Term Loans pursuant
to subsections 2.4A or 2.4B or this subsection 2.4C, (a) Company shall use
reasonable efforts to notify the Lenders of such prepayment in advance of
payment to the Administrative Agent of such amount, (b) upon receipt of
such payment, the Administrative Agent shall notify the Lenders of such
payment, (c) in the event any Lender with Term B Loans elects to waive such
Lender's right to receive such prepayment in respect of any such Loans,
such Lender shall so advise the Administrative Agent in writing no later
than the close of business on the date it receives such notice from the
Administrative Agent and (d) upon receipt of such written advice from such
Lender, the Administrative Agent shall apply the amount waived by such
Lender to prepay the Term A Loans.
(ii) Application of Prepayments of Term Loans to Installments. The
--------------------------------------------------------
amount of any prepayments of Term A Loans or Term B Loans, as applicable,
shall be applied first, to reduce each scheduled installment thereof set
-----
forth in subsection 2.4A(i) or 2.4A(ii), as applicable, that is unpaid and
due within the next twelve months of the date of such prepayment in the
order that such installments are scheduled to occur, and second, to ratably
------
reduce each scheduled installment of principal thereof set forth in
subsection 2.4A(i) or 2.4A(ii), as applicable.
(iii) Application of Prepayments of Loans to Base Rate Loans and
----------------------------------------------------------
Eurodollar Rate Loans. Considering Loans constituting Term A Loans, Term B
---------------------
Loans and Revolving Loans being prepaid separately, any prepayment thereof
shall be applied first to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, in each case in a manner which
minimizes the amount of any payments required to be made by Company
pursuant to subsection 2.6D.
D. Application of Proceeds of Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Collateral. Except as provided in
-------------------------------------
subsection 2.4B(iii) with respect to prepayments from Net Cash Proceeds,
Insurance Proceeds or Condemnation Proceeds, all proceeds received by the
Administrative Agent or the Collateral Agent, as the case may be, in
respect of any sale of, collection from, or other realization upon all or
any part of the Collateral under any Collateral Document may, in the
discretion of the Collateral Agent, be held by the Collateral Agent as
Collateral for, and applied in full by the Administrative Agent against,
the applicable Secured Obligations (as defined in such Collateral Document)
in the following order of priority:
(a) to the payment of all costs and expenses of such sale,
collection or other realization, including all other reasonable
expenses, liabilities and advances made or incurred by such Agents in
connection therewith, and all amounts for which such Agents are
entitled to indemnification under such Collateral
-60-
<PAGE>
Document and all advances made by the Collateral Agent thereunder for
the account of the applicable Loan Party, and to the payment of all
reasonable costs and expenses paid or incurred by the Collateral Agent
in connection with the exercise of any right or remedy under such
Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess proceeds, to the
payment of all other such Secured Obligations for the ratable benefit
of the holders thereof; and
(c) thereafter, to the extent of any excess proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received
----------------------------------------
by the Administrative Agent under any Guaranty shall be applied promptly
from time to time by the Administrative Agent in the following order of
priority:
(a) to the payment of the reasonable costs and expenses of any
collection or other realization under such Guaranty, including all
reasonable expenses, liabilities and advances made or incurred by the
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to the
payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to the
payment to the applicable Guarantor or to whosoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction
may direct.
E. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of principal,
--------------------------
interest, fees and other Obligations hereunder and under the Notes shall be
made in same day funds and without defense, setoff or counterclaim, free of
any restriction or condition, and delivered to the Administrative Agent not
later than 12:00 Noon (New York time) on the date due at the Funding and
Payment Office for the account of the Lenders; funds received by the
Administrative Agent after that time on such due date shall be deemed to
have been paid by Company on the next succeeding Business Day. Company
hereby authorizes the Administrative Agent to charge its accounts with the
Administrative Agent in order to cause timely payment to be made to the
Administrative Agent of all principal,
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interest, fees and expenses due hereunder (subject to sufficient funds
being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
-------------------------------------------------
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest, on the
principal amount being repaid or prepaid, and all such payments (and in any
event any payments made in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to the Lenders' respective
Pro Rata Shares. The Administrative Agent shall promptly distribute to
each Lender, at its applicable Lending Office specified on Schedule 2.1 or
------------
at such other address as such Lender may request, its Pro Rata Share of all
such payments received by the Administrative Agent and the commitment fees
of such Lender when received by the Administrative Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this subsection
2.4E(iii) if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, the Administrative Agent shall give effect thereto
in apportioning payments received thereafter.
(iv) Payments on Business Days. Except if expressly provided
-------------------------
otherwise, whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be included
in the computation of the payment of interest hereunder or of the
commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing
-------------------
of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
--------
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect such
disposition or the obligations of Company hereunder or under such Note with
respect to any Loan or any payments of principal or interest on such Note.
19.5 Use of Proceeds.
---------------
A. Term Loans and Revolving Loans Made on the Closing Date. The proceeds
of the Term Loans and the Revolving Loans to be made to Company on the Closing
Date shall be applied, together with the cash proceeds of the
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Equity Contribution, the net cash proceeds of the issuance and sale of the
Subordinated Debt and approximately $60,000,000 of cash on hand at Company, to
repay certain existing Indebtedness of Company and its Subsidiaries, finance the
redemption price of the Capital Stock of Company pursuant to the Merger
Agreement and to pay the Transaction Costs.
B. Revolving Loans; Swing Line Loans. The proceeds of any Revolving
Loans made after the Closing Date and any Swing Line Loans shall be applied by
Company for working capital and general corporate purposes of Company and its
Subsidiaries.
C. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
19.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 11:00 A.M. (New York time) on each Interest Rate Determination Date, the
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
the Administrative Agent shall have reasonably determined (which determination
shall be final and conclusive and binding upon all parties hereto), on any
Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that
by reason of circumstances arising after the date of this Agreement affecting
the London interbank market, adequate and fair means do not exist for
ascertaining the interest rate applicable to such Loans on the basis provided
for in the definition of Reserve Adjusted Eurodollar Rate the Administrative
Agent shall on such date give notice (by telecopy or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made or continued as, or converted to, Eurodollar Rate Loans, until
such time as the Administrative Agent notifies Company and the Lenders that the
circumstances giving rise to such notice no longer exist (such notification not
to be unreasonably withheld or delayed) and (ii) any Notice of Borrowing or
Notice of Conversion/Continuation given by Company with respect to the Loans in
respect of which such determination was made shall be deemed to be rescinded by
Company.
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C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and the Administrative
Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans
(i) has become unlawful as a result of compliance by such Lender in good faith
with any law, treaty, governmental rule, regulation, guideline or order (or
would conflict with any such treaty, governmental rule, regulation, guideline or
order not having the force of law even though the failure to comply therewith
would not be unlawful) or (ii) has become impracticable, or would cause such
Lender material hardship, as a result of contingencies occurring after the date
of this Agreement which materially and adversely affect the London interbank
market, then, and in any such event, such Lender shall be an "Affected Lender"
---------------
and it shall on that day give notice (by telecopy or by telephone confirmed in
writing) to Company and the Administrative Agent of such determination (which
notice the Administrative Agent shall promptly transmit to each other Lender).
Thereafter (a) the obligation of the Affected Lender to make Loans as, or to
convert Loans to, Eurodollar Rate Loans, shall be suspended until such notice
shall be withdrawn by the Affected Lender, (b) to the extent such determination
by the Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar Rate Loans, as the case may be
(the "Affected Loans"), shall be terminated at the earlier to occur of the
--------------
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant
to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall
have the option, subject to the provisions of subsection 2.6D, to rescind such
Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by
giving notice (by telecopy or by telephone confirmed in writing) to the
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
the Administrative Agent shall promptly transmit to each other Lender). Except
as provided in the immediately preceding sentence, nothing in this subsection
2.6C shall affect the obligation of any Lender other than an Affected Lender to
make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to the Lenders of funds borrowed by it to make or
carry its Eurodollar Rate Loans and any loss, expense or liability sustained by
that Lender in connection with the liquidation or re-employment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefore in a Notice of
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Borrowing or a telephonic request for borrowing, or a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including any prepayment
pursuant to subsection 2.4B) or conversion of any of its Eurodollar Rate Loans
occurs on a date that is not the last day of an Interest Period applicable to
that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not
made on any date specified in a notice of prepayment given by Company, or (iv)
as a consequence of any other default by Company in the repayment of its
Eurodollar Rate Loans when required by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Subject to its obligations under
subsection 2.8, any Lender may make, carry or transfer Eurodollar Rate Loans at,
to, or for the account of any of its branch offices or the office of an
Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Reserve Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and, through the transfer of such Eurodollar deposit from an offshore
office of that Lender to a domestic office of that Lender in the United States
of America; provided, however, that each Lender may fund each of its Eurodollar
-------- -------
Rate Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of an Event of Default, unless the Requisite Lenders
otherwise consent, (i) Company may not elect to have a Loan be made or
maintained as, or converted to, a Eurodollar Rate Loan after the expiration of
any Interest Period then in effect for that Loan and (ii) subject to the
provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/
Continuation given by Company with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.
19.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes
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effective after the Closing Date, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(i) results in a change in the basis of taxation of such Lender (or
its applicable lending office) (other than a change with respect to any Tax
on the overall net income of such Lender or franchise tax in lieu thereof)
with respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of principal,
interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Eurodollar Rate
Loans that are reflected in the definition of Reserve Adjusted Eurodollar
Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, the Lender shall
promptly notify Company and the Administrative Agent thereof and Company shall
promptly pay to such Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender shall reasonably determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder, provided that notwithstanding anything to the contrary contained in
--------
this subsection 2.7A, unless a Lender gives notice to Company that it is
obligated to pay an amount under this subsection within six months after the
later of (x) the date such Lender incurs such increased cost or suffers such
reduction in amounts received or receivable or (y) the date such Lender has
actual knowledge of such costs on reduction in amounts received or receivable,
then such Lender shall only be entitled to be compensated for such amount to the
extent of the increased cost or reduction in amounts received or receivable that
is incurred or suffered on or after the date which occurs six months prior to
such Lender giving notice to Company that it is obligated to repay the
respective amounts pursuant to this subsection 2.7A. Such Lender shall deliver
to Company (with a copy to the Administrative Agent) a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Lender under this subsection 2.7A, which statement shall be
conclusive and binding upon all parties hereto absent manifest error.
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B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under
-----------------------------
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of the Administrative Agent or any Lender and franchise taxes unpaid
in lieu thereof) imposed, levied, collected, withheld or assessed by or
within the United States of America or any political subdivision in or of
the United States of America or any other jurisdiction from which a payment
is made by or on behalf of Company.
(ii) Withholding of Taxes. Subject to the provisions of subsection
--------------------
2.7B(iii), if Company or any other Person is required by law to make any
deduction or withholding on account of any Tax (other than a Tax on the
overall net income of the Administrative Agent or any Lender and franchise
taxes imposed in lieu thereof) from any sum paid or payable by Company to
the Administrative Agent or any Lender under any of the Loan Documents:
(a) Company shall notify the Administrative Agent of any such
requirement or any change in any such requirement as soon as
practicable;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on the Administrative Agent or such Lender, as the case may
be) on behalf of and in the name of the Administrative Agent or such
Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, the Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment of such tax been required or made; and
(d) within 30 days after paying any sum from which it is required
by law to make any deduction or withholding, and within 30 days after
the due date of payment of any Tax which it is required by clause (b)
above to pay, Company shall deliver to the Administrative Agent
evidence satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
- --------
Lender under clause (c) above except to the extent that any change after the
Closing Date or after the date of the
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Assignment Agreement pursuant to which such Lender became a Lender (in the case
of each other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate of such
deduction, withholding or payment from that in effect at the date of this
Agreement or at the date of such Assignment Agreement, as the case may be, in
respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
------------------------------------------------
(a) Each Lender that is not a United States Person (as such term
is defined in Section 7701(a)(30) of the Internal Revenue Code) for
U.S. federal income tax purposes (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to each of the
-------------
Administrative Agent and Company, on or prior to the Closing Date, or
in the case of a Lender that is an assignee or transferee of an
interest under this Agreement pursuant to Sections 10.1, on or prior
to the date of the Assignment Agreement pursuant to which it becomes a
Lender, and at such other times as may be necessary in the
determination of Company or the Administrative Agent (each in the
reasonable exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor forms),
accurately completed and duly executed by such Lender, together with
any other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to any payments to
such Lender of principal, interest, fees or other amounts payable
under any of the Loan Documents or (2) if such Lender is not a "bank"
or other Person described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver either Internal Revenue Service Form 1001 or
4224 pursuant to clause (1) above, a Certificate of Non-Bank Status
together with an original copy of Internal Revenue Service Form W-8
(or any successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations issued
thereunder to establish that such Lender is not subject to deduction
or withholding (including, without limitation, backup withholding) of
United States federal income tax with respect to any payments to such
Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, such Lender
shall promptly (1) deliver to each of the Administrative Agent and
Company two new original copies of Internal Revenue Service Form 1001
or
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4224, or a Certificate of Non-Bank Status and an original copy of
Internal Revenue Service Form W-8, as the case may be, accurately
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required in order to confirm or
establish that such Lender is not subject to deduction or withholding
of or is subject to a reduced rate of withholding of United States
federal income tax with respect to payments to such Lender under the
Loan Documents or (2) immediately notify the Administrative Agent and
Company of its inability to deliver any such forms, certificates or
other evidence.
(c) Company shall not be required to pay any additional amount to
any Non-US Lender under clause (c) of subsection 2.7B(ii) in respect
of deductions or withholdings of United States federal income taxes if
such Lender shall have failed to satisfy the requirements of
subsection 2.7B(iii)(a) or 2.7B(iii)(b); provided that if such Lender
--------
shall have satisfied such requirements on the Closing Date or on the
date of the Assignment Agreement pursuant to which it became a Lender
(in the case of each other Lender), nothing in this subsection
2.7B(iii)(c) shall relieve Company of its obligation to pay any
additional amounts pursuant to clause (c) of subsection 2.7B(ii) in
the event that, as a result of any change after the Closing Date in
any applicable law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or application
thereof, such Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date establishing the
fact that such Lender is not subject to withholding as described in
subsection 2.7B(iii)(a) or 2.7B(iii)(b).
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the Closing
Date of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its applicable lending office)
with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of any such governmental
authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or Letters of Credit or
participations therein or other obligations hereunder with respect to the
Loans or the Letters of Credit to a level below that which such Lender
reasonably determines such Lender or such controlling corporation could
have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies
of such Lender or such controlling corporation with regard to capital
adequacy), then from time to time, within fifteen Business Days after
receipt by Company from such Lender of the statement referred to in the
next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on
an after-tax basis for such reduction. Such
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Lender shall deliver to Company (with a copy to the Administrative Agent) a
written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.
D. Substitute Lenders. In the event (i) Company is required under the
provisions of this subsection 2.7 or subsection 3.6 to make payments to any
Lender or in the event any Lender fails to lend to Company in accordance
with this Agreement, or (ii) any Lender fails to consent to a proposed
change, waiver, discharge or termination under the Loan Documents otherwise
approved by Requisite Lenders, then, in either case, Company may elect to
terminate such Lender as a party to this Agreement; provided that,
--------
concurrently with such termination, (i) Company shall pay that Lender all
principal, interest and fees and other amounts (including without
limitation amounts, if any, owed under this subsection 2.7) due to be paid
to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
the Administrative Agent (or, in the event the Administrative Agent is also
the Lender to be terminated, the successor Administrative Agent) shall
agree, as of such date, to become a Lender for all purposes under this
Agreement (whether by assignment or amendment) and to assume all
obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the reasonable judgment of
the Administrative Agent (or, in the event the Administrative Agent is also
the Lender to be terminated, the successor Administrative Agent) to
evidence the substitution of such Lender shall have been received and
approved by the Administrative Agent as of such date.
19.8 Obligation of Lenders and Issuing Bank to Mitigate.
--------------------------------------------------
Each Lender and the Issuing Bank agrees that, as promptly as practicable
after the officer of such Lender or the Issuing Bank responsible for
administering the Loans or Letters of Credit of such Lender or the Issuing Bank,
as the case may be, becomes aware of the occurrence of an event or the existence
of a condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender or the Issuing Bank to receive payments under
subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent with
the internal policies of such Lender or the Issuing Bank and any applicable
legal or regulatory restrictions, use reasonable efforts (i) to make, issue,
fund or maintain the Commitments of such Lender or the affected Loans or Letters
of Credit of such Lender or the Issuing Bank through another lending or letter
of credit office of such Lender or the Issuing Bank, or (ii) take such other
measures as such Lender or the Issuing Bank may deem reasonable, if as a result
thereof the circumstances which would cause such Lender to be an Affected Lender
would cease to exist or the additional amounts which would otherwise be required
to be paid to such Lender or the Issuing Bank pursuant to subsection 2.7 or
subsection 3.6 would be reduced and if, as determined by such Lender or the
Issuing Bank in its reasonable discretion, the making, issuing, funding or
maintaining of such Commitments or Loans or Letters of Credit through such other
the lending or letter of credit office or in
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accordance with such other measures, as the case may be, would not otherwise
materially adversely affect such Commitments or Loans or Letters of Credit or
the interests of such Lender or the Issuing Bank; provided that such Lender or
--------
the Issuing Bank will not be obligated to utilize such other lending or letter
of credit office pursuant to this subsection 2.8 unless Company agrees to pay
all incremental expenses incurred by such Lender or the Issuing Bank as a result
of utilizing such other lending or letter of credit office. A certificate as to
the amount of any such expenses payable by Company pursuant to this subsection
2.8 (setting forth in reasonable detail the basis for requesting such amount)
submitted by such Lender or the Issuing Bank to Company (with a copy to the
Administrative Agent) shall be conclusive absent manifest error.
SECTION 20.
LETTERS OF CREDIT
20.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
---------------------------------------------------------------------
Therein.
-------
A. Letters of Credit. In addition to Company requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(iii) and that the Swing Line
Lender make Swing Line Loans pursuant to subsection 2.1A(iv), Company may
request, in accordance with the provisions of this subsection 3.1, from time to
time during the period from the Closing Date to but excluding the date which is
five (5) Business Days before the Revolving Loan Commitment Termination Date,
that the Issuing Bank issue Letters of Credit for the account of Company for the
purposes specified in the definitions of Commercial Letters of Credit and
Standby Letters of Credit. Subject to and upon the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Loan
Parties herein set forth, the Issuing Bank agrees to issue such Letters of
Credit in accordance with the provisions of this subsection 3.1; provided that
--------
Company shall not request that the Issuing Bank issue (and the Issuing Bank
shall not issue):
(i) any Letter of Credit if, after giving effect to such issuance, the
Total Utilization of Revolving Loan Commitments would exceed the Revolving
Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed the Letter of Credit Subfacility
Commitment;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) five (5) Business Days prior to the Revolving Loan
Commitment Termination Date and (b) the date which is one year from the
date of issuance of such Standby Letter of Credit; provided, that the
--------
immediately preceding clause (b) shall not prevent the Issuing Bank from
agreeing that a Standby Letter of Credit will automatically be extended for
one or more successive periods absent a Default or Event of Default,
subject to the immediately preceding clause (a), not to exceed one year
each unless the Issuing Bank elects not to extend for any such additional
period; provided, further, that, unless the Requisite Lenders otherwise
-------- -------
consent, the Issuing Bank shall give notice that it will not
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extend such Standby Letter of Credit if it has knowledge that a Default or
Event of Default has occurred and is continuing (and has not been waived in
accordance with subsection 10.6) on the last day on which such Issuing Bank
may give notice to the beneficiary that it will not extend such Standby
Letter of Credit; or
(iv) any Commercial Letter of Credit (a) having an expiration date
later than the earlier of (x) thirty (30) days prior to the Revolving Loan
Commitment Termination Date and (y) the date which is one hundred eighty
(180) days from the date of issuance of such Commercial Letter of Credit or
(b) that is otherwise unacceptable to the Issuing Bank in its reasonable
discretion.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance of a
------------------
Letter of Credit, it shall deliver to the Issuing Bank, at the Letter of
Credit Issuing Office, and the Administrative Agent, at the Funding and
Payment Office, a Notice of Issuance of Letter of Credit no later than
12:00 Noon (New York time) at least three (3) Business Days in the case of
Stand By Letters of Credit and five (5) Business Days (in the case of
Commercial Letters of Credit), or such shorter period as may be agreed to
by the Issuing Bank in any particular instance, in advance of the proposed
date of issuance. The Notice of Issuance of Letter of Credit shall specify
(a) the proposed date of issuance (which shall be a Business Day), (b) the
face amount of or maximum aggregate liability under, as applicable, the
Letter of Credit, (c) the expiration date of the Letter of Credit, (d) the
name and address of the beneficiary, and (e) either the verbatim text of
the proposed Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents and the verbatim text of
any certificates to be presented by the beneficiary which, if presented by
the beneficiary prior to the expiration date of the Letter of Credit, would
require the Issuing Bank to make payment thereunder; and provided that the
--------
Issuing Bank, in its reasonable discretion, may require changes in the text
of the proposed Letter of Credit or any such documents or certificates;
provided further that no Letter of Credit shall require payment against a
-------- -------
conforming draft or other request for payment to be made thereunder on the
same business day (under the laws of the jurisdiction in which the office
of the Issuing Bank to which such draft or other request for payment is
required to be presented is located) that such draft or other request for
payment is presented if such presentation is made after 10:00 A.M. (in the
time zone of such office of the Issuing Bank) on such Business Day.
Company shall notify the Issuing Bank (and the Administrative Agent,
if not such Issuing Bank) prior to the issuance of any Letter of Credit in
the event that any of the matters to which Company is required to certify
in the applicable Notice of Issuance of Letter of Credit is no longer true
and correct as of the proposed date of issuance of such Letter of Credit,
and upon the issuance of any Letter of Credit, Company shall be deemed
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to have re-certified, as of the date of such issuance, as to the matters to
which Company is required to certify in the applicable Notice of Issuance
of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
-----------------------------
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Bank shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard procedures, and upon its
issuance of such Letter of Credit the Issuing Bank shall promptly notify
the Administrative Agent and each Lender of such issuance, which notice
shall be accompanied by a copy of such Letter of Credit.
(iii) Reports to Lenders. Within thirty (30) days after the end of
------------------
each calendar quarter ending after the Closing Date, so long as any Letter
of Credit shall have been outstanding during such calendar quarter, the
Issuing Bank shall deliver to the Administrative Agent and the
Administrative Agent shall deliver to each Lender a report setting forth
for such calendar quarter the daily maximum amount available to be drawn
under the Letters of Credit that were outstanding during such calendar
quarter.
C. Lenders' Purchase of Participations in Letters of Credit. Immediately
upon the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Bank a
participation in such Letter of Credit and any drawings honored or payments made
thereunder in an amount equal to such Lender's Pro Rata Share (with respect to
the Revolving Loan Commitments) of the maximum amount which is or at any time
may become available to be drawn or required to be paid thereunder.
20.2 Letter of Credit Fees.
---------------------
Company agrees to pay the following amounts to the Issuing Bank with
respect to Letters of Credit issued by it for the account of Company:
(i) with respect to each Letter of Credit, (a) a fronting fee equal
to 0.250% per annum of the daily maximum amount available to be drawn under
such Letter of Credit and (b) a Letter of Credit fee equal to the product
of (x) the then Applicable Eurodollar Rate Margin with respect to Revolving
Loans and (y) the daily maximum amount available to be drawn under such
Letter of Credit, in each case payable in arrears on and to the last
Business Day in each of March, June, September and December of each year,
commencing June 1999, and on the Revolving Loan Commitment Termination Date
and computed on the basis of a 360-day year for the actual number of days
elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit (without duplication of the fees payable under clause (i)
above), documentary and processing charges in accordance with such Issuing
Lender's standard schedule for such charges in effect at the time of such
issuance, amendment or transfer, as the case may be.
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Promptly upon receipt by such Issuing Bank of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Bank shall distribute to each other
Lender having Revolving Loan Exposure its Pro Rata Share of such amount.
20.3 Drawings and Payments and Reimbursement of Amounts Drawn or Paid Under
----------------------------------------------------------------------
Letters of Credit.
-----------------
A. Responsibility of Issuing Bank With Respect to Requests For Drawings
and Payments. In determining whether to honor any drawing or request for
payment under any Letter of Credit by the beneficiary thereof, the Issuing Bank
shall be responsible only to determine that the documents and certificates
required to be delivered under such Letter of Credit have been delivered and to
use reasonable care so that they comply on their face with the requirements of
such Letter of Credit.
B. Reimbursement by Company of Amounts Drawn or Paid Under Letters of
Credit. In the event an Issuing Bank has determined to honor a drawing or
request for payment under a Letter of Credit issued by it, the Issuing Bank
shall immediately notify Company and the Administrative Agent, and Company shall
reimburse such Issuing Bank on or before the Business Day immediately following
the date on which such drawing is honored or such payment is made (the
applicable "Reimbursement Date") in an amount in same day funds equal to the
------------------
amount of such honored drawing; provided that, anything contained in this
--------
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified the Administrative Agent and the Issuing Bank prior to 12:00 Noon (New
York time) on the date immediately following the date of such honored drawing or
request for payment that Company intends to reimburse such Issuing Bank for the
amount of such honored drawing or payment with funds other than the proceeds of
Revolving Loans, Company shall be deemed to have given a timely Notice of
Borrowing to the Administrative Agent requesting the Lenders to make Revolving
Loans which are Base Rate Loans on the applicable Reimbursement Date in an
amount equal to the amount of such honored drawing or payment and (ii) subject
to satisfaction or waiver of the conditions specified in subsection 4.2B, the
Lenders shall, on the applicable Reimbursement Date, make Revolving Loans in the
amount of such honored drawing or payment, the proceeds of which shall be
applied directly by the Administrative Agent to reimburse the Issuing Bank for
the amount of such honored drawing or payment; provided further that if for any
-------- -------
reason proceeds of Revolving Loans are not received by the Issuing Bank on the
applicable Reimbursement Date in an amount equal to the amount of such honored
drawing or payment, Company shall reimburse the Issuing Bank, on demand, in an
amount in same day funds equal to the excess of the amount of such honored
drawing or payment over the aggregate amount of such Revolving Loans, if any,
which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Revolving Loans on the terms and
conditions set forth in this Agreement, and Company shall retain any and all
rights it may have against any Lender resulting from the failure of such Lender
to make such Revolving Loans under this subsection 3.3B.
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C. Payment by Lenders of Unreimbursed Drawings or Payments Under Letters
of Credit.
(i) Payment by Lenders. In the event that Company shall fail for
------------------
any reason to reimburse any Issuing Bank as provided in subsection 3.3B in
an amount equal to the amount of any honored drawing or payment made by
such Issuing Bank under a Letter of Credit issued by it, such Issuing Bank
shall promptly notify each other Lender of the unreimbursed amount of such
honored drawing or payment and of such other Lender's respective
participation therein based on such Lender's Pro Rata Share of the
Revolving Loan Commitments. Each Lender shall make available to such
Issuing Bank an amount equal to its respective participation, in same day
funds, at the office of such Issuing Bank specified in such notice, not
later than 2:00 P.M. (New York time) on the first business day (under the
laws of the jurisdiction in which such office of such Issuing Bank is
located) after the date notified by such Issuing Bank. In the event that
any Lender fails to make available to such Issuing Bank on such business
day the amount of such Lender's participation in such Letter of Credit as
provided in this subsection 3.3C, such Issuing Bank shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by such Issuing Bank for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice
the right of any Lender to recover from any Issuing Bank any amounts made
available by such Lender to such Issuing Bank pursuant to this subsection
3.3C in the event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of Credit
by such Issuing Bank in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of such
Issuing Bank.
(ii) Distribution to Lenders of Reimbursements Received From Company.
---------------------------------------------------------------
In the event any Issuing Bank shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any honored
drawing or payment made by such Issuing Bank under a Letter of Credit
issued by it, such Issuing Bank shall distribute to each other Lender which
has paid all amounts payable by it under subsection 3.3C(i) with respect to
such honored drawing or payment such other Lender's Pro Rata Share of all
payments subsequently received by such Issuing Bank from Company in
reimbursement of such honored drawing or payment when such payments are
received. Any such distribution shall be made to a Lender at its primary
address set forth below its name on the appropriate signature page hereof
or at such other address as such Lender may request.
D. Interest on Amounts Drawn or Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to each
------------------------------
Issuing Bank, with respect to drawings or payments made under any Letters
of Credit issued by it, interest on the amount paid by such Issuing Bank in
respect of each such drawing or
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payment from the date such drawing is honored or payment is made to but
excluding the date such amount is reimbursed by Company (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B) at a rate equal to (a) for the period from the date such drawing is
honored or payment is made to but excluding the applicable Reimbursement
Date, the Base Rate plus the Applicable Base Rate Margin with respect to
----
Revolving Loans, and (b) thereafter, at the written election of the Issuing
Bank, a rate which is 2% per annum in excess of the rate of interest
described in the foregoing clause (a). Interest payable pursuant to this
subsection 3.3D(i) shall be computed on the basis of a 360-day year for the
actual number of days elapsed in the period during which it accrues and
shall be payable on demand or, if no demand is made, on the date on which
the related drawing or payment under a Letter of Credit is reimbursed in
full.
(ii) Distribution of Interest Payments by Issuing Bank. Promptly
-------------------------------------------------
upon receipt by any Issuing Bank of any payment of interest pursuant to
subsection 3.3D(i), (a) such Issuing Bank shall distribute to each other
Lender, out of the interest received by such Issuing Bank in respect of the
period from the date of the applicable honored drawing or payment under a
Letter of Credit issued by such Issuing Bank to but excluding the date on
which such Issuing Bank is reimbursed for the amount of such drawing or
payment (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B), the amount that such other Lender would
have been entitled to receive in respect of the Letter of Credit fee that
would have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored or payment had
been made under such Letter of Credit, and (b) in the event such Issuing
Bank shall have been reimbursed by other Lenders pursuant to subsection
3.3C(i) for all or any portion of such drawing or payment, such Issuing
Bank shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such drawing or
payment such other Lender's Pro Rata Share of any interest received by such
Issuing Bank in respect of that portion of such drawing or payment so
reimbursed by other Lenders for the period from the date on which such
Issuing Bank was so reimbursed by other Lenders to and including the date
on which such portion of such drawing or payment is reimbursed by Company.
Any such distribution shall be made to a Lender at its Lending Office set
forth on Schedule 2.1 or at such other address as such Lender may request.
------------
20.4 Obligations Absolute.
--------------------
The obligation of Company to reimburse each Issuing Bank for drawings
honored or payments made under the Letters of Credit issued by it and to repay
any Revolving Loans made by the Lenders pursuant to subsection 3.3B and the
obligations of the Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
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(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Bank or other Lender or any other
Person or, in the case of a Lender, against Company whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one of
its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which appears to substantially comply with the terms of such
Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that Default or Event of Default shall have occurred
and be continuing;
provided, in each case, that payment by the applicable Issuing Bank under the
- --------
applicable Letter of Credit shall not have constituted bad faith, gross
negligence or willful misconduct of such Issuing Bank under the circumstances in
question.
20.5 Indemnification; Nature of Issuing Lender's Duties.
--------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Bank from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Bank may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Bank, other than as a result of (a) the bad faith, gross negligence or willful
misconduct of such Issuing Bank or (b) subject to the
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following clause (ii), the wrongful dishonor by such Issuing Bank of a proper
demand for payment made under any Letter of Credit issued by it or (ii) the
failure of such Issuing Bank to honor a drawing or other request for payment
under any such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called
"Governmental Acts").
-----------------
B. Nature of Issuing Bank's Duties. As between Company and any Issuing
Bank, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Bank by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Bank shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing or
payment under such Letter of Credit; or (viii) any consequences arising from
causes beyond the control of such Issuing Bank, including without limitation any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Bank under or in connection with the Letters of
Credit issued by it or any documents and certificates delivered thereunder, if
taken or omitted in good faith, shall not put such Issuing Bank under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Bank for
any liability arising out of the bad faith, gross negligence or willful
misconduct of such Issuing Bank.
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20.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
Subject to the provisions of subsection 2.7B (which shall be controlling
with respect to matters covered thereby), in the event that any Issuing Bank or
any Lender shall determine (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto) that any law, treaty
or governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the Closing Date, or compliance by any Issuing Bank or
Lender with any guideline, request or directive issued or made after the Closing
Date by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
(i) subject to any additional Tax such Issuing Bank or any Lender
(or its applicable lending or letter of credit office) (other than a change
with respect to any Tax on the overall net income of such Issuing Bank or
Lender) with respect to the issuing or maintaining of any Letters of Credit
or the purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Bank;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing Bank
or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Bank or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Bank or Lender of agreeing to issue, issuing or maintaining any Letter of Credit
or agreeing to purchase, purchasing or maintaining any participation therein or
to reduce any amount received or receivable by such Issuing Bank or Lender (or
its applicable lending or letter of credit office) with respect thereto; then,
in any case, Company shall promptly pay to such Issuing Bank or Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts (reasonably determined by such Issuing Bank or Lender) as may
be necessary to compensate such Issuing Bank or Lender for any such increased
cost or reduction in amounts received or receivable hereunder. Such Issuing
Bank or Lender shall deliver to Company a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Issuing Bank or Lender under this subsection 3.6, which statement shall be
conclusive and binding upon all parties hereto absent manifest error.
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SECTION 21.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction (or waiver) of
the following conditions.
21.1 Conditions to Term Loans; Initial Revolving Loans.
-------------------------------------------------
The obligations of the Lenders to make the Term Loans and the Revolving
Loans to be made on the Closing Date are, in addition to the conditions
precedent specified in subsection 4.2, subject to prior or concurrent
satisfaction (or waiver) of the following conditions:
A. Company Documents. On or before the Closing Date, Company shall
deliver to the Administrative Agent the following, each, unless otherwise noted,
dated the Closing Date:
(i) Certified copies of its Certificate of Incorporation, together
with a good standing certificate from the Secretary of State of the
Commonwealth of Pennsylvania, and each other state in which it is qualified
as a foreign corporation to do business (except any such state in which
failure to be qualified could not reasonably be expected to have a Material
Adverse Effect), each dated a recent date prior to the Closing Date;
(ii) Copies of its Bylaws, certified as of the Closing Date by its
corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing
the execution, delivery and performance of this Agreement and the other
Loan Documents and the Transaction Documents to which it is a party,
certified as of the Closing Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment;
(iv) Incumbency certificates of its officers executing this Agreement
and the other Loan Documents to which it is a party as of the Closing Date;
(v) Executed originals of this Agreement and the other Loan
Documents to which it is a party;
(vi) Certified copies of each of the Transaction Documents to which
it is a party; and
(vii) Such other documents as the Administrative Agent may reasonably
request.
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B. Subsidiary Documents. On or before the Closing Date, Company shall
deliver to the Administrative Agent for the Lenders the following for each
Subsidiary Guarantor (which may be waived by the Agents for any Subsidiaries of
Company with respect to the items described in clause (i) below) after giving
effect to the Recapitalization Transactions, each, unless otherwise noted, dated
the Closing Date:
(i) Certified copies of the Organizational Certificate, together
with a good standing certificate from the applicable Governmental Authority
of its jurisdiction of incorporation, organization or formation and each
other jurisdiction in which it is qualified as a foreign corporation or
other entity to do business (except any such state in which failure to be
qualified could not reasonably be expected to have a Material Adverse
Effect), each dated a recent date prior to the Closing Date;
(ii) Copies of the Organizational Documents of such Subsidiary
Guarantor, certified as of the Closing Date by its corporate secretary or
an assistant secretary;
(iii) Copies of the Organizational Authorizations of such Subsidiary
Guarantor approving and authorizing the execution, delivery and performance
of the Subsidiary Guaranty and the other Loan Documents and the Transaction
Documents to which such Subsidiary Guarantor is party, certified as of the
Closing Date by its corporate secretary or an assistant secretary as being
in full force and effect without modification or amendment;
(iv) Incumbency certificates of its officers executing the Subsidiary
Guaranty, and the other Loan Documents to which such Subsidiary is party;
(v) Executed originals of the Subsidiary Guaranty, and the other
Loan Documents to which such Subsidiary Guarantor is party;
(vi) Certified copies of each of the Transaction Documents to which
such Subsidiary Guarantor is a party; and
(vii) Such other documents as the Administrative Agent may reasonably
request.
C. Consummation of the Recapitalization Transactions.
(i) (a) Each of the material terms and conditions of the Transaction
Documents shall be in form and substance reasonably satisfactory to the
Administrative Agent and each such Transaction Document shall be in full
force and effect and (b) all conditions to the Recapitalization
Transactions set forth in the Transaction Documents shall have been
satisfied or the fulfillment of any such conditions shall have been waived
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with the reasonable consent of the Administrative Agent (such consent not
to be unreasonably withheld);
(ii) on or before the Closing Date, the Investors shall have made
the Equity Contribution;
(iii) on or before the Closing Date, the Merger shall have been
consummated in accordance with the Merger Agreement and the Administrative
Agent shall have received evidence reasonably satisfactory to it of the
foregoing;
(iv) on or before the Closing Date, Company shall have issued and
sold for Cash not less than $47,500,000 in gross aggregate principal amount
of Subordinated Debt in accordance with the terms and conditions of the
Subordinated Debt Documents;
(v) on or before the Closing Date, Company and its Subsidiaries
shall have terminated any commitment to lend or make other extensions of
credit under the Existing Credit Agreement and the Administrative Agent
shall have received evidence reasonably satisfactory to it of the
foregoing; and
(vi) the Agents shall be reasonably satisfied with all material
legal, tax and accounting matters (other than a failure to receive
recapitalization accounting treatment with respect to the Recapitalization
Transactions) relating to the Recapitalization Transactions that could
reasonably be expected to have a Material Adverse Effect.
D. Necessary Consents. Company shall have obtained all consents of
Governmental Authorities and other Persons necessary in connection with the
Recapitalization Transactions, and each of the foregoing shall be in full force
and effect and in form and substance reasonably satisfactory to the
Administrative Agent (other than any such consents, the failure to obtain which,
either individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect). All applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the
Recapitalization Transactions or the financing thereof and no action, request
for stay, petition for review or rehearing, reconsideration or appeal shall be
pending and any time for agency action to set aside its consent on its own
motion has expired.
E. Perfection of Security Interests. Company shall have taken or caused
to be taken such actions in such a manner so that the Collateral Agent upon
filing and recording has a valid and perfected First Priority security interest
in the entire personal property (both tangible and intangible) constituting
Collateral. Such actions shall include, without limitation: (i) the delivery
pursuant to the applicable Collateral Documents of (a) such certificates or
other instruments (each of which shall be registered in the name of the
Collateral Agent or properly endorsed in blank for transfer or accompanied by
irrevocable undated stock or equivalent powers duly endorsed in blank, all in
form and substance reasonably satisfactory to the Collateral Agent)
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representing all of the shares or other interests of Capital Stock required to
be pledged pursuant to the Collateral Documents and (b) all promissory notes or
other instruments (duly endorsed, where appropriate, in a manner reasonably
satisfactory to the Collateral Agent) evidencing any Collateral; (ii) the
delivery to the Collateral Agent of (a) the results of a recent search, by a
Person satisfactory to the Collateral Agent, of all effective UCC financing
statements and fixture filings and all judgment and tax lien filings which may
have been made with respect to any personal or mixed property of any Loan Party,
together with copies of all such filings disclosed by such search; (iii) the
delivery to the Collateral Agent of Uniform Commercial Code financing statements
executed by the applicable Loan Parties as to all such Collateral granted by
such Loan Parties for all jurisdictions as may be reasonably necessary to
perfect Administrative Agent's security interest in such Collateral; (iv) the
delivery to the Collateral Agent of evidence reasonably satisfactory to the
Collateral Agent that all other filings (including, without limitation, Uniform
Commercial Code termination statements and releases and filings with the PTO and
the United States Copyright Office with respect to Intellectual Property of
Company and its Subsidiaries), recordings and other actions the Collateral Agent
deems reasonably necessary to establish, preserve and perfect the First Priority
Liens granted to the Collateral Agent in personal (both tangible and intangible)
and mixed property shall have been made; and (v) such other filings,
registrations, recordings and other actions the Collateral Agent deems
reasonably necessary to establish, preserve and perfect the First Priority Liens
granted to the Collateral Agent in any Collateral, which by the nature, location
or pledgor thereof, should be made or taken in or with respect to any foreign
jurisdiction.
F. Real Property. The Administrative Agent and the Collateral Agent
shall have received from Company and each applicable Subsidiary Guarantor,
unless waived by the Administrative Agent (in which case, any waived items shall
be delivered pursuant to subsection 6.12D), in the case of each Leasehold
Property as so noted on Schedule 5.5B, a Landlord Consent and Estoppel with
respect thereto.
G. Financial Condition Certificate. Company shall have delivered to the
Administrative Agent a certificate from the chief financial officer of Company,
in form and substance reasonably satisfactory to the Administrative Agent,
confirming that after giving effect to the consummation of the Recapitalization
Transactions and the financing transactions contemplated hereby, Company and its
Subsidiaries are Solvent. In addition, the Administrative Agent shall have
received an opinion of Murray Devine & Co., in form and substance reasonably
satisfactory to the Administrative Agent, to the effect that, as of the Closing
Date and after giving effect to the Recapitalization Transactions and the
financing transactions contemplated hereby, Company and its Subsidiaries are
Solvent.
H. Transaction Costs. The Transaction Costs (other than fees payable to
any of the Agents) shall not exceed approximately $19,500,000.
I. Opinions of Loan Parties' Counsel. The Agent and its counsel shall
have received originally executed copies for each Agent and Lenders of one or
more favorable written
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opinions of Kirkland & Ellis, special New York counsel for the Loan Parties, and
(ii) Pepper Hamilton LLP, special Pennsylvania counsel for the Loan Parties,
setting forth substantially the opinions designated in Exhibit X annexed hereto
---------
and otherwise in form and substance reasonably satisfactory to the
Administrative Agent.
J. Opinions of Counsel in the Recapitalization Transactions. The
Administrative Agent and its counsel shall have received copies of each legal
opinion, if any, delivered by any counsel for any Loan Party pursuant to the
Transaction Documents, together with a letter from counsel rendering each such
opinion authorizing the Agents and the Lenders to rely upon the applicable
opinion to the same extent as though it were addressed to the Agents and the
Lenders.
K. Opinions of Administrative Agent's Counsel. The Administrative Agent
shall have received originally executed copies for each Agent and Lender of one
or more favorable written opinions of Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel to the Administrative Agent, dated as of the Closing Date,
substantially in the form of Exhibit XI annexed hereto and as to such other
----------
matters as the Administrative Agent acting on behalf of the Lenders may
reasonably request.
L. Fees and Expenses. Company shall have paid to the Administrative
Agent, for distribution (as appropriate) to the Agents and the Lenders, the fees
payable on the Closing Date referred to in subsection 2.3 and all reasonable
expenses owing to any such Person by Company as of the Closing Date for which
invoices have been presented prior to the Closing Date.
M. Financial Statements. On or before the Closing Date, the
Administrative Agent and the Lenders shall have received from Company, the
financial information and projections described in subsection 5.3 hereof, all in
form and substance reasonably satisfactory to the Administrative Agent.
N. Evidence of Insurance. The Administrative Agent shall have received
satisfactory certificates of insurance with respect to each of the insurance
policies required pursuant to subsection 6.4, and the Administrative Agent shall
be reasonably satisfied with the nature and scope of these insurance policies.
O. Environmental. The Administrative Agent shall have received such
environmental reports for each owned Real Property Asset of Company and its
Subsidiaries, if any, in form, scope and substance reasonably satisfactory to
the Administrative Agent.
P. No Material Adverse Effect. (i) Since June 27, 1998 no Material
Adverse Effect (in the reasonable opinion of the Administrative Agent) shall
have occurred.
Q. Corporate and Capital Structure, Ownership, Management, Etc.
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(i) Corporate Structure. The corporate organizational structure of
-------------------
Company and its Subsidiaries, both before and after giving effect to the
Recapitalization Transactions, shall be as set forth on Schedule 4.1Q
-------------
annexed hereto.
(ii) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of Company after giving effect to the Recapitalization
Transactions, shall be as set forth on Schedule 4.1Q annexed hereto.
-------------
R. Representations and Warranties. Company shall have delivered to the
Administrative Agent (with a sufficient number of originally executed
counterparts for the Lenders) an Officer's Certificate, in form and substance
reasonably satisfactory to the Administrative Agent, to the effect that the
representations and warranties in Section 5 hereof are true and correct in all
material respects on and as of the Closing Date, and both before and after
giving effect to the Recapitalization Transactions, to the same extent as though
made on and as of that date.
S. Completion of Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto shall be reasonably satisfactory in form and
substance to the Administrative Agent and its counsel, and the Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents, instruments and legal opinions as the
Administrative Agent may reasonably request.
21.2 Conditions to All Loans.
------------------------
The obligations of the Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. The Administrative Agent shall have received before that Funding Date,
in accordance with the provisions of subsection 2.1B, an originally executed
Notice of Borrowing, in each case signed by a Responsible Officer on behalf of
Company and delivered to the Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects on
and as of such earlier date;
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(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute a Default or Event of Default;
(iii) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it, on that Funding Date; and
(iv) The making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation T, Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System.
21.3 Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Bank is obligated to issue such Letter of Credit) is subject
to the following additional conditions precedent:
A. On or before the date of issuance of such Letter of Credit, the
Issuing Bank and the Administrative Agent shall have received, in accordance
with the provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, signed by a Responsible Officer of Company on
behalf of Company and delivered to the Administrative Agent, together with all
other information specified in subsection 3.1B(i) and such other documents or
information as the applicable Issuing Bank may reasonably require in connection
with the issuance of such Letter of Credit.
B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 22.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to make the
Loans, to induce the Issuing Bank to issue Letters of Credit and to induce the
other Lenders to purchase participations therein, Company represents and
warrants to each Lender and the Issuing Bank, on the date of this Agreement, on
the Closing Date, on each Funding Date, and on the date of issuance of each
Letter of Credit, that the following statements are true and correct.
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22.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries.
------------
A. Organization and Powers. Company and each Subsidiary Guarantor which
is a corporation are duly organized, validly existing and in good standing under
the laws of their respective states of organization. Each Subsidiary Guarantor
which is a partnership or limited liability company is a duly organized and
validly existing limited partnership or limited liability company under the laws
of its jurisdiction of formation and is in good standing in such jurisdiction.
Company and each Subsidiary Guarantor has all requisite corporate, partnership
or limited liability company (as applicable) power and authority to own and
operate their respective properties, to carry on their respective business as
now conducted and as proposed to be conducted, to enter into the Loan Documents,
to carry out the transactions contemplated thereby and, in the case of Company,
to issue and pay the Notes.
B. Qualification and Good Standing. Company and each Subsidiary
Guarantor is qualified or authorized to do business and in good standing in
every jurisdiction where their respective assets are located and wherever
necessary to carry out their respective businesses and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and would not reasonably be expected to have a Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.13.
D. Company and Subsidiaries. All of the Subsidiaries of Company as of
the Closing Date (after giving effect to the Recapitalization Transactions) are
identified in Schedule 5.1 annexed hereto, as it may be supplemented from time
------------
to time in accordance with the provisions of subsection 6.9. The Capital Stock
or other equity interests of Company and each of the Subsidiaries identified in
Schedule 5.1 annexed hereto is duly authorized, validly issued, fully paid and
- ------------
nonassessable and none of such Capital Stock or other equity interests
constitutes Margin Stock. Schedule 5.1 annexed hereto correctly sets forth the
------------
ownership interest of Company in each of its Subsidiaries identified therein.
22.2 Authorization of Borrowing, etc.
--------------------------------
A. Authorization of Borrowing. The execution, delivery and performance
of the Loan Documents and the issuance, delivery and payment of the Notes have
been duly authorized by all necessary corporate and/or partnership (as
applicable) action on the part of each of the Loan Parties party thereto.
B. No Conflict. After giving effect to the consummation of the
transactions contemplated hereby to occur on the Closing Date, the execution,
delivery and performance by each of the applicable Loan Parties of the Loan
Documents, the issuance, delivery and payment of the Notes and the consummation
of the transactions contemplated by the Loan Documents do not and will not (i)
violate any provision of any law or any governmental rule or regulation
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applicable to any Loan Party, the Organizational Certificate or any other
Organizational Documents of any Loan Party or any order, judgment or decree of
any court or other agency of government binding on any Loan Party, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of any Loan Party, (iii) result
in or require the creation or imposition of any Lien upon any of the properties
or assets of any Loan Party (other than any Liens created under any of the Loan
Documents in favor of the Collateral Agent), or (iv) require any approval of
shareholders, partners or members or any approval or consent of any Person under
any Contractual Obligation of any Loan Party, except for such approvals or
consents which will be obtained on or before the Closing Date or where failure
to obtain or make foregoing would not reasonably be expected to have a Material
Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by the
Loan Parties of the Loan Documents, the issuance, delivery and payment of the
Notes and the consummation of the transactions contemplated by the Loan
Documents do not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body except to the extent obtained on or
before the Closing Date or where the failure to obtain or make the foregoing
would not reasonably be expected to have a Material Adverse Effect.
D. Binding Obligation. Each of the Loan Documents has been duly executed
and delivered by each of the Loan Parties party thereto and is the legally valid
and binding obligation of each such Loan Party, enforceable against such Loan
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
E. Valid Issuance of the Subordinated Debt. Company has the power and
authority to issue the Subordinated Debt. The Subordinated Debt, when issued
and paid for, will be the legally valid and binding obligation of Company,
enforceable against Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability. The Subordinated Debt, when issued and sold in the
manner contemplated by the Transaction Documents on the Closing Date, will
either (a) have been registered or qualified under applicable federal and state
securities laws or (b) be exempt therefrom.
22.3 Financial Condition; Projections.
--------------------------------
A. Financial Statements. Company has heretofore delivered to the
Administrative Agent, the following financial statements and information:
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(i) pro forma consolidated balance sheet of Company and its
Subsidiaries as at (a) December 26, 1998, together with the related pro
forma consolidated statements of income for the twelve month period then
ended, (b) June 27, 1998, and (c) each of the six month periods ended
December 27, 1997, December 26, 1998 and June 27, 1998, in each case
reflecting pro forma adjustments that give effect to the consummation of
the Recapitalization Transactions and supplemental adjustments that give
effect to certain other transactions described therein; and
(ii) (a) unaudited consolidated balance sheet of Company and its
Subsidiaries as at December 26, 1998, together with the related
consolidated statements of income for the six month period then ended, and
(b) audited consolidated balance sheets for Company and its Subsidiaries as
at June 29, 1996, June 28, 1997 and June 27, 1998, together with the
related audited consolidated statements of operations and cash flows for
each Fiscal Year then ended;
All such statements in clause (ii) hereof were prepared in conformity with GAAP
and fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments and the absence of
footnote disclosure required in accordance with GAAP. On the Closing Date,
neither Company nor any of its Subsidiaries has any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the financial statements
referred to in the preceding clauses of this subsection, or the notes thereto
and which in any such case is material in relation to the business, results of
operations or financial condition of Company and its Subsidiaries taken as a
whole.
B. Projections. On and as of the Closing Date, the projections of
Company and its Subsidiaries for the period from the Saturday closest to June
30, 1998 through the Saturday closest to June 30, 2006 previously delivered to
the Lenders (the "Projections") are based on good faith estimates and
-----------
assumptions made by the management of Company, and on the Closing Date are
reasonable, it being recognized, however, that projections as to future events
are not to be viewed as facts and that the actual results during the period or
periods covered by the Projections may differ from the projected results and
that the differences may be material.
22.4 No Material Adverse Change.
--------------------------
Since June 27, 1998, no event or change has occurred that has caused or
evidences or could reasonably be expected to cause, either individually or in
the aggregate, a Material Adverse Effect.
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22.5 Title to Properties; Liens; Real Property; Intellectual Property.
----------------------------------------------------------------
A. Title to Properties; Liens. After giving effect to the transactions
contemplated hereby and by the other Transaction Documents to occur on the
Closing Date, Company and its Subsidiaries have good title to or a valid
leasehold interest in or license in all of their respective material properties
and assets reflected in the financial statements referred to in subsection 5.3
or in the most recent financial statements delivered pursuant to subsection 6.1
in each case subject to Permitted Encumbrances and Liens permitted under
subsection 7.2, except for assets disposed of since the date of such financial
statements or as otherwise permitted under subsection 7.7 and except for such
defects that neither individually nor in the aggregate could reasonably be
expected to have a Material Adverse Effect. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens.
B. Real Property. As of the Closing Date, Schedule 5.5B annexed hereto
-------------
contains a true, accurate and complete list of all fee interests and Leasehold
Properties of any Loan Party. Except as specified in Schedule 5.5B annexed
-------------
hereto, each lease or sublease, as applicable, for each such Leasehold Property
is in full force and effect and Company does not have knowledge of any material
default by any party thereto that has occurred and is continuing thereunder
(except where the consequences of any such default would not reasonably be
expected to have a Material Adverse Effect), and each such agreement constitutes
the legally valid and binding obligation of each applicable Loan Party,
enforceable against such Loan Party in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles.
C. Intellectual Property. Company and its Subsidiaries own or have the
valid right to use all trademarks and service marks, tradenames, patents,
copyrights, trade secrets and technology used in or necessary to conduct
Company's and its Subsidiaries' business (collectively, the "Intellectual
------------
Property"), free and clear of any and all Liens other than Permitted
- --------
Encumbrances except where the failure to so own or have the right to use could
not reasonably be expected to have a Material Adverse Effect. All currently
existing registrations therefor are in full force and effect and are valid and
enforceable. The conduct of Company's and its Subsidiaries' business as
currently conducted, including, but not limited to, all products, processes or
services, made, offered or sold by Company and its Subsidiaries, does not
infringe upon, violate, misappropriate or dilute any intellectual property of
any third party which infringement, violation, misappropriation or dilution
could reasonably be expected to have a Material Adverse Effect. To the best of
Company's and its Subsidiaries' knowledge, no third party is infringing upon the
Intellectual Property in any material respect. Except as set forth in Schedule
--------
5.5C, there is no pending or to the best of Company's and its Subsidiaries'
- ----
knowledge, threatened claim or litigation contesting Company's right to own or
use any material Intellectual Property or the validity or enforceability
thereof.
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22.6 Litigation; Adverse Facts.
-------------------------
There is no action, suit, proceeding, arbitration or governmental
investigation (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company or
any of its Subsidiaries (after due inquiry), threatened against or affecting
Company or any of Company's Subsidiaries or any property of Company or any of
Company's Subsidiaries that, individually or in the aggregate could reasonably
be expected to result in, a Material Adverse Effect. Neither Company nor any of
Company's Subsidiaries is (i) in violation of any applicable law that has had,
or could reasonably be expected to result in, a Material Adverse Effect or (ii)
subject to or in default with respect to any final judgment, writ, injunction,
decree, rule or regulation of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that has had, or could reasonably be
expected to result in, a Material Adverse Effect.
22.7 Payment of Taxes.
----------------
Except to the extent permitted by subsection 6.3, all material tax returns
and reports of Company and Company's Subsidiaries required to be filed by any of
them have been timely filed and all material taxes, assessments, fees and other
governmental charges upon Company and Company's Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Neither Company nor any of
Company's Subsidiaries knows of any proposed material tax assessment against
Company or any of Company's Subsidiaries other than those which are being
actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings and for which reserves or other appropriate provisions,
if any, as may be required in conformity with GAAP shall have been made or
provided therefor.
22.8 Performance of Agreements.
-------------------------
Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a material default, except, in each case, individually or
in the aggregate, where the consequences, direct or indirect, of such default or
defaults, if any, would not have a Material Adverse Effect.
22.9 Governmental Regulation.
-----------------------
Neither Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation
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which may limit its ability to incur Indebtedness or which may otherwise render
all or any portion of the Obligations unenforceable.
22.10 Securities Activities.
---------------------
Neither Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
22.11 Employee Benefit Plans.
----------------------
A. Company and each of its ERISA Affiliates are in material compliance
with all applicable provisions and requirements of ERISA with respect to each
Employee Benefit Plan, and have performed in all material respects all their
obligations under each Employee Benefit Plan, except to the extent that any non-
compliance with ERISA or any such failure to perform would not have a Material
Adverse Effect on Company or any of its ERISA Affiliates. No material liability
to the PBGC (other than required premium payments), the Internal Revenue
Service, any Plan or any trust established under Title IV of ERISA has been, or
is expected by Company or any of its ERISA Affiliates to be, incurred by Company
or any of its ERISA Affiliates.
B. No ERISA Event has occurred which has resulted or to the knowledge of
Company or its ERISA Affiliates is reasonably expected to occur which has or
would reasonably be expected to have a Material Adverse Effect.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code and/or Section 601 of ERISA, neither Company nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Company or any of its Subsidiaries that would be reasonably
expected to have a Material Adverse Effect.
22.12 Certain Fees.
------------
Except as set forth on Schedule 5.12, no broker's or finder's fee or
-------------
commission will be payable with respect to this Agreement or any of the
transactions contemplated hereby, and Company hereby indemnifies the Lenders
against, and agrees that it will hold the Lenders harmless from, any claim,
demand or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
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22.13 Environmental Matters.
---------------------
(i) Company, each of its Subsidiaries (including without limitation,
all operations and conditions at or in the Facilities presently owned and
operated by Company or its Subsidiaries), and, to the knowledge of Company,
each of the tenants under any leases or occupancy agreements governing any
portion of any Facilities presently owned or operated by Company or its
Subsidiaries, are in compliance with all applicable Environmental Laws
(which compliance includes, but is not limited to, the possession by
Company, each of its Subsidiaries and each of such tenants of all permits
and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where failure to be in compliance would not reasonably be expected
to have a Material Adverse Effect.
(ii) There is no Environmental Claim pending or to Company's
knowledge threatened against Company or any of its Subsidiaries or, to the
best knowledge of Company, against any Person whose liability for any
Environmental Claim Company or any of its Subsidiaries has retained or
assumed contractually in each such case which, individually or in the
aggregate, would have a Material Adverse Effect.
(iii) There are no past or present (or to the best knowledge of
Company, future) actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the Release or presence of any
Hazardous Material, which could reasonably be expected to form the basis of
any Environmental Claim against Company or any of its Subsidiaries, or to
the best knowledge of Company, against any Person whose liability for any
Environmental Claim Company or any of its Subsidiaries has or assumed
contractually in each such case which would have a Material Adverse Effect.
(iv) Except as would not reasonably be expected to have a Material
Adverse Effect, none of the Facilities contain any: underground storage
tanks; asbestos; polychlorinated biphenyls ("PCBS"); underground injection
----
wells; radioactive materials; or septic tanks or waste disposal pits in
which process wastewater or any Hazardous Materials have been discharged or
disposed.
22.14 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
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22.15 Solvency.
--------
Company and its Subsidiaries, taken as a whole, are, and, upon the
incurrence of any Obligations by any Loan Party (including, without limitation,
the making of the Loans, the delivery of the Guaranties and the Liens created by
the Collateral Documents) on any date on which this representation is made, and
after giving effect to the Recapitalization Transactions and the incurrence of
Indebtedness in connection therewith, will be, Solvent.
22.16 Disclosure.
----------
The representations and warranties of Company and its Subsidiaries
contained in the Loan Documents and the information contained in the other
documents, certificates and written statements furnished to any of the Agents or
the Lenders (including, without limitation, the Information Memorandum) by or on
behalf of Company or any of its Subsidiaries for use in connection with the
transactions contemplated by this Agreement or any other Loan Document, when
taken together, do not contain any untrue statement of a material fact or omit
to state a material fact (known to Company or the applicable Subsidiary, in the
case of any document not furnished by it) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Company to be reasonable at the time made,
it being recognized by the Agents and the Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results and that the differences may be material. There is no fact known to
Company (other than matters of a general economic nature) that has had, or could
reasonably be expected to result in, a Material Adverse Effect and that has not
been disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated hereby.
22.17 Year 2000 Matters.
-----------------
Company reasonably believes that, as relating to Company and its
Subsidiaries, taken as a whole, (x) the assessment and correction of any Year
2000 Problems, in each case, which, individually or in the aggregate, if not
corrected could reasonably be expected to have a Material Adverse Effect, will
be substantially completed on or prior to September 30, 1999, (y) a Material
Adverse Effect will not occur as a result of any Year 2000 Problem, and (z) the
aggregate costs and expenses incurred and reasonably expected to be incurred in
connection with the assessment and correction of Year 2000 Problems, including,
without limitation, a plan of correction ("Plan of Correction"), with respect to
------------------
any Year 2000 problems, and the testing and monitoring of all Systems and the
correction of Year 2000 Problems, could not reasonably be expected to have a
Material Adverse Effect.
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SECTION 23.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations (other than indemnification obligations not due and
payable), and the cancellation or expiration of all Letters of Credit, unless
the Requisite Lenders shall otherwise give prior written consent, Company shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 6.
23.1 Financial Statements and Other Reports.
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to the Administrative Agent (and the
Administrative Agent shall deliver to each Lender):
(i) Monthly Financials: as soon as available and in any event
------------------
within thirty (30) days after the end of each month, commencing July 1999
(but not, in any case, for any month in which a Fiscal Quarter ends), the
consolidated balance sheet of Company and its Subsidiaries as at the end of
such month and the related consolidated statements of income, stockholders'
equity and cash flows of Company for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month, all in
reasonable detail and certified by a principal financial officer of Company
that they fairly present, in all material respects, the financial condition
of Company and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustments and the
absence of footnotes;
(ii) Quarterly Financials: as soon as available and in any event
--------------------
within forty-five (45) days after the end of each Fiscal Quarter commencing
with the Fiscal Quarter ending June, 1999, (a) the consolidated balance
sheets of Company and its Subsidiaries as at the end of such Fiscal Quarter
and the related consolidated statements of income and consolidated
statement of cash flows of Company and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, setting forth, in the case of
statements of income only, in comparative form the corresponding figures
for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the consolidated plan and financial forecast for
the current Fiscal Year delivered pursuant to subsection 6.1(xiii), all
prepared in accordance with the GAAP and in reasonable detail and certified
by the chief executive officer or chief financial officer of Company that
they fairly present, in all material respects, the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject to
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changes resulting from audit and normal year-end adjustments and the
absence of footnotes; and (b) a narrative report;
(iii) Year-End Financials: as soon as available and in any event
-------------------
within ninety (90) days after the end of each Fiscal Year, (a) the
consolidated balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated statements of income and
consolidated statement of cash flows of Company and its Subsidiaries for
such Fiscal Year, setting forth, in the case of statements of income only,
in comparative form the corresponding figures for the previous Fiscal Year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6.1(xiii) for the Fiscal Year
covered by such financial statements, all prepared in accordance with the
GAAP and in reasonable detail and certified by the chief executive officer
or chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated; (b) a narrative report describing the
operations of Company and its Subsidiaries in the form prepared for
presentation to senior management for such Fiscal Year; and (c) in the case
of such consolidated financial statements, a report thereon of independent
certified public accountants of recognized national standing selected by
Company and reasonably satisfactory to the Administrative Agent, which
report shall be unqualified as to going concern and scope of audit, and
shall state that such consolidated financial statements fairly present, in
all material respects, the consolidated financial position of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the audit by
such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with each
-------------------------------------
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, (a) an Officer's Certificate of
Company stating that the signer has reviewed the terms of this Agreement
and has made, or caused to be made under his or her supervision, a review
in reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signer did not have
knowledge of the existence as at the date of such Officer's Certificate, of
any condition or event that constitutes an Default or Event of Default, or,
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action Company has taken, is taking
and proposes to take with respect thereto; and (b) a Compliance Certificate
(which may be delivered after the applicable Fiscal Quarter or Fiscal Year
end but prior to the date of delivery of such financial statements for
purposes of determining the Applicable Leverage Ratio) demonstrating in
reasonable detail compliance during and at the end of the
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applicable accounting periods with the restrictions contained in Section 7
(but only to the extent compliance with such restrictions is required to be
tested at the end of the applicable accounting period); provided, that
Company shall deliver to Administrative Agent a Compliance Certificate and
an Officer's Certificate upon and together with the delivery of a Pricing
Certificate;
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1
will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions had
no such change in accounting principles and policies been made, then (a)
together with the first delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, consolidated financial statements of Company and its
Subsidiaries for (y) the current Fiscal Year to the effective date of such
change and (z) the full Fiscal Year immediately preceding the Fiscal Year
in which such change is made, in each case prepared on a pro forma basis as
if such change had been in effect during such periods, and (b) together
with each delivery of financial statements pursuant to subdivision (i),
(ii), (iii) or (xiii) of this subsection 6.1 following such change, a
written statement of the chief accounting officer or chief financial
officer of Company setting forth the differences which would have resulted
if such financial statements had been prepared without giving effect to
such change, if reasonably requested by the Administrative Agent;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit has included a reading of the terms of this Agreement and the
other Loan Documents as they relate to the covenants set forth in
subsection 7.6 and accounting matters, and (b) stating whether, in
connection with their audit examination, any condition or event, insofar as
such condition or event relates to the covenants set forth in subsection
7.6 or accounting matters, that constitutes an Default or Event of Default
has come to their attention and, if such a condition or event has come to
their attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any failure
--------
to obtain knowledge of any such Default or Event of Default that would not
be disclosed in the course of their audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Company by a national independent certified public accountants
in connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such
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accountants, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders (but only in their capacity as security holders), (b) all
regular and periodic reports and all registration statements (other than on
Form S-8 or a similar form) and prospectuses, if any, filed by Company or
any of its Subsidiaries with any securities exchange or with the Securities
and Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made available
generally by Company or any of its Subsidiaries to the public concerning
material developments in the business of Company or any of its
Subsidiaries;
(ix) Events of Default, etc.: promptly upon any Responsible Officer
-----------------------
of Company obtaining knowledge (a) of any condition or event that
constitutes a Default or an Event of Default, or becoming aware that any
Lender has given any notice (other than to the Administrative Agent) or
taken any other action with respect to a claimed Default or Event of
Default, (b) that any Person has given any notice to Company or any of its
Subsidiaries or taken any other action with respect to a claimed default or
event or condition of the type referred to in subsection 8.2, or (c) of the
occurrence of any event or change that has caused or evidences or could be
reasonably expected to cause, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Default, Event of Default, default, event or condition, and what
action Company (or applicable Subsidiary) has taken, is taking and proposes
to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any Responsible
-------------------------------
Officer of Company obtaining knowledge of (X) the institution of, or
nonfrivolous threat of, any material action, suit, proceeding (whether
administrative, judicial or otherwise), Environmental Claim, governmental
investigation or arbitration against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries
(collectively, "Proceedings") not previously disclosed in writing by
-----------
Company to the Administrative Agent or (Y) any material development in any
Proceeding that, in any case:
(a) could reasonably be expected to have a Material Adverse
Effect; or
(b) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
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written notice thereof together with such other information as may be
reasonably available to Company to enable the Lenders and their counsel to
evaluate such matters;
(xi) ERISA Events: promptly upon Company becoming aware of the
------------
occurrence of any ERISA Event that would reasonably be expected to result
in a material liability of Company or any of its ERISA Affiliates, a
written notice specifying the nature thereof, what action Company or any of
its ERISA Affiliates has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all
-------------
written notices received by Company or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event which would reasonably
be expected to result in a material liability; and (b) such other documents
or governmental reports or filings relating to any Employee Benefit Plan as
the Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no
---------------
later than 45 days after the beginning of each Fiscal Year, a consolidated
plan and financial forecast for the next succeeding Fiscal Year, including
without limitation (a) forecasted consolidated balance sheet and forecasted
consolidated statements of income and consolidated statement of cash flows
of Company and its Subsidiaries for such Fiscal Year, together with a pro
---
forma Compliance Certificate for such Fiscal Year and an explanation of the
-----
assumptions on which such forecasts are based, and (b) such other
information and projections as the Administrative Agent may reasonably
request:
(xiv) Insurance: as soon as practicable and in any event by the last
---------
day of each Fiscal Year, a report in form and substance reasonably
satisfactory to the Administrative Agent outlining all material changes
made to insurance coverage maintained as of the date of such report by
Company and its Subsidiaries;
(xv) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to Company or any of Company's
Subsidiaries as from time to time may be reasonably requested by the
Administrative Agent or the Requisite Lenders.
23.2 Corporate Existence
-------------------
Except as otherwise permitted under subsection 7.7, Company will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to the
business of Company and its Subsidiaries (on a consolidated basis) or the Loan
Parties, taken as a whole; provided, however that neither Company nor any of its
-------- -------
Subsidiaries shall be required to preserve any such right or franchise if the
Board of Directors of Company or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of business of such
entity.
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23.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
material taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its income, businesses
or franchises before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable which, if unpaid, might
become a Lien (other than a Permitted Encumbrance) upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided that no such tax, charge or claim need be paid if
--------
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company and Subsidiaries of Company).
23.4 Maintenance of Properties; Insurance.
------------------------------------
Company will, and will cause each of its Subsidiaries to, maintain or cause
to be maintained in good repair, working order and condition, ordinary wear and
tear and damage by casualty excepted, all material properties used or useful in
the business of Company and its Subsidiaries and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and businesses of its Subsidiaries against loss or damage of the
kinds and with respect to liability customarily carried or maintained under
similar circumstances by corporations of established reputation engaged in
similar businesses. Each such policy of casualty insurance covering damage to
or loss of property shall name the Collateral Agent for the benefit of the
Lenders as additional insured and as the loss payee thereunder for all losses,
subject to application of proceeds as required by subsection 2.4B(iii)(d), each
such policy of liability insurance coverage shall name the Collateral Agent for
the benefit of the Lenders as additional insured, and all such policies of
insurance shall provide for at least thirty (30) days' prior written notice to
the Collateral Agent of any modification or cancellation of such policy.
23.5 Inspection; Lender Meeting.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, permit the
Administrative Agent and any authorized representatives designated by any Lender
to visit and inspect any of the properties of Company or any of Company's
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants provided Company may be present at these discussions upon reasonable
advance notice and at
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<PAGE>
such reasonable times during normal business hours and as often as may be
reasonably requested, provided, further, that each Lender shall coordinate with
--------
the Administrative Agent the frequency and timing of any such visits,
inspections and discussions so as to reasonably minimize the burden imposed on
Company and its Subsidiaries; provided still further that, unless an Event of
--------
Default has occurred, no single Lender shall be entitled to more than one
inspection during any twelve month period. Without in any way limiting the
foregoing, Company will, upon the reasonable request of the Administrative
Agent, participate in a meeting of the Administrative Agent and the Lenders once
during each Fiscal Year to be held at Company's corporate offices (or such other
location as may be agreed to by Company and the Administrative Agent) at such
time as may be agreed to by Company and the Administrative Agent.
23.6 Compliance with Laws, etc.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which, individually or in the
aggregate with other non-compliances, could reasonably be expected to cause a
Material Adverse Effect.
23.7 Environmental Disclosure and Inspection.
---------------------------------------
A. Company agrees that the Administrative Agent may retain, at Company's
expense, an independent professional consultant reasonably acceptable to Company
to review any report relating to Hazardous Materials prepared by or for Company
and to conduct its own investigation (reasonable in scope under the
circumstances) of any Facility currently owned, leased, operated or used by
Company or any of its Subsidiaries, if (x) a Default or an Event of Default
related to environmental matters shall have occurred and be continuing, or (y)
the Administrative Agent reasonably believes that a violation of an
Environmental Law on or around such Facility has occurred or is likely to occur,
which could, in either such case, reasonably be expected to result in a Material
Adverse Effect. In the event that the conditions specified in (x) or (y) above
exist, Company agrees to use commercially reasonable efforts to obtain
permission for the Administrative Agent's professional consultant to conduct its
own investigation of any such Facility previously owned, leased, operated or
used by Company or any of its Subsidiaries. In the event that the conditions
specified in (x) or (y) above exist, Company shall use its commercially
reasonable efforts to obtain for the Administrative Agent and its agents,
employees, consultants and contractors the right, upon reasonable notice to
Company, to enter into or on to the Facilities currently owned, leased, operated
or used by Company or any of its Subsidiaries to perform such tests on such
property as are reasonably necessary to conduct such a review and/or
investigation. Any such investigation of any Facility shall be conducted, unless
otherwise agreed to by Company and the Administrative Agent, during normal
business hours, shall be conducted so as not to interfere with the ongoing
operations at any such Facility or to cause any damage or loss to any property
at such Facility. Company and the Administrative Agent hereby acknowledge and
agree that any report of any investigation conducted at the request of the
Administrative Agent pursuant to this subsection 6.7A will be obtained and shall
be used by the Administrative Agent
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and the Lenders for the purposes of the Lenders' internal credit decisions, to
monitor and police the Loans and to protect the Lenders' security interests, if
any, created by the Loan Documents. The Administrative Agent agrees, upon
request by Company, to deliver a copy of any such report to Company with the
understanding that Company acknowledges and agrees that (i) consistent with the
terms of subsection 10.3 hereof, it will indemnify and hold harmless the
Administrative Agent and each Lender from any costs, losses or liabilities
relating to Company's use of or reliance on such report, (ii) neither Agent nor
any Lender makes any representation or warranty with respect to such report, and
(iii) by delivering such report to Company, neither the Administrative Agent nor
any Lender is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. Company shall promptly notify the Administrative Agent of (i) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Liability that could have a
Material Adverse Effect or that could reasonably be expected to have a material
adverse effect on any Governmental Authorization required under Environmental
Laws for the operations of Company or any of its Subsidiaries and (ii) any
proposed action to be taken by Company or any of its Subsidiaries to modify
current operations in a manner that could reasonably be expected to subject
Company or any of its Subsidiaries to material additional obligations under
Environmental Laws where such obligations would reasonably be expected to have
a Material Adverse Effect.
C. Company shall, at its own expense, provide copies of such documents or
information as the Administrative Agent may reasonably request in relation to
any matters disclosed pursuant to this subsection 6.7.
23.8 Company's Remedial Action Regarding Hazardous Materials.
--------------------------------------------------------
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, handling, storage, use, disposal, transportation or Release or
threatened Release of any Hazardous Materials on, under or affecting any
Facility in order to comply with all applicable Environmental Laws and
Governmental Authorizations unless the failure to so comply could not reasonably
be expected to have a Material Adverse Effect. In the event Company or any of
its Subsidiaries undertakes any Cleanup action with respect to the presence,
Release or threatened Release of any Hazardous Materials on or affecting any
Facility, Company or such Subsidiary shall conduct and complete such Cleanup
action in material compliance with all applicable Environmental Laws where
failure to do so would reasonably be expected to have a Material Adverse Effect.
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<PAGE>
23.9 Execution of Guaranty and Collateral Documents by Future Subsidiaries.
---------------------------------------------------------------------
In the event that any Person becomes a Subsidiary of Company (including,
without limitation, any Subsidiary created in accordance with subsection
7.7(vi)), Company will promptly notify the Administrative Agent of that fact and
cause such Subsidiary to execute and deliver to the Administrative Agent and the
Collateral Agent a counterpart of the Subsidiary Guaranty and the Pledge
Agreement and the Security Agreement, as the case may be, and to take all such
further action and execute all such further documents and instruments as may be
required to grant and perfect in favor of the Collateral Agent, for the benefit
of the Lenders, a First Priority Lien in all (subject to exceptions for assets
in which a security interest cannot be granted) of the real (to the extent
required pursuant to subsection 6.12C), mixed and personal property assets of
such Subsidiary; provided, that a Foreign Subsidiary shall not be required to
--------
enter into any Loan Document if either (x) the grant by such Foreign Subsidiary
of a Lien on all of its assets as security for the Obligations or (y) the
guaranteeing by such Foreign Subsidiary of the Obligations, or both, would in
the good faith reasonable judgment of Company, result in adverse tax
consequences to Company. In addition, Company shall pledge (if it is the direct
owner of Capital Stock of such Subsidiary) or shall cause each of its applicable
Subsidiaries (other than a Foreign Subsidiary) to pledge (if any of such other
Subsidiaries is the direct owner of Capital Stock of such Subsidiary, each such
owner, whether Company or any of its other Subsidiaries, the "Pledging Parent")
---------------
all of the Capital Stock of such Subsidiary (or 65% of such Capital Stock if
such Subsidiary is a first-tier Foreign Subsidiary) to the Collateral Agent
pursuant to the applicable Collateral Documents and to take all such further
action and execute all such further documents and instruments as may be
reasonably required to grant and perfect in favor of the Collateral Agent, for
the benefit of the Lenders, a First Priority security interest in such Capital
Stock. Company shall deliver to the Administrative Agent, together with such
Loan Documents, in the case of each such Subsidiary that is required to be a
party to any Loan Document: (i) (a) certified copies of such Subsidiary's
Organizational Certificate together, if applicable, with a good standing
certificate from the Secretary of State of the jurisdiction of its
incorporation, formation or organization, as applicable, each to be dated a
recent date prior to their delivery to the Administrative Agent, (b) a copy of
such Subsidiary's Organizational Documents, certified by its secretary or an
assistant corporate secretary (or Person holding an equivalent title or having
equivalent duties and responsibilities) as of a recent date prior to their
delivery to the Administrative Agent, (c) a certificate executed by the
secretary or an assistant secretary of such Subsidiary as to (x) the incumbency
and signatures of the officers of such Subsidiary executing such Guaranty, the
Collateral Documents and the other Loan Documents to which such Subsidiary is a
party and (y) the fact that the attached Organizational Authorizations of such
Subsidiary authorizing the execution, delivery and performance of such Guaranty,
such Collateral Documents and such other Loan Documents are in full force and
effect and have not been modified or rescinded, and (ii) to the extent
reasonably requested by the Administrative Agent, an opinion of counsel to such
Subsidiary, that is reasonably satisfactory to the Administrative Agent and its
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of such
Guaranty, the Collateral Documents and any other Loan Documents to which it is a
party and (c) the enforceability of
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<PAGE>
such Guaranty and such Collateral Documents against such Subsidiary, (d) the
validity and perfection of the security interests granted by such Subsidiary
(and by the Pledging Parent of such Subsidiary in respect of the Capital Stock
of such Subsidiary) in favor of the Collateral Agent pursuant to the Collateral
Documents, and (e) such other matters as any Agent may reasonably request, all
of the foregoing to be reasonably satisfactory in form and substance to the
Administrative Agent and its counsel.
23.10 Interest Rate Protection.
-------------------------
Commencing three hundred sixty five (365) days after the Closing Date,
Company shall maintain in effect one or more Interest Rate Agreements in form
and substance reasonably satisfactory to the Administrative Agent to the extent
necessary so that, for a period of at least two (2) years, interest on the
portion of the outstanding principal amount of Term Loans equal to at least 40%
of the aggregate outstanding principal amount of the Term Loans is covered by
such Interest Rate Agreements.
23.11 Further Assurances.
------------------
At any time or from time to time upon the reasonable request of the
Administrative Agent or the Collateral Agent, Company will, at its expense,
promptly execute, acknowledge and deliver such further documents and do such
other acts and things as the Administrative Agent or the Collateral Agent may
reasonably request in order to effect fully the purposes of the Loan Documents
and to provide for payment of the Obligations in accordance with the terms of
this Agreement, the Notes and the other Loan Documents. In furtherance and not
in limitation of the foregoing, Company shall take, and cause each of its
Domestic Subsidiaries to take, such actions as the Administrative Agent or the
Collateral Agent may reasonably request from time to time (including, without
limitation, the execution and delivery of guaranties, security agreements,
pledge agreements, mortgages, deeds of trust, landlord's consents and estoppels,
stock powers, financing statements and other documents, the filing or recording
of any of the foregoing, title insurance with respect to any of the foregoing
that relates to an interest in real property, and the delivery of stock
certificates and other collateral with respect to which perfection is obtained
by possession) to ensure that the Obligations are guarantied by the Guarantors
and are secured by substantially all of the assets of Company and its Domestic
Subsidiaries and all of the outstanding Capital Stock of the Domestic
Subsidiaries and 65% of the Capital Stock of the first-tier Foreign Subsidiaries
of Company.
23.12 Conforming Leasehold Interests; Matters Relating to Additional and
------------------------------------------------------------------
Closing Real Property Collateral.
--------------------------------
A. Notice of Property Acquisition. As promptly as practicable after the
acquisition by Company or any of its Subsidiaries (other than Foreign
Subsidiaries) of any interest in real property (whether fee or leased) with
respect to which Company or its Subsidiaries is required to
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<PAGE>
deliver an Additional Mortgage, as applicable, Company shall deliver written
notice to the Administrative Agent and the Collateral Agent of such acquisition.
B. Conforming Leasehold Interests. If Company or any of its Subsidiaries
(other than Foreign Subsidiaries) acquires any Leasehold Property with respect
to which Company or any of its Subsidiaries is required to deliver an Additional
Mortgage, Company shall promptly notify the Administrative Agent and the
Collateral Agent and Company shall, or shall cause such Subsidiary to, use its
commercially reasonable efforts to cause such Leasehold Property to be a
Conforming Leasehold Interest.
C. Additional Mortgages, Etc. From and after the Closing Date, in the
event that (i) Company or any of its Subsidiaries (other than Foreign
Subsidiaries which are not required to execute a Subsidiary Guaranty) acquires
any fee interest in real property, (ii) Company or any of its Subsidiaries
(other than Foreign Subsidiaries) acquires any leasehold interest in any real
property (other than any leased real property (a) with respect to which the
aggregate payments under the term of the lease are less than $1,000,000 per
annum, (b) that does not contain any financial records not contained elsewhere,
(c) that does not have any personal property located thereon with an aggregate
value in excess of $1,000,000 and (d) that is not otherwise material to the
operation of the business of Company or any of its Subsidiaries (each such
property meeting all of the foregoing requirements being an "Excluded Leased
---------------
Asset"), or (iii) at the time any Person becomes a Subsidiary Guarantor, such
- -----
Person owns or holds any fee interest in real property or any leasehold interest
in real property (other than an Excluded Leased Asset) (any such real property
asset described in the foregoing clauses (i), (ii) or (iii) being an "Additional
----------
Mortgaged Property"), Company or such Subsidiary shall deliver to the Collateral
- ------------------
Agent, as soon as practicable after such Person acquires such Additional
Mortgaged Property the following:
(i) Additional Mortgage and Assignment of Rents and Leases. A fully
------------------------------------------------------
executed and notarized Mortgage (an "Additional Mortgage"), fully executed
-------------------
and notarized Assignment of Rents and Leases and fully executed Uniform
Commercial Code fixture filings and other financing statements, each in
proper form for recording in all appropriate places in all applicable
jurisdictions, encumbering the interest of such Loan Party in such
Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) Upon the reasonable request of the
-------------------
Administrative Agent, an opinion of counsel to such Loan Party, in form and
substance reasonably satisfactory to the Collateral Agent and its counsel,
as to the due authorization, execution and delivery by such Loan Party of
such Additional Mortgage and additional Assignment of Rents and Leases and
fixture filings and other financing statements and such other matters as
the Administrative Agent may reasonably request, and (b) if required by the
Administrative Agent, an opinion of counsel (which counsel shall be
reasonably satisfactory to the Administrative Agent) in the state in which
such Additional Mortgaged Property is located with respect to the
enforceability of the Additional
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<PAGE>
Mortgage and Assignment of Rent and Leases to be recorded in such state and
such other matters (including without limitation any matters governed by
the laws of such state regarding personal property security interests in
respect of any Collateral) as the Collateral Agent may reasonably request,
in each case in form and substance reasonably satisfactory to the
Administrative Agent;
(iii) Landlord Consent and Estoppel. In the case of any Additional
-----------------------------
Mortgaged Property consisting of a Leasehold Property, Company will use
commercially reasonable efforts to obtain a Landlord Consent and Estoppel;
(iv) Title Insurance. (a) An ALTA standard form mortgagee title
---------------
insurance policy or an unconditional commitment therefor (an "Additional
----------
Mortgage Policy") issued by a title company with respect to such Additional
---------------
Mortgaged Property, in an amount reasonably satisfactory to the Collateral
Agent, insuring fee simple title to, or a valid leasehold interest in, such
Additional Mortgaged Property vested in such Loan Party and insuring the
Collateral Agent that such Additional Mortgage creates a valid and
enforceable First Priority mortgage Lien on such Additional Mortgaged
Property, subject (unless a survey is delivered pursuant to clause (vi)
below) only to a standard survey exception, which Additional Mortgage
Policy (1) shall include an endorsement for mechanics' liens, for future
advances under this Agreement and for any other matters reasonably
requested by the Collateral Agent to the extent available in the particular
jurisdiction and (2) shall provide for affirmative insurance and such
reinsurance as the Collateral Agent may reasonably request, all of the
foregoing in form and substance reasonably satisfactory to the Collateral
Agent; and (b) evidence satisfactory to the Administrative Agent that such
Loan Party has (i) delivered to a title company all certificates and
affidavits required by a title company in connection with the issuance of
the Additional Mortgage Policy and (ii) paid to a title company or to the
appropriate governmental authorities all expenses and premiums of a title
company in connection with the issuance of the Additional Mortgage Policy
and all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Additional
Mortgage in the appropriate real estate records, provided, however that the
-------- -------
Administrative Agent shall allow for such reasonable revisions to the
applicable Additional Mortgage and shall take such other steps as are
reasonable and customary to minimize recording, mortgage recording, stamp
documentary and intangible taxes;
(v) Surveys and Appraisals. A survey and appraisal with
----------------------
respect to such Additional Mortgaged Property, prepared by a Person and in
form and substance reasonably satisfactory to the Collateral Agent.
(vi) Copies of Documents Relating to Title Exceptions. Copies of
------------------------------------------------
all recorded documents listed as exceptions to title or otherwise referred
to in the Additional Mortgage Policy or title report delivered pursuant to
clause (iv) or (v) above;
-106-
<PAGE>
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
-------------------------------------------
which may be in the form of a letter from an insurance broker
or a municipal engineer or a surveyor's note on a survey report,
as to (1) whether such Additional Mortgaged Property is a Flood Hazard
Property and (2) if so, whether the community in which such Flood Hazard
Property is located is participating in the National Flood Insurance
Program, (b) if such Additional Mortgaged Property is a Flood Hazard
Property, such Loan Party's written acknowledgment of receipt of written
notification from the Collateral Agent (1) that such Additional Mortgaged
Property is a Flood Hazard Property and (2) as to whether the community
in which such Flood Hazard Property is located is participating in the
National Flood Insurance Program, and (c) in the event such Additional
Mortgaged Property is a Flood Hazard Property that is located in a
community that participates in the National Flood Insurance Program,
evidence that Company has obtained flood insurance in respect of such
Flood Hazard Property to the extent required under the applicable
regulations of the Board of Governors of the Federal Reserve System; and
(vii) Environmental Audit. If required by the Administration Agent,
-------------------
reports or other information, in form, scope and substance satisfactory to
the Administrative Agent in its reasonable discretion and prepared by
environmental consultants satisfactory to the Administrative Agent,
concerning any material or potentially material environmental hazards or
liabilities to which Company or any of its Subsidiaries may be subject with
respect to such Additional Mortgaged Property;
provided, that notwithstanding anything to the contrary contained in this
- --------
subsection 6.12C, neither Company nor any of its Subsidiaries shall be required
to deliver any of the items (other than an Additional Mortgage and Additional
Mortgage Policy) set forth in this subsection 6.12C with respect to (x) any
property to the extent that the Administrative Agent or the Collateral Agent has
waived delivery of such items (which waiver the Administrative Agent or
Collateral Agent may grant or withhold in its reasonable discretion), and (y)
any property owned or leased by any Foreign Subsidiary of Company that is not
required to be a Foreign Subsidiary Guarantor.
D. Landlord Consents and Estoppel. Company shall, at its sole cost and
expense, cause to be delivered to the Collateral Agent to the extent reasonably
requested from time to time by the Administrative Agent or the Collateral Agent
in respect of any Leasehold Property of any Loan Party noted on Schedule 5.5B as
requiring a Landlord Consent and Estoppel, any instrument, agreement or other
document (including, without limitation, a Mortgage) described in subsection
6.12C in respect of Additional Mortgaged Properties, but only to the extent
obtainable with respect to each such Leasehold Property after using
commercially reasonable efforts, all such documents and items to be in form and
substance reasonably satisfactory to the Administrative Agent and the Collateral
Agent. In addition, Company shall (a) cause to be made, executed and delivered
such adjustments, modifications and replacements to any documents delivered
pursuant to this subsection 6.12D or subsection 4.1F that may from time to time
be reasonably requested by either such Agent, and (b) cause all of the
Collateral Agent's reasonable costs and expenses (including attorneys' fees)
related to such deliveries, and title insurance costs,
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<PAGE>
expenses and premiums, recording fees, mortgage recording and similar taxes, and
all related reasonable fees, costs and expenses to be paid promptly following
presentation of invoices (or other similar evidence of the amount due) with
respect to the deliveries under the preceding clause (iii), and on demand with
respect to deliveries under the other provisions of this subsection 6.12D.
23.13 Year 2000 Matters.
-----------------
Company shall (i) promptly advise the Administrative Agent of any material
(A) disruption or delay in the implementation of the Plan of Correction, as the
same may be updated from time to time; and (ii) periodically report to the
Administrative Agent, in such form as the Administrative Agent may reasonably
request but in no event none frequently than one per calendar quarter, on (a)
the progress of Company and its Subsidiaries in implementing the Plan of
Correction, (b) the budget for, and actual financial performance with respect
to, implementation of the Plan of Correction and (c) the assessment of Company,
any senior manager of Company or any Subsidiary of Company, or any consultant of
the adequacy of the Plan of Correction or the related implementation budget.
SECTION 24.
NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations (other than indemnification obligations not due and
payable) and the cancellation or expiration of all Letters of Credit, unless the
Requisite Lenders shall otherwise give prior written consent, Company shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
24.1 Indebtedness.
------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness
except:
(i) Each of the Loan Parties may become and remain liable with
respect to its respective Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness evidenced by, and with respect to guaranties of,
Subordinated Debt;
(iii) Company and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 annexed hereto, and
------------
any refinancing, modification replacement or renewal thereof;
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<PAGE>
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(v) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness under Capital Leases and other Indebtedness secured
by Liens permitted under subsection 7.2A(iii); provided, that the aggregate
--------
amount of all Indebtedness outstanding under this clause (v) at any time
shall not exceed $5,000,000;
(vi) Company may become and remain liable with respect to
Indebtedness owed to (on an intercompany basis) any of its Domestic
Subsidiaries, and any Domestic Subsidiary may become and remain liable with
respect to Indebtedness to (on an intercompany basis) Company or any other
Domestic Subsidiary, provided that, in each case, (a) all intercompany
--------
Indebtedness shall be evidenced by promissory notes which shall have been
pledged to the Collateral Agent pursuant to the Collateral Documents, (b)
all intercompany Indebtedness owed by Company to any of its respective
Domestic Subsidiaries shall be unsecured and subordinated in right of
payment to the payment in full of the Obligations pursuant to the terms of
the applicable promissory notes or an intercompany subordination agreement
that in any such case, are reasonably satisfactory to the Administrative
Agent, and (c) any payment by any Domestic Subsidiary of Company under any
Guaranty shall result in a pro tanto reduction of the amount of any
--- -----
intercompany Indebtedness owed by such Domestic Subsidiary to Company or to
any of its Domestic Subsidiaries for whose benefit such payment is made;
(vii) Company and its Subsidiaries may become and remain liable with
respect to Permitted Seller Paper; provided that any cash payments of
--------
principal, interest or other amounts with respect thereto required to be
made prior to the payment in full of the Obligations shall not exceed the
difference between (a) $15,000,000 and (b) the aggregate amount of
Indebtedness outstanding pursuant to subsection 7.1(xv); provided further,
-------- -------
that no more than $1,000,000 aggregate principal amount of the Indebtedness
permitted to be incurred under this clause (vii) shall be incurred by
Subsidiaries of Company;
(viii) Any Foreign Subsidiary may become and remain liable with
respect to Indebtedness to Company or to any of the Subsidiary Guarantors
so long as the aggregate principal amount of all such Indebtedness
outstanding at any time, plus the aggregate amount of Investments of the
----
type permitted under subsection 7.3(xiv), does not exceed $15,000,000,
plus the amount of intercompany Indebtedness owed by Foreign Subsidiaries
to Company or any of its Domestic Subsidiaries as of the Closing Date as
listed on Schedule 7.1 annexed hereto; provided that, all such
------------ -------- ----
intercompany Indebtedness shall be evidenced by promissory notes which
shall have been pledged to the Collateral Agent pursuant to the
Collateral Documents;
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<PAGE>
(ix) Company and any wholly-owned Subsidiary of Company may become
and remain liable with respect to Indebtedness to any wholly-owned Foreign
Subsidiary; provided, that (1) all intercompany Indebtedness shall be
--------
evidenced by promissory notes, and (2) all such intercompany Indebtedness
owed by Company or any Subsidiary Guarantor to any wholly-owned Foreign
Subsidiary shall be subordinated in right of payment to the payment in full
of the Obligations pursuant to the terms of the applicable promissory notes
or an intercompany subordination agreement;
(x) Company may become and remain liable with respect to
Indebtedness owed to former members of management of Company incurred by
Company in connection with the repurchase of the capital stock of Company
held by such members of management; provided that after giving effect to
--------
each such incurrence of Indebtedness Company shall be in Pro Forma
Compliance with the provisions of subsection 7.6;
(xi) Foreign Subsidiaries of Company may become and remain liable
with respect to Indebtedness under lines of credit extended to any such
Foreign Subsidiary by Persons other than Company or any or its
Subsidiaries, the proceeds of which Indebtedness are used for such Foreign
Subsidiary's working capital purposes; provided that the aggregate
--------
principal amount of all such Indebtedness outstanding at any time for all
such Foreign Subsidiaries shall not exceed $7,500,000;
(xii) Any Subsidiary of Company acquired pursuant to a Permitted
Acquisition may become and remain liable with respect to Indebtedness
existing at the time of consummation of the Permitted Acquisition; provided
--------
that (a) such Indebtedness was not incurred in connection with or in
anticipation of such Permitted Acquisition, (b) such Indebtedness does not
constitute debt for borrowed money (other than debt for borrowed money
incurred in connection with industrial revenue or industrial development
bond or similar financings), it being understood and agreed that Capital
Lease obligations shall not constitute debt for borrowed money for purposes
of this clause (xii), and (c) at the time of such Permitted Acquisition
such Indebtedness does not exceed 50% of the total purchase price paid
(including, for purposes of determining the total purchase price paid,
Indebtedness assumed in connection with such Permitted Acquisition) with
respect to the assets acquired in the related Permitted Acquisition;
(xiii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness consisting of the financing in the ordinary course
of business of insurance premiums with respect to coverage required to be
maintained under subsection 6.4; and
(xiv) Subsidiaries of Company may become and remain liable with
respect to Indebtedness consisting of a converted equity Investment by
Company or another Subsidiary of Company in such Subsidiaries, provided
--------
that the underlying equity Investment was permitted hereunder at the time
of such conversion; and
-110-
<PAGE>
(xv) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed at any time outstanding the difference of (a) $15,000,000, and (b)
the aggregate amount of cash payments made with respect to Permitted Seller
Paper pursuant to subsection 7.1(vii) provided, that no more than
--------
$1,000,000 in aggregate principal amount of the Indebtedness permitted to
be incurred under this clause (xv) may be incurred by Subsidiaries of
Company.
24.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens described in Schedule 7.2A annexed hereto;
-------------
(iii) Purchase money security interests (including mortgages,
conditional sales, Capital Leases and any other title retention or deferred
purchase devices) in real or tangible personal property of Company or any
of its Subsidiaries acquired after the Closing Date and existing or created
at the time of acquisition thereof or within one hundred eighty (180) days
thereafter, and the renewal, extension and refunding of any such security
interest in an amount not exceeding the amount thereof remaining unpaid
immediately prior to such renewal, extension or refunding; provided, that
--------
the Indebtedness secured by such Lien is permitted by subsection 7.1(v);
provided, further, that such Liens do not at any time (including, without
-------- -------
limitation, in connection with any renewal, extension and refunding) cover
or encumber any assets or property other than the assets or property
financed by such Indebtedness;
(iv) Liens on the assets of any Foreign Subsidiary that secure only
the Indebtedness permitted pursuant to Section 7.1(xi);
(v) Liens on assets of Company and its Subsidiaries not otherwise
permitted under this subsection 7.2A, securing obligations in an aggregate
amount not to exceed $5,000,000 at any time outstanding;
-111-
<PAGE>
(vi) Liens securing any Indebtedness permitted pursuant to Section
7.1(xii); provided that such Liens only encumber the assets acquired in the
--------
related Permitted Acquisition and; provided further that such Liens were
-------- -------
not granted in contemplation of the related Permitted Acquisition; and
(vii) Liens in favor of the Collateral Agent granted pursuant to the
Collateral Documents or granted in favor of any Agent or Lender pursuant to
subsection 10.4 hereof.
B. No Further Negative Pledges. Except with respect to specific property
encumbered by a Lien permitted under this Agreement or to secure payment of
particular Indebtedness or to be sold pursuant to an executed agreement with
respect to an Asset Sale or the sale of all or substantially all of the stock
(or assets) of a Subsidiary permitted under this Agreement, neither Company nor
any of its Subsidiaries shall enter into any agreement (other than any documents
of a type described in subdivisions (c) through (g) of subsection 7.2C, the Loan
Documents and the Subordinated Debt Documents) prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
C. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as otherwise provided herein, Company will not, and will
not permit any of its Subsidiaries to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance, limitation or restriction
of any kind on the ability of any such Subsidiary to (i) pay dividends or make
any other distributions on any of such Subsidiary's Capital Stock owned by
Company or any other Subsidiary of Company, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to Company or any other Subsidiary of
Company, (iii) make loans or advances to Company or any other Subsidiary of
Company, or (iv) transfer any of its property or assets to Company or any other
Subsidiary of Company, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) this Agreement and the other Loan
Documents, (c) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of Company or any of its Subsidiaries, (d)
customary provisions restricting assignment of any licensing agreement entered
into by Company or any of its Subsidiaries in the ordinary course of business,
(e) customary provisions restricting the transfer of assets subject to Liens
permitted under subsection 7.2A(iii), (f) joint ventures entered into pursuant
to subsection 7.3, (g) any document or instrument evidencing Foreign Subsidiary
working capital Indebtedness permitted under subsection 7.1(xi) so long as such
encumbrance or restriction only applies to the Foreign Subsidiary of Company
incurring such Indebtedness, and (h) the Subordinated Debt Documents.
24.3 Investments; Joint Ventures.
---------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment except:
-112-
<PAGE>
(i) (a) Company and its Subsidiaries may (x) continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company, and (y) make and own additional Investments in any Subsidiary
Guarantor;
(ii) Company and its Subsidiaries may make and own intercompany
loans to the extent permitted by subsections 7.1(vi), 7.1(viii) and
7.1(ix);
(iii) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(iv) Company and its Subsidiaries may make and own Consolidated
Capital Expenditures permitted by subsection 7.6D;
(v) Company and its Subsidiaries may make and own Investments
consisting of notes received in connection with any Asset Sale permitted
under subsection 7.7(iv);
(vi) Company and its Subsidiaries may make loans to officers,
employees, directors, executives or consultants of Company and its
Subsidiaries (a) in the ordinary course of business for travel, moving,
entertainment or similar expenses, or (b) otherwise in an aggregate amount
not to exceed $1,000,000 outstanding at any time;
(vii) Company and its Subsidiaries may make and own Permitted
Acquisitions;
(viii) Company and its Subsidiaries may continue to own the
Investments described in Schedule 7.3 annexed hereto;
------------
(ix) Company and its Subsidiaries may make loans and advances to
employees, officers, executives or consultants to Company and its
Subsidiaries in the ordinary course of business of Company and its
Subsidiaries as presently conducted for the purpose of purchasing capital
stock of Company so long as the proceeds of such loans or advances are used
in their entirety to purchase such capital stock;
(x) Company and its Subsidiaries may make and own Investments in
Subsidiaries pursuant to Permitted Acquisitions under subsection 7.7(v) and
other Investments owned by entities acquired pursuant to such Permitted
Acquisitions to the extent owned as at the time of consummation of such
Permitted Acquisitions;
(xi) Company and its Subsidiaries may make and own Investments in
wholly-owned Subsidiaries of Company consisting of intercompany
Indebtedness of such Subsidiaries converted to equity Investments, provided
--------
that the underlying intercompany Indebtedness was permitted hereunder at
the time of such conversion;
-113-
<PAGE>
(xii) Company and its Subsidiaries may make and own Investments not
otherwise permitted under this subsection 7.3 in an aggregate amount not in
excess of $5,000,000, plus, with respect to Investments made by Company and
----
its Domestic Subsidiaries only, the Excess Proceeds Amount; and
(xiii) Company and its Subsidiaries may make and own Investments in
Foreign Subsidiaries of Company; provided that the sum of (y) aggregate
--------
amount of all such Investments, plus (z) the aggregate outstanding
----
principal amount of Indebtedness of the type permitted under subsection
7.1(viii), shall not exceed the sum of (a) $15,000,000 plus, (b) an amount
----
equal to the amount of intercompany Indebtedness owed by Foreign
Subsidiaries to Company or any of its Domestic Subsidiaries as of the
Closing Date and listed on Schedule 7.1 annexed hereto.
------------
24.4 Contingent Obligations.
----------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of Letters of Credit; the
Subsidiary Guarantors may become and remain liable with respect to
Contingent Obligations arising under the Guaranties;
(ii) Company and the Subsidiary Guarantors may become and remain
liable with respect to Contingent Obligations arising under their
guaranties of the Subordinated Debt as are required under the Subordinated
Debt Documents;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations of any such Person incurred in
connection with Asset Sales or other sales of assets;
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business of the obligations of suppliers, landlords, customers,
franchisees, workers' compensation providers and licensees of Company and
its Subsidiaries;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
hereto and any modifications, extensions or renewal of such Contingent
Obligations;
(vi) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided, that the maximum
--------
aggregate liability,
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<PAGE>
contingent or otherwise, of Company and its Subsidiaries in respect of all
such Contingent Obligations shall at no time exceed $5,000,000; provided
--------
further, that no more than $1,000,000 of the Contingent Obligations
-------
permitted to be incurred under this clause (vi) may be incurred by
Subsidiaries of Company;
(vii) Company and its Subsidiaries may become and remain liable with
respect to Hedge Agreements entered into pursuant to this Agreement or
otherwise in the ordinary course of business, and not for speculative
purposes;
(viii) Company's Foreign Subsidiaries may become and remain liable
with respect to guaranties of Indebtedness permitted to be incurred by
another Foreign Subsidiary; and
(ix) Company and its Subsidiaries may become and remain liable with
respect to guaranties of Indebtedness assumed in connection with a
Permitted Acquisition pursuant to subsection 7.1(xii), provided, that, such
--------
guaranties were existing at the time of consummation of the Permitted
Acquisition and not incurred in connection with, or in an anticipation of,
such Permitted Acquisition.
24.5 Restricted Payments.
-------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Payment; provided that Company and its Subsidiaries may make the
--------
following the Restricted Payments:
(i) any Subsidiary of Company may pay dividends to Company or a
Subsidiary of Company;
(ii) Company may make regularly scheduled payments (but not
prepayments) of principal and interest in respect of the Subordinated Debt
in accordance with the terms of, and subject to the subordination provision
contained in, the Subordinated Debt Documents;
(iii) Company or any Subsidiary may make regularly scheduled
principal and interest payments in respect of Permitted Seller Paper to the
extent permitted under subsection 7.1(vii) in accordance with the terms of,
and subject to the subordination provisions contained in, such Permitted
Seller Paper;
(iv) Company may make cash Restricted Payments (including cash
payments made on Indebtedness incurred pursuant to subsection 7.1(x)) in an
aggregate amount not to exceed $2,500,000 in any Fiscal Year, plus an
----
amount equal to any cash Restricted Payments permitted to be made during
one or more preceding Fiscal Years under this clause (iv) but not made
during such preceding Fiscal Year(s) in an aggregate amount not
-115-
<PAGE>
in excess of $5,000,000, plus an additional amount, if any, otherwise
----
reasonably acceptable to the Administrative Agent, to the extent necessary
to make repurchases of Securities (and options or warrants to purchase such
Securities) of Company from employees, officers or directors (a) upon
termination (including by reason of death, disability or retirement) of
such employees officers or directors or (b) pursuant to a contractual
obligation of Company or any of its Subsidiaries;
(v) Company may make Restricted Payments in connection with
repurchases of equity Securities, including the Common Stock, deemed to
occur upon the exercise of stock options if such Securities represent a
portion of the exercise price thereof;
(vi) Company may make Restricted Payments contemplated by the
Recapitalization Transactions; and
(vii) Company may make Restricted Payments in the form of
Indebtedness incurred pursuant to subsection 7.1(x) and payments made
pursuant to subdivisions (iii) and (vii) of subsection 7.9.
24.6 Financial Covenants.
-------------------
A. Minimum Interest Coverage Ratio. The ratio (the "Interest Coverage
-----------------
Ratio") of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
- -----
Expense payable in cash (excluding, to the extent otherwise included in
Consolidated Interest Expense, (i) fees paid to the Administrative Agent after
the Closing Date; (ii) cash payments made under consulting agreements; and (iii)
cash payments made under Hedge Agreements or Interest Rate Agreements) for any
four-Fiscal Quarter period ending during or at the end of any of the periods set
forth below (each applicable four-Fiscal Quarter period being a "Calculation
-----------
Period") shall not be less than the correlative ratio indicated below:
- ------
<TABLE>
<CAPTION>
Period During Which Minimum Interest
Calculation Period Ends Coverage Ratio
========================================================================
<S> <C>
First Fiscal Quarter of Fiscal Year 2000 through the 1.70:1.00
Third Fiscal Quarter of Fiscal Year 2000
- ------------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2000 through 1.80:1.00
Second Fiscal Quarter of Fiscal Year 2001
- ------------------------------------------------------------------------
Third Fiscal Quarter of Fiscal Year 2001 1.90:1.00
- ------------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2001 through 2.00:1.00
the Third Fiscal Quarter of Fiscal Year 2002
- ------------------------------------------------------------------------
</TABLE>
-116-
<PAGE>
<TABLE>
<CAPTION>
Period During Which Minimum Interest
Calculation Period Ends Coverage Ratio
========================================================================
<S> <C>
Fourth Fiscal Quarter of Fiscal Year 2002 through 2.10:1.00
the First Fiscal Quarter of Fiscal Year 2003
- ------------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2003 through 2.20:1.00
the Third Fiscal Quarter of Fiscal Year 2003
- ------------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2003 through 2.30:1.00
the Second Fiscal Quarter of Fiscal Year 2004
- ------------------------------------------------------------------------
Third Fiscal Quarter of Fiscal Year 2004 through 2.40:1.00
First Fiscal Quarter of Fiscal Year 2005
- ------------------------------------------------------------------------
Thereafter 2.50:1.00
========================================================================
</TABLE>
B. Maximum Leverage Ratio. The ratio (the "Leverage Ratio") of (i)
--------------
Consolidated Total Debt as of the last day (any such day being a
"Calculation Date") of any Fiscal Quarter ending during any of the periods
----------------
set forth below, to (ii) Consolidated Adjusted EBITDA for the four-Fiscal
Quarter period ending on such Calculation Date shall not exceed the
correlative ratio indicated below:
<TABLE>
<CAPTION>
Period During Which Maximum
Calculation Date Occurs Leverage Ratio
========================================================================
<S> <C>
First Fiscal Quarter of Fiscal Year 2000 through 5.50:1.00
the Third Fiscal Quarter of Fiscal Year 2000
- -------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2000 through 5.3:1.0
the First Fiscal Quarter of Fiscal Year 2001
- -------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2001 5.1:1.0
- -------------------------------------------------------------------
Third Fiscal Quarter of Fiscal Year 2001 4.8:1.0
- -------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2001 4.7:1.0
- -------------------------------------------------------------------
First Fiscal Quarter of Fiscal Year 2002 4.6:1.0
- -------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2002 4.5:1.0
- -------------------------------------------------------------------
Third Fiscal Quarter of Fiscal Year 2002 4.4:1.0
- -------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2002 4.3:1.0
- -------------------------------------------------------------------
First Fiscal Quarter of Fiscal Year 2003 4.2:1.0
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Period During Which Maximum
Calculation Date Occurs Leverage Ratio
===================================================================
<S> <C>
- -------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2003 4.0:1.0
- -------------------------------------------------------------------
Third Fiscal Quarter of Fiscal Year 2003 3.9:1.0
- -------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2003 3.8:1.0
- -------------------------------------------------------------------
First Fiscal Quarter of Fiscal Year 2004 3.7:1.0
- -------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2004 3.6:1.0
- -------------------------------------------------------------------
Third Fiscal Quarter of Fiscal Year 2004 through 3.5:1.0
Fourth Fiscal Quarter of Fiscal Year 2004
- -------------------------------------------------------------------
First Fiscal Quarter of Fiscal Year 2005 3.4:1.0
- -------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2005 through 3.3:1.0
Fourth Fiscal Quarter of Fiscal Year 2005
- -------------------------------------------------------------------
First Fiscal Quarter of Fiscal Year 2006 3.2:1.0
- -------------------------------------------------------------------
Second Fiscal Quarter of Fiscal Year 2006 through 3.1.:1.0
the Third Fiscal Quarter of Fiscal Year 2006
- -------------------------------------------------------------------
Fourth Fiscal Quarter of Fiscal Year 2006 3.0:1.0
===================================================================
</TABLE>
C. Minimum Consolidated Adjusted EBITDA. Consolidated Adjusted EBITDA
for any four Fiscal Quarter period ending on the last day of any Fiscal
Quarter specified below shall not be less than the correlative amount
indicated below:
<TABLE>
<CAPTION>
Minimum
Fiscal Quarter During Which Consolidated
Calculation Period Ends Adjusted
EBITDA
===================================================================
<S> <C>
The First Fiscal Quarter of Fiscal Year 2000 $32,500,000
- -------------------------------------------------------------------
The Second Fiscal Quarter of Fiscal Year 2000 $32,500,000
- -------------------------------------------------------------------
The Third Fiscal Quarter of Fiscal Year 2000 $32,500,000
- -------------------------------------------------------------------
The Fourth Fiscal Quarter of Fiscal Year 2000 $32,500,000
- -------------------------------------------------------------------
The First Fiscal Quarter of Fiscal Year 2001 $33,100,000
- -------------------------------------------------------------------
The Second Fiscal Quarter of Fiscal Year 2001 $33,900,000
- -------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Minimum
Fiscal Quarter During Which Consolidated
Calculation Period Ends Adjusted
EBITDA
===================================================================
<S> <C>
The Third Fiscal Quarter of Fiscal Year 2001 $34,400,000
- -------------------------------------------------------------------
The Fourth Fiscal Quarter of Fiscal Year 2001 $35,000,000
- -------------------------------------------------------------------
The First Fiscal Quarter of Fiscal Year 2002 $35,500,000
- -------------------------------------------------------------------
The Second Fiscal Quarter of Fiscal Year 2002 $36,100,000
- -------------------------------------------------------------------
The Third Fiscal Quarter of Fiscal Year 2002 $36,600,000
- -------------------------------------------------------------------
The Fourth Fiscal Quarter of Fiscal Year 2002 $37,000,000
- -------------------------------------------------------------------
The First Fiscal Quarter of Fiscal Year 2003 $37,500,000
- -------------------------------------------------------------------
The Second Fiscal Quarter of Fiscal Year 2003 $38,100,000
- -------------------------------------------------------------------
The Third Fiscal Quarter of Fiscal Year 2003 $38,600,000
- -------------------------------------------------------------------
The Fourth Fiscal Quarter of Fiscal Year 2003 $39,000,000
- -------------------------------------------------------------------
The First Fiscal Quarter of Fiscal Year 2004 $39,300,000
- -------------------------------------------------------------------
The Second Fiscal Quarter of Fiscal Year 2004 $39,500,000
- -------------------------------------------------------------------
The Third Fiscal Quarter of Fiscal Year 2004 $39,800,000
- -------------------------------------------------------------------
The Fourth Fiscal Quarter of Fiscal Year 2004 $40,000,000
- -------------------------------------------------------------------
Each Fiscal Quarter of Each Fiscal Year thereafter $40,000,000
===================================================================
</TABLE>
D. Consolidated Capital Expenditures.
(i) Except as provided below, Company shall not, and shall not permit
its Subsidiaries to, make or incur Consolidated Capital Expenditures in any
Fiscal Year (or specified portion thereof) in an aggregate amount in excess
of the corresponding amount (the "Maximum Consolidated Capital Expenditures
-----------------------------------------
Amount") set forth below opposite such Fiscal Year (or such portion
------
thereof) as indicated below; provided, that the Maximum Consolidated
--------
Capital Expenditures Amount for any Fiscal Year shall be increased by an
amount equal to the excess, if any, of (x) the Maximum Consolidated Capital
Expenditures Amount (excluding, and without giving effect to, any increases
thereto from any prior carry over of amounts pursuant to this clause for
the previous Fiscal Year (or specified portion thereof)) over (y) the
actual amount of Consolidated Capital Expenditures for such previous Fiscal
Year (or specified portion thereof) (the
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<PAGE>
amount of such increase described in this proviso being the "Carryforward"
------------
from such preceding Fiscal Year):
<TABLE>
<CAPTION>
Fiscal Year Maximum Consolidated
(or Portion Thereof) Capital Expenditures Amount
==============================================================
<S> <C>
Fiscal Year 2000 $7,000,000
- --------------------------------------------------------------
Fiscal Year 2001 $7,000,000
- --------------------------------------------------------------
Fiscal Year 2002 $7,000,000
- --------------------------------------------------------------
Fiscal Year 2003 and thereafter $8,000,000
==============================================================
</TABLE>
; provided that, the Maximum Consolidated Capital Expenditure Amount for
--------
each period during or after a Permitted Acquisition occurs shall be
increased by an amount equal to the greatest of (x) historical capital
expenditures made with respect to the person or assets acquired (the
"Acquired Business") during the twelve-month period most recently ended
prior to consummation of the related Permitted Acquisition, (y) the average
historical capital expenditures made with respect to the Acquired Business
for the last two fiscal years applicable to such person or assets ending
prior to consummation of the related Permitted Acquisition and (z) 25% of
the expenditures made with respect to research and development for the
Acquired Business for the twelve-month period most recently ended prior to
consummation of the Permitted Acquisition.
(ii) In addition to the Consolidated Capital Expenditures made
pursuant to the foregoing clause (i) of the subsection 7.6D, Company and
its Subsidiaries may make additional Consolidated Capital Expenditures not
in excess of the Excess Proceeds Amount.
E. Certain Calculations.
With respect to any period during which any Permitted Acquisition
occurs or any business of any other Person is acquired by Company or any of
its Subsidiaries as permitted pursuant to the terms hereof, for purposes of
determining compliance or Pro Forma Compliance with the financial covenants
set forth in this subsection 7.6, Consolidated Adjusted EBITDA and
Consolidated Interest Expense shall be calculated with respect to such
periods and such Permitted Acquisition or business on a Pro Forma Basis.
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<PAGE>
24.7 Restriction on Fundamental Changes; Asset Sales.
-----------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Company or any of its Subsidiaries
or enter into any transaction of merger or consolidation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of all or any portion of its
business or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or a substantial part of the business or assets of, or
Capital Stock or other evidence of beneficial ownership of, any Person or any
unit or division thereof, except:
(i) Any Subsidiary of Company may be merged with or into Company
or any wholly-owned Subsidiary, or be liquidated, wound up or dissolved, or
all or any part of its business, property or assets may be conveyed, sold,
leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Company or any wholly-owned Subsidiary; provided
--------
that, in the case of such a merger involving Company, Company shall be the
continuing or surviving corporation, in the case of any such merger of
Domestic Subsidiaries (not involving Company), or of any merger of a
Domestic Subsidiary and a Foreign Subsidiary, a Domestic Subsidiary shall
be the continuing or surviving corporation and in the case of any other
merger involving a Subsidiary Guarantor, a Subsidiary Guarantor shall be
the continuing or surviving corporation;
(ii) Company and its Subsidiaries may acquire inventory, equipment
and other assets in the ordinary course of business;
(iii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by the
board of directors of Company);
(iv) Company and its Subsidiaries may make Asset Sales of assets
having a fair market value (determined in good faith by the board of
directors of Company) not in excess of $5,000,000 (or $10,000,000 if, after
giving effect to such Asset Sale, the Leverage Ratio determined on a Pro
Forma Basis is less than 3.50:1.00) for any Fiscal Year; provided that, in
--------
each such case, (x) the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof (determined in
good faith by the board of directors of Company); and (y) the proceeds of
such Asset Sales shall be applied as required by subsection 2.4B(iii)(a);
(v) Company and its Subsidiaries may acquire the stock or other
equity Securities of any Person that, as a result of such acquisition,
becomes a wholly-owned Subsidiary of Company or any of its Subsidiaries or
is merged into Company or its Subsidiaries, or may acquire the business,
property or assets of any Person; provided, that (x) on a Pro Forma Basis,
--------
the aggregate principal amount of all Indebtedness incurred by
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<PAGE>
Company or its Subsidiaries to finance such acquisition, plus the aggregate
----
amount of Indebtedness of such acquired business existing at the time of
such acquisition for which Company or any of its Subsidiaries (including,
without limitation such acquired business) shall be liable following such
acquisition shall be less than 90% of the aggregate amount of consideration
paid by Company and its Subsidiaries for such acquired business (y) no
Default or Event of Default shall have occurred and be continuing or result
therefrom (z) if, after giving effect to such Acquisition, the Leverage
Ratio determined on a Pro Forma Basis is greater than 5.00:1.00 the
aggregate cash consideration paid in connection with all such acquisitions
made pursuant to this clause (z); shall not exceed $10,000,000, plus the
----
Excess Proceeds Amount;
(vi) Company may create or acquire new Subsidiaries; provided that,
--------
(a) promptly after the formation or acquisition of each such Subsidiary,
Company or such Subsidiary, as applicable, shall deliver or cause to be
delivered each of the items and execute each of the documents, if any,
required pursuant to subsection 6.9; and
(vii) Company may consummate the Recapitalization Transactions.
24.8 Sales and Lease-Backs.
---------------------
Except for the transactions described on Schedule 7.8, Company shall not,
------------
and shall not permit any of its Subsidiaries to, directly or indirectly, become
or remain liable as lessee or as a guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any property (whether
real, personal or mixed), whether now owned or hereafter acquired, (i) which
Company or any of its Subsidiaries has sold or transferred or is to sell or
transfer to any other Person (other than Company or any of its Subsidiaries) or
(ii) which Company or any of its Subsidiaries intends to use for substantially
the same purpose as any other property which has been or is to be sold or
transferred by Company or any of its Subsidiaries to any Person (other than
Company or any of its Subsidiaries) in connection with such lease.
24.9 Transactions with Shareholders and Affiliates.
---------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or such Subsidiary or with any Affiliate
of Company or of any such Subsidiary or holder, on terms that are less favorable
to Company or that Subsidiary, as the case may be, than those that might be
obtained at the time from Persons who are not such a holder or Affiliate;
provided that the foregoing restriction shall not apply to (i) transactions
- --------
between Company and any Subsidiary or between Subsidiaries, (ii) reasonable and
customary fees paid to members of the boards of directors of Company and its
Subsidiaries, (iii) management and one-time transaction (acquisitions,
divestitures and financings) fees paid by Company pursuant to the Bain Advisory
Services Agreement, plus reasonable out-of-pocket
----
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<PAGE>
expenses related thereto; provided, in no event shall any management fees be
--------
paid (but may accrue) under the Bain Advisory Services Agreement at any time an
Event of Default under any of subsection 8.1, 8.6, or 8.7 has occurred and is
continuing; (iv) loans and advances permitted to be made under subsections
7.3(vi) or (ix), (v) Restricted Payments permitted to be made under subsection
7.5, (vi) issuance of capital stock to employees and consultants of Company
pursuant to employment or consulting arrangements, (vii) employment and
consulting arrangements entered into in the ordinary course of business and
(viii) the Recapitalization Transactions.
24.10 Ownership of Subsidiary Stock.
-----------------------------
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of Capital Stock or other equity
Securities of any of its Subsidiaries, except as permitted under this
Agreement and the Collateral Documents or to qualify directors if required
by applicable law; or
(ii) except as a result of a sale permitted hereby of all of the
outstanding Capital Stock of a Subsidiary Guarantor to a third-party,
permit any Capital Stock of any Subsidiary Guarantor to be directly or
indirectly owned by any person other than a Subsidiary Guarantor or
Company;
(iii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of Capital
Stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except as permitted under this Agreement and the Collateral
Documents, to Company or another Subsidiary of Company or to qualify
directors or for nominee holders, if required by applicable law.
24.11 Amendments or Waivers of Certain Agreements.
-------------------------------------------
A. Amendments or Waivers of Certain Agreements and Documents. None of
Company nor any of its respective Subsidiaries shall terminate or agree to any
amendment, restatement, supplement or other modification to, or waive any of its
rights under, any Transaction Document (other than any document relating to the
Subordinated Debt), or any document relating to CSM Deposits, if such
termination, amendment, restatement, supplement, modification or waiver would
reasonably be expected to be materially adverse to the Lenders without obtaining
the prior written consent of the Requisite Lenders to such amendment or waiver.
B. Amendments of Documents Relating to Subordinated Debt. Company shall
not, and shall not permit any of its Subsidiaries to, amend or otherwise change
the terms of any Subordinated Debt, or make any payment consistent with an
amendment thereof or change thereto, if the effect of such amendment or change
is to increase the interest rate on such
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<PAGE>
Subordinated Debt, change (to earlier dates) any dates upon which payments of
principal or interest are due thereon, change any event of default or condition
to an event of default with respect thereto (other than to eliminate any such
event of default or increase any grace period related thereto), change the
redemption, prepayment or defeasance provisions thereof, change the
subordination provisions of such Subordinated Debt or any guaranty of any
Subordinated Debt), or if the effect of such amendment or change, together with
all other amendments or changes made, is to increase materially the obligations
of the obligor thereunder or to confer any additional rights on the holders of
such Subordinated Debt (or a trustee or other representative on their behalf)
which would reasonably be expected to be materially adverse to the Lenders
without obtaining the prior written consent of the Requisite Lenders to such
amendment or waiver.
24.12 Fiscal Year.
-----------
Neither Company nor any of its Subsidiaries shall change its Fiscal Year-
end from the Saturday occurring closest to June 30 of each calendar year.
24.13 Conduct of Business.
-------------------
Company shall not, nor shall it permit any of its Subsidiaries to, engage
in any business or activities other than of the type engaged in as of the
Closing Date or similar, related or supportive businesses or those consented to
by the Requisite Lenders, including the performance of its obligations
hereunder, under the other Loan Documents and under the Transaction Documents.
SECTION 25.
EVENTS OF DEFAULT
IF any of the following conditions or events ("Events of Default") shall
-----------------
occur:
25.1 Failure to Make Payments When Due.
---------------------------------
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Bank in reimbursement of any drawing honored or payment made under a Letter of
Credit; or failure by Company to pay any interest on any Loan or any fee or any
other amount due under this Agreement or any other Loan Document within five (5)
Business Days after the date due; or
25.2 Default in Other Agreements.
---------------------------
(i) Failure of Company or any of its Subsidiaries to pay when due (a) any
principal of or interest on any Indebtedness (other than Indebtedness referred
to in subsection 8.1) in an individual principal amount of $1,500,000 or more or
any items of Indebtedness with an
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<PAGE>
aggregate principal amount of $3,500,000 or more, in each case beyond the end of
any grace period provided therefor; or (b) any Contingent Obligation in an
individual principal amount of $1,500,000 or more or any Contingent Obligations
with an aggregate principal amount of $3,500,000 or more, in each case beyond
the end of any grace period provided therefor; or (ii) breach or default by
Company or any of its Subsidiaries with respect to any other material term of
(a) any evidence of any Indebtedness in an individual principal amount of
$1,500,000 or more or any items of Indebtedness with an aggregate principal
amount of $3,500,000 or more or any Contingent Obligation in an individual
principal amount of $1,500,000 or more or any Contingent Obligations with an
aggregate principal amount of $3,500,000 or more, in each case beyond the end of
any grace period provided thereof; or (b) any loan agreement, mortgage,
indenture or other agreement relating to such Indebtedness or Contingent
Obligation(s), or the occurrence of any other event, condition or circumstance
in respect of any such Indebtedness or Contingent Obligations if in any case
under this clause (ii) the effect of such breach or default or event, condition
or circumstance is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder
or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or
be declared due and payable (or redeemable) prior to its stated maturity or the
stated maturity of any underlying obligation, as the case may be (upon the
giving or receiving of notice, lapse of time, both, or otherwise); or
25.3 Breach of Certain Covenants.
---------------------------
Failure of any Loan Party to perform or comply with any term or condition
contained in subsection 2.5, 6.2, or Section 7 of this Agreement; provided,
--------
however, that such failure with respect to the covenants contained in
- -------
subsections 7.1 through 7.5 shall not constitute an Event of Default for ten
(10) days after such failure so long as such Loan Party is diligently pursuing
the cure of such failure;
25.4 Breach of Warranty.
------------------
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
25.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within thirty (30) days after the
earlier of (i) a Responsible Officer of Company becoming aware of the occurrence
of such default or (ii) receipt by Company of notice from the Administrative
Agent of such default; or
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<PAGE>
25.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Subsidiaries (other than
Immaterial Subsidiaries) in an involuntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted under any applicable federal or state law; or (ii) an
involuntary case shall be commenced against Company or any of its Subsidiaries
(other than Immaterial Subsidiaries) under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or any of its Subsidiaries
(other than Immaterial Subsidiaries), or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Company or any
of its Subsidiaries (other than Immaterial Subsidiaries) for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Subsidiaries (other than Immaterial
Subsidiaries), and any such event described in this clause (ii) shall continue
for sixty (60) days unless dismissed, bonded or discharged; or
25.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
---------------------------------------------------
(i) Company or any of its Subsidiaries (other than Immaterial Subsidiaries)
shall have an order for relief entered with respect to it or commence a
voluntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; or Company or
any of its Subsidiaries (other than Immaterial Subsidiaries) shall make any
assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or
25.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $1,500,000 or (ii)
in the aggregate at any time an amount in excess of $3,500,000 (in either case
not adequately covered by insurance) shall be entered or filed against Company
or any of its Subsidiaries or any of their respective assets and
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<PAGE>
shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty
(60) days (or in any event later than five days prior to the date of any
proposed sale thereunder); or
25.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against Company or any of
its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of thirty (30) days; or
25.10 Employee Benefit Plans.
----------------------
There shall occur one or more of the following: (i) ERISA Events which
individually or in the aggregate results or (ii) Company or one of its ERISA
Affiliates shall have engaged in a transaction which is prohibited under Section
4975 of the Code of Section 406 of ERISA which results in the imposition of a
liability which has a Material Adverse Effect on Company or any of its ERISA
Affiliates; or
25.11 Change in Control.
-----------------
(i) Bain and the Other Investors shall beneficially own less than, in the
aggregate, any other Person or "group" (within meaning of 13d-3 or 13d-5 of the
Exchange Act) of all issued and outstanding equity securities of Company
representing economic and voting interests in Company; (ii) Bain shall cease to
beneficially own less than 35% of the outstanding equity securities of Company
(excluding (a) equity securities issued to management pursuant to management
stock option plans or similar arrangements; and (b) any equity securities,
including warrants with respect thereto, issued to any financial institution in
connection with the refinancing of the Loans) representing economic interests in
Company; (iii) a majority of the members of the Board of Directors of Company
shall not be Continuing Directors; or (iv) any "Change of Control" shall occur
under the Subordinated Debt Documents; or
25.12 Invalidity of Guaranties.
------------------------
At any time after the execution and delivery thereof, any Guaranty of the
Obligations of Company for any reason, other than the satisfaction in full of
all Obligations (other than indemnification obligations not due and payable),
ceases to be in full force and effect (other than in accordance with its terms)
or is declared to be null and void, or any Loan Party denies in writing that it
has any further liability, including without limitation with respect to future
advances by the Lenders, under any Loan Document to which it is a party; or
25.13 Failure of Security.
-------------------
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the
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<PAGE>
satisfaction in full of the Obligations (other than indemnification obligations
not due and payable) or any other termination of such Collateral Document in
accordance with the terms hereof or thereof) or shall be declared null and void,
or the validity or enforceability thereof shall be contested in writing by any
Loan Party, or the Collateral Agent shall not have or shall cease to have a
valid security interest in any Collateral purported to be covered thereby having
a fair market value exceeding $750,000, perfected and with the priority required
by the relevant Collateral Document, for any reason other than the failure of
the Collateral Agent, the Administrative Agent or any Lender to take any action
within its control, subject only to Liens permitted under the applicable
Collateral Documents;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit) and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of the Issuing Bank to issue any Letter of Credit shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any other
Event of Default, the Administrative Agent shall, upon the written request of
the Requisite Lenders, by written notice to Company, declare all or any portion
of the amounts described in clauses (a) through (c) above to be, and the same
shall forthwith become, immediately due and payable, and the obligation of each
Lender to make any Loan and the obligation of the Issuing Bank to issue any
Letter of Credit shall thereupon terminate; provided that the foregoing shall
--------
not affect in any way the obligations of the Lenders under subsection 3.3C(i).
Any amounts described in clause (i)(b) above, when received by the
Administrative Agent or the Collateral Agent, shall be held by the Collateral
Agent pursuant to the terms of the Collateral Account Agreement and shall be
applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph, if at
any time within sixty (60) days after an acceleration of the Loans pursuant to
such paragraph Company shall pay all arrears of interest and all payments on
account of principal which shall have become due otherwise than as a result of
such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Defaults and Events of Default (other than non-payment of the principal of and
accrued interest on the Loans, in each case which is due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to subsection 10.6,
then the Requisite Lenders, by written notice to Company, may at their option
rescind and annul such acceleration and its consequences; but such action shall
not affect any subsequent Default or Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to
bind the Lenders to a decision which may be made at the election of the
Requisite Lenders and are not intended to benefit
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Company and do not grant Company the right to require the Lenders to rescind or
annul any acceleration hereunder or preclude the Agents or the Lenders from
exercising any of the rights or remedies available to them under any of the Loan
Documents, even if the conditions set forth in this paragraph are met.
SECTION 26.
AGENTS
26.1 Appointment.
-----------
A. CSFB is hereby appointed the Administrative Agent and Sole Lead
Arranger hereunder and under the other Loan Documents. CSFB is also hereby
appointed the Collateral Agent hereunder and under the Collateral Documents.
Each Lender hereby authorizes each Agent to act as its agent in accordance with
the terms of this Agreement and the other Loan Documents. Each Agent agrees to
act upon the express conditions contained in this Agreement and the other Loan
Documents, as applicable. The provisions of this Section 9 are solely for the
benefit of the Agents and the Lenders and Company shall have no rights as a
third party beneficiary of any of the provisions thereof. In performing its
functions and duties under this Agreement, each Agent shall act solely as an
agent of the Lenders and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with or for Company or
any of its Subsidiaries. Upon the conclusion of the Initial Period, all
obligations of the Sole Lead Arranger hereunder shall terminate and thereafter,
the Sole Lead Arranger shall have no obligations or liabilities under any of the
Loan Documents.
B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case the Administrative Agent or the
Collateral Agent deems that by reason of any present or future law of any
jurisdiction the Administrative Agent or the Collateral Agent may not exercise
any of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that the Administrative Agent or the
Collateral Agent appoint an additional individual or institution as a separate
trustee, co-trustee, collateral agent or collateral co-agent (any such
additional individual or institution being referred to herein individually as a
"Supplemental Collateral Agent" and collectively as "Supplemental Collateral
----------------------------- -----------------------
Agents").
- ------
In the event that the Administrative Agent or the Collateral Agent appoints
a Supplemental Collateral Agent with respect to any Collateral, (i) each and
every right, power, privilege or duty expressed or intended by this Agreement or
any of the other Loan Documents to
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be exercised by or vested in or conveyed to the Administrative Agent or the
Collateral Agent with respect to such Collateral shall be exercisable by and
vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either the Administrative Agent or the Collateral Agent or such Supplemental
Collateral Agent, and (ii) the provisions of this Section 9 and of subsections
10.2 and 10.3 that refer to the Administrative Agent or the Collateral Agent
shall inure to the benefit of such Supplemental Collateral Agent and all
references therein to the Administrative Agent or the Collateral Agent shall be
deemed to be references to the Administrative Agent or the Collateral Agent
and/or such Supplemental Collateral Agent, as the context may require.
Should any instrument in writing from Company or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by the Administrative
Agent or the Collateral Agent for more fully and certainly vesting in and
confirming to him or it such rights, powers, privileges and duties, Company
shall, or shall cause such Loan Party to, execute, acknowledge and deliver any
and all such instruments promptly upon request by the Administrative Agent or
the Collateral Agent. In case any Supplemental Collateral Agent, or a successor
thereto, shall die, become incapable of acting, resign or be removed, all the
rights, powers, privileges and duties of such Supplemental Collateral Agent, to
the extent permitted by law, shall vest in and be exercised by the
Administrative Agent or the Collateral Agent until the appointment of a new
Supplemental Collateral Agent.
26.2 POWERS; GENERAL IMMUNITY.
------------------------
A. DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to
take such action on such Lender's behalf and to exercise such powers hereunder
and under the other Loan Documents as are specifically delegated to such Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents and it may perform such duties by or through its agents or
employees. No Agent shall have, by reason of this Agreement or any of the other
Loan Documents, a fiduciary relationship in respect of any Lender; and nothing
in this Agreement or any of the other Loan Documents, expressed or implied, is
intended to or shall be so construed as to impose upon any Agent any obligations
in respect of this Agreement or any of the other Loan Documents except as
expressly set forth herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
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financial or other statements, instruments, reports or certificates or any other
documents furnished by any Agent to the Lenders or by or on behalf of Company
and/or its Subsidiaries to any Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Company or any other Person liable for the
payment of any Obligations, nor shall any Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Default or Event of Default.
Anything contained in this Agreement to the contrary notwithstanding, the
Administrative Agent shall not have any liability arising from confirmations of
the amount of outstanding Loans or the Total Utilization of Revolving Loan
Commitments or the component amounts thereof.
C. Exculpatory Provisions. Neither any Agent nor any of such Agent's
respective officers, directors, employees or agents shall be liable to the
Lenders for any action taken or omitted by such Agent under or in connection
with any of the Loan Documents except to the extent caused by such Agent's gross
negligence or willful misconduct. If any Agent shall request instructions from
the Lenders with respect to any act or action (including the failure to take an
action) in connection with this Agreement or any of the other Loan Documents,
such Agent shall be entitled to refrain from such act or taking such action
unless and until such Agent shall have received instructions from the Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6). Without prejudice to the generality of the foregoing,
(i) such Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Company and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Lender shall have any right of action whatsoever against such
Agent as a result of such Agent acting or (where so instructed) refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of the Requisite Lenders (or such other Lenders as may be
required to give such instructions under subsection 10.6). Such Agent shall be
entitled to refrain from exercising any power, discretion or authority vested in
it under this Agreement or any of the other Loan Documents unless and until it
has obtained the instructions of the Requisite Lenders (or such other Lenders as
may be required to give such instructions under subsection 10.6).
D. Agents Entitled to Act as the Lender. The agency hereby created shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity.
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Each Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with Company or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Company and/or its Subsidiaries for services in connection with this Agreement
and otherwise without having to account for the same to the Lenders.
26.3 Representations and Warranties; No Responsibility For Appraisal of
------------------------------------------------------------------
Creditworthiness.
----------------
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of the
Lenders or, except as expressly provided elsewhere in this Agreement, to provide
any Lender with any credit or other information with respect thereto (except as
provided in Section 4 or subsection 6.1), whether coming into its possession
before the making of the Loans or at any time or times thereafter, and no Agent
shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to the lenders.
26.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, reasonable counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against such Agent in performing its duties hereunder or under
the other Loan Documents or otherwise in its capacity as such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
- --------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to any Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
26.5 Successor Administrative Agent and Swing Line Lender.
----------------------------------------------------
A. Successor Administrative Agent. The Administrative Agent may resign
at any time by giving thirty (30) days' prior written notice thereof to the
Lenders and Company Upon any such notice of resignation, the Requisite Lenders
shall have the right, upon five (5) Business Days' notice to Company, to appoint
a successor Administrative Agent with the consent of
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Company. Upon the acceptance of any appointment as the Administrative Agent
hereunder by a successor Administrative Agent, that successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring the Administrative Agent and the retiring
the Administrative Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring the Administrative Agent's resignation
hereunder as the Administrative Agent, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was the Administrative Agent under this Agreement.
B. Successor Swing Line Lender. Any resignation of the Administrative
Agent pursuant to subsection 9.5A shall also constitute the resignation of CSFB
or its successor as the Swing Line Lender, and any successor Administrative
Agent appointed pursuant to subsection 9.5A shall, upon its acceptance of such
appointment, become the successor Swing Line Lender for all purposes hereunder.
In such event (i) any outstanding Swing Line Loans made by the retiring
Administrative Agent in its capacity as Swing Line Lender shall be transferred
to the successor Swing Line Lender, (ii) the retiring Administrative Agent and
Swing Line Lender shall surrender the Swing Line Note held by it to Company for
cancellation, and (iii) Company shall issue a new Swing Line Note to the
successor Administrative Agent and Swing Line Lender substantially in the form
of Exhibit V-B annexed hereto, in the principal amount of the Swing Line Loan
-----------
Commitment then in effect and with other appropriate insertions.
26.6 Collateral Documents; Successor Collateral Agent.
-------------------------------------------------
Each Lender hereby further authorizes the Collateral Agent to enter into
each Collateral Document as secured party on behalf of and for the benefit of
the Lenders and the other beneficiaries named therein and agrees to be bound by
the terms of each Collateral Document; provided that the Collateral Agent shall
--------
not enter into or consent to any material amendment, modification, termination
or waiver of any provision contained in any Collateral Document without the
prior consent of the Requisite Lenders (or, if required pursuant to subsection
10.6, all the Lenders); provided further, however, that, without further written
-------- ------- -------
consent or authorization from any Lender, the Collateral Agent may execute any
documents or instruments necessary to effect the release of any asset
constituting Collateral from the Lien of the applicable Collateral Document in
the event that such asset is sold in a transaction to which the Requisite
Lenders have consented or otherwise disposed of in a transaction permitted by
this Agreement, or to the extent otherwise permitted or required by any
Collateral Document. Anything contained in any of the Loan Documents to the
contrary notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral Document
(including without limitation through the exercise of a right of set-off against
call deposits of such Lender in which any funds on deposit in the Collateral
Account may from time to time be invested), it being understood and agreed that
all rights and remedies under the Collateral Documents may be exercised solely
by the Collateral Agent for the benefit of the Lenders and the other
beneficiaries named therein in accordance with the terms thereof. The
Collateral Agent may resign at any time, and a successor Collateral Agent may be
appointed, in accordance with
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subsection 9.5 as if such subsection 9.5 applied to the Collateral Agent in lieu
of the Administrative Agent.
SECTION 27.
MISCELLANEOUS
27.1 Assignments and Participations in Loans, Letters of Credit.
----------------------------------------------------------
A. General. Subject to subsection 10.1B or 10.1C, as applicable, each
Lender shall have the right at any time to (i) sell, assign, transfer or
negotiate to any Eligible Assignee, or (ii) sell participations to any Person
in, all or any part of its Commitments (together with its Letters of Credit or
participations therein made or arising pursuant to its Revolving Loan
Commitment) or any Loan or Loans made by it or any other interest herein or in
any other Obligations owed to it; provided that no such sale, assignment,
--------
transfer or participation shall, without the consent of Company, require Company
to file a registration statement with the Securities and Exchange Commission or
apply to qualify such sale, assignment, transfer or participation under the
securities laws of any state; provided further that no such sale, assignment or
-------- -------
transfer described in clause (i) above shall be effective unless and until an
Assignment Agreement effecting such sale, assignment or transfer shall have been
accepted by the Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii); provided, further that no such sale, assignment, transfer
-------- -------
or participation of any Letter of Credit or any participation therein may be
made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Lender effecting such sale, assignment, transfer or participation.
Except as otherwise provided in this subsection 10.1, no Lender shall, as
between Company and such Lender, be relieved of any of its obligations hereunder
as a result of any sale, assignment, transfer or negotiation of, or any granting
of participations in, all or any part of its Commitments or the Loans, the
Letters of Credit or participations therein or the other Obligations owed to
such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit, or participation therein or other Obligation may (a) be assigned
in any amount to another Lender who is a Non-Defaulting Lender, or to an
Approved Fund or an Affiliate of the assigning Lender or another Lender
who, in either such case, is a Non-Defaulting Lender, with the giving of
notice to Company and the Administrative Agent or (b) be assigned in an
aggregate amount of not less than $5,000,000 (or such lesser amount (1) as
shall constitute the aggregate amount of the Commitments, Loans, Letters of
Credit, and participations therein and other Obligations of the assigning
Lender, or (2) as may be agreed to by Company and the Administrative Agent)
to any other Eligible Assignee with the consent of the Administrative Agent
(such consent not to be unreasonably withheld) and, so long as no Event of
Default shall have occurred and be continuing with the
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consent of Company (such consent not to be unreasonably withheld). To the
extent of any such assignment in accordance with either clause (a) or (b)
above, the assigning Lender shall be relieved of its obligations with
respect to its Commitments, Loans, Letters of Credit, or participations
therein or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment Agreement, together with a processing fee of $3,500 payable by
the assigning Lender, such certificates, documents or other evidence, if
any, with respect to United States federal income tax withholding matters
as the assignee under such Assignment Agreement may be required to deliver
to the Administrative Agent pursuant to subsection 2.7B(iii) and, if
requested by the Administrative Agent, a completed administrative
questionnaire in the Administrative Agent's customary form with respect to
the assignee under such Assignment Agreement. Upon such execution,
delivery, acceptance and recordation, from and after the effective date
specified in such Assignment Agreement, (y) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and (z) the assigning
Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment Agreement,
relinquish its rights and be released from its obligations under this
Agreement (and, in the case of an Assignment Agreement covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto); provided
--------
that, anything contained in any of the Loan Documents to the contrary
notwithstanding, if such Lender is the Issuing Bank such Lender shall
continue to have all rights and obligations of the Issuing Bank with
respect to outstanding Letters of Credit until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts
drawn thereunder. The Commitments hereunder shall be modified to reflect
the Commitments of such assignee and any remaining Commitments of such
assigning Lender and, if any such assignment occurs after the issuance of
the Notes hereunder, the assigning Lender shall surrender its applicable
Notes and, upon such surrender, new Notes shall be issued to the assignee
and, if applicable, to the assigning Lender, substantially in the form of
Exhibit IV-A or B or Exhibit V-A annexed hereto, as the case may be, with
------------ - -----------
appropriate insertions, to reflect the new Commitments and/or outstanding
Term Loans of the assignee and the assigning Lender.
(ii) Acceptance by the Administrative Agent; Recordation in Register.
---------------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing fee referred to in subsection 10.1B(i) and any certificates,
documents or other evidence with respect to United States federal income
tax withholding matters that such assignee may be required to deliver to
the Administrative Agent pursuant to subsection 2.7B(iii), the
Administrative Agent shall, if such Assignment Agreement has been completed
and is in substantially the form of Exhibit XII hereto and if the
-----------
Administrative Agent has
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consented to the assignment evidenced thereby (to the extent such consent
is required pursuant to subsection 10.1B(i)), (a) accept such Assignment
Agreement by executing a counterpart thereof as provided therein (which
acceptance shall evidence any required consent of the Administrative Agent
to such assignment), (b) record the information contained therein in the
Register, and (c) give prompt notice thereof to Company. The Administrative
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
(i) effecting the extension of the final maturity of the Loan allocated to such
participation or (ii) effecting a reduction of the principal amount of or
affecting the rate of interest payable on any Loan or any fee allocated to such
participation. Company and each Lender hereby acknowledge and agree that, solely
for purposes of subsections 2.6D, 2.7, 3.6, 10.2, 10.3, 10.4 and 10.5, (a) any
participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; and any Lender which is an investment fund may pledge all or any portion
of its Notes or Loans to its trustee in support of its obligations to such
trustee, provided that (i) no Lender shall, as between Company and such Lender,
--------
be relieved of any of its obligations hereunder as a result of any such
assignment and pledge and (ii) in no event shall such Federal Reserve Bank be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.20.
F. Special Purpose Funding Vehicle. Notwithstanding anything to the
contrary contained herein, any Lender (a "Granting Bank") may grant to a special
-------------
purpose funding vehicle (a "SPC"), identified as such in writing from time to
---
time by the Granting Bank to the Administrative Agent and Company, the option to
provide to Company all or any part of any Loan that such Granting Bank would
otherwise be obligated to make to Company pursuant to this Agreement; provided
--------
that (i) nothing herein shall constitute a commitment by any SPC to make any
- ----
Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to
provide all or any part of such Loan, the Granting Bank shall be obligated to
make such Loan pursuant to the terms hereof. The making of a Loan by an SPC
hereunder shall utilize the Commitment of the Granting Bank to the same extent,
and as if, such Loan were made by such Granting Bank. Each
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party hereto hereby agrees that no SPC shall be liable for any indemnity or
similar payment obligation under this Agreement (all liability for which shall
remain with the Granting Bank). In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof. In addition, notwithstanding anything to the contrary contained
in this subsection 10.1F, any SPC may (i) with notice to, but without the prior
written consent of, Company and the Administrative Agent and without paying any
processing fee therefor, assign all or a portion of its interests in any Loans
to the Granting Bank or to any financial institutions (consented to by Company
and Administrative Agent) providing liquidity and/or credit support to or for
the account of such SPC to support the funding or maintenance if Loans and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC. This section may not
be amended without the written consent of the SPC.
G. Limitation. No assignee, participant or other transferee or any
Lender's rights shall be entitled to receive any greater payment under
subsection 2.7 than such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with Company's prior
written consent or at a time when the circumstances giving rise to such greater
payment did not exist.
27.2 Expenses.
--------
Company agrees to pay promptly (i) all the actual and reasonable costs and
out-of-pocket expenses of the Agents in connection with the preparation of the
Loan Documents; (ii) all costs of furnishing all opinions by counsel for Company
(including without limitation any opinions requested by the Lenders or Agents as
to any legal matters arising hereunder) and of Company's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including,
without limitation, with respect to confirming compliance with environmental and
insurance requirements; (iii) the reasonable fees, expenses and disbursements of
counsel to the Agents (including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and the Loans and any consents, amendments, waivers or other
modifications hereto or thereto, in each case, requested by or for the benefit
of Company and any other documents or matters requested by Company; (iv) all
other reasonable costs and expenses incurred by the Agents in connection with
the negotiation, preparation and execution of the Loan Documents and the
transactions contemplated hereby and thereby and the syndication of the Loans
and Commitments; and (v) after the occurrence of a Default or Event of Default,
all the respective reasonable costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement,
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incurred by the Agents and the Lenders in enforcing any Obligations of or in
collecting any payments due from Company hereunder or under the other Loan
Documents by reason of such Default or Event of Default or in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
27.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection 10.2, whether
or not the transactions contemplated hereby shall be consummated, Company agrees
to defend (subject to Indemnitees' selection of counsel), indemnify, pay and
hold harmless on an after-tax basis the Agents and the Lenders, and the
officers, directors, employees, agents, attorneys and affiliates of the Agents
and the Lenders (collectively called the "Indemnitees") from and against any and
-----------
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees, and all such fees and
disbursements, as well as other costs and expenses, incurred by Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including without limitation securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner relating
to or arising out of this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including without limitation the
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds of any of the Loans or the issuance of Letters of Credit hereunder or
the use or intended use of any of the Letters of Credit) or any Environmental
Liabilities that arise from or relate to the management, use, control,
ownership, occupancy or operation of any Facility or assets of any Loan Party or
its subsidiaries (including without limitation, all on-site and off-site
activities involving Hazardous Materials), or the Release or threatened Release
of any Hazardous Materials (or allegations of the same) on or from any of the
Facilities or on or from any other property where Hazardous Materials are or
were (or are or were alleged to be) Released or threatened to be Released in
connection with any of the Facilities or the business of any of the Loan
Parties, their subsidiaries, or any predecessor in interest to the Loan Parties
or their subsidiaries (collectively called the "Indemnified Liabilities");
-----------------------
provided that Company shall not have any obligation to any Indemnitee hereunder
- --------
with respect to any Indemnified Liabilities to the extent that such Indemnified
Liabilities arose from the bad faith, gross negligence or willful misconduct of
that Indemnitee. To the extent that the undertaking to defend, indemnify, pay
and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, Company shall contribute
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
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27.4 Set-Off; Security Interest in Deposit Accounts.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized by Company
at any time or from time to time, without notice to Company or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts or payroll accounts) and
any other Indebtedness at any time held or owing by that Lender (at any office
of that Lender wherever located) to or for the credit or the account of Company
against and on account of the obligations and liabilities of Company to that
Lender under this Agreement, the Notes, the Letters of Credit and participations
therein, including, but not limited to, all claims of any nature or description
arising out of or connected with this Agreement, the Notes, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
the Administrative Agent and each Lender a security interest in all deposits and
accounts maintained with the Administrative Agent or such Lender as security for
the Obligations.
27.5 Ratable Sharing.
---------------
The Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
---------
Amounts Due" to such Lender) which is greater than the proportion received by
- -----------
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
the Administrative Agent and each other Lender of the receipt of such payment
and (ii) apply a portion of such payment to purchase participations (which it
shall be deemed to have purchased from each seller of a participation
simultaneously upon the receipt by such seller of its portion of such payment)
in the Aggregate Amounts Due to the other Lenders so that all such recoveries of
Aggregate Amounts Due shall be shared by all the Lenders in proportion to the
Aggregate Amounts Due to them; provided that if all or part of such
--------
proportionately greater payment received by such purchasing the Lender is
thereafter recovered from such Lender upon the bankruptcy, reorganization or
insolvency proceeding of Company or otherwise, those purchases
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<PAGE>
shall be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Company expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Company to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
27.6 Amendments and Waivers.
----------------------
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Company or any
other Loan Party therefrom, shall in any event be effective without the written
consent of the Requisite Lenders; provided that any such amendment,
--------
modification, termination, waiver or consent which: (a) reduces the principal
amount of any of the Loans; (b) changes in any manner any provision of this
Agreement which, by its terms, expressly requires the approval or consent of all
the Lenders; (c) postpones the scheduled final maturity date of any of the
Loans; (d) reduces the percentage specified in the definition of the "Requisite
Lenders" (it being understood that, with the consent of the Requisite Lenders,
additional extensions of credit pursuant to this Agreement may be included in
the definition of the "Requisite Lenders" on substantially the same basis as the
Term A Loans, Term A Loan Commitments, Term B Loans, Term B Loan Commitments,
Revolving Loans and Revolving Loan Commitments are included on the Closing
Date); (e) postpones the date or reduces the amount of any scheduled payment
(but not prepayment) of principal of any of the Loans or of any scheduled
reduction of the Revolving Credit Commitments; (f) postpones the date on which
any interest or any fees are payable; (g) decreases the interest rate borne by
any of the Loans (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any
fees payable hereunder; (h) releases all or substantially all of the Collateral;
(i) except as permitted by this Agreement (subsection 7.7) or any Guaranty,
releases any of the Guarantors from their obligations under the Guaranties; (j)
reduces the amount or postpones the due date of any amount payable in respect
of, or extends the required expiration date of, any Letter of Credit; or (k)
changes in any manner the provisions contained in this subsection 10.6; shall be
effective only if evidenced by a writing signed by or on behalf of all the
Lenders to whom Obligations are owed or who have Commitments outstanding being
directly affected by such amendment, modification, termination, waiver or
consent. In addition, (i) any amendment, modification, termination or waiver of
any of the provisions contained in Section 4 shall be effective only if
evidenced by a writing signed by or on behalf of the Administrative Agent, (ii)
no amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the Lender which is the
holder of that Note, (iii) no increase in the Commitments of any Lender over the
amount thereof then in effect shall be effective without the written concurrence
of that Lender, it being understood and agreed that in no event shall waivers or
modifications of conditions precedent, covenants, Defaults, Events of Default or
of a mandatory prepayment or a reduction of any or all of the Commitments be
deemed to
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<PAGE>
constitute an increase of the Commitment of any Lender and that an increase in
the available portion of any Commitment of any Lender shall not be deemed to
constitute an increase in the Commitment of such Lender, (iv) no amendment,
modification, termination or waiver of any provision of subsection 2.1A(iv) or
any other provision of this Agreement relating to the Swing Line Loan Commitment
or the Swing Line Loans shall be effective without the written concurrence of
the Swing Line Lender, (v) no amendment, modification, termination or waiver of
any provision of Section 3 relating to the rights or obligations of the Issuing
Bank shall be effective without the written concurrence of the Issuing Bank with
respect to any Letter of Credit then outstanding, and (vi) no amendment,
modification, termination or waiver of any provision of Section 9 or of any
other provision of this Agreement which, by its terms, expressly requires the
approval or concurrence of any Agent shall be effective without the written
concurrence of such Agent. The Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender and no amendment,
modification, termination or waiver of any provision of subsection 2.4 which has
the effect of changing any voluntary or mandatory prepayments or Commitment
reductions applicable to any Class (the "Affected Class") in a manner that
--------------
disproportionately disadvantages such Class relative to the other Class shall be
effective without the written concurrence of the Requisite Class Lenders of the
Affected Class (it being understood and agreed that any amendment, modification,
termination or waiver of any such provision which only postpones or reduces any
voluntary or mandatory prepayment or Commitment reduction from those set forth
in subsection 2.4 with respect to one Class but not the other Classes shall be
deemed to disproportionately disadvantage such one Class but not to
disproportionately disadvantage such other Classes for purposes of this clause).
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Company
in any case shall entitle Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.6 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company.
27.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another such covenant shall not avoid the occurrence of an
Default or Event of Default if such action is taken or condition exists.
27.8 Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telecopy or telex, or four Business Days
after depositing it in the United States mail, registered or certified, with
postage prepaid and properly addressed. For the purposes hereof, the address of
each party hereto shall be as set
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<PAGE>
forth on the signature pages hereof attached hereto, or such other address as
shall be designated by such party in a written notice delivered to the
Administrative Agent and Company.
27.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of the Lenders set forth in
subsections 9.2C, 9.4, 10.4, 10.5 and 10.20 shall survive the payment of the
Loans, the cancellation or expiration of the Letters of Credit and the
reimbursement of any amounts drawn or paid thereunder, and the termination of
this Agreement.
27.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of any Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other power, right or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
27.11 Marshalling; Payments Set Aside.
-------------------------------
Neither any Agent nor any Lender shall be under any obligation to marshal
any assets in favor of Company or any other party or against or in payment of
any or all of the Obligations. To the extent that Company makes a payment or
payments to the Administrative Agent or the Lenders (or to the Administrative
Agent or Collateral Agent for the benefit of the Lenders), or any Agent or the
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
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<PAGE>
27.12 Severability.
------------
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
27.13 Obligations Several; Independent Nature of the Lenders' Rights.
--------------------------------------------------------------
The obligations of the Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
the Lenders pursuant hereto or thereto, shall be deemed to constitute the
Lenders as a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.
27.14 Maximum Amount.
--------------
A. It is the intention of Company and the Lenders to conform strictly to
the usury and similar laws relating to interest from time to time in force, and
all agreements between the Loan Parties and their respective Subsidiaries and
the Lenders, whether now existing or hereafter arising and whether oral or
written, are hereby expressly limited so that in no contingency or event
whatsoever, whether by acceleration of maturity hereof or otherwise, shall the
amount paid or agreed to be paid in the aggregate to the Lenders as interest
(whether or not designated as interest, and including any amount otherwise
designated but deemed to constitute interest by a court of competent
jurisdiction) hereunder or under the other Loan Documents or in any other
agreement given to secure the Indebtedness or obligations of Company to the
Lenders, or in any other document evidencing, securing or pertaining to the
Indebtedness evidenced hereby, exceed the maximum amount permissible under
applicable usury or such other laws (the "Maximum Amount"). If under any
--------------
circumstances whatsoever fulfillment of any provision hereof, or any of the
other Loan Documents, at the time performance of such provision shall be due,
shall involve exceeding the Maximum Amount, then, ipso facto, the obligation to
be fulfilled shall be reduced to the Maximum Amount. For the purposes of
calculating the actual amount of interest paid and/or payable hereunder in
respect of laws pertaining to usury or such other laws, all sums paid or agreed
to be paid to the holder hereof for the use, forbearance or detention of the
Indebtedness of Company evidenced hereby, outstanding from time to time shall,
to the extent permitted by Applicable Law, be amortized, pro-rated, allocated
and spread from the date of disbursement of the proceeds of the Notes until
payment in full of all of such Indebtedness, so that the actual rate of interest
on account of such Indebtedness is uniform through the term hereof. The terms
and provisions of this subsection shall control and supersede every other
provision of all agreements between Company or any endorser of the Notes and the
Lenders.
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<PAGE>
B. If under any circumstances any Lender shall ever receive an amount
which would exceed the Maximum Amount, such amount shall be deemed a payment in
reduction of the principal amount of the Loans and shall be treated as a
voluntary prepayment under subsection 2.4B(i) and shall be so applied in
accordance with subsection 2.4 hereof or if such excessive interest exceeds the
unpaid balance of the Loans and any other Indebtedness of Company in favor of
such Lender, the excess shall be deemed to have been a payment made by mistake
and shall be refunded to Company.
27.15 Headings.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
27.16 Applicable Law.
--------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
27.17 Successors and Assigns.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders (it being understood that
the Lenders' rights of assignment are subject to subsection 10.1). Company's
rights or obligations hereunder nor any interest therein may not be assigned or
delegated by Company without the prior written consent of all Lenders.
27.18 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,
COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT,
COMPANY FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
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<PAGE>
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION
10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.18 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
27.19 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP OR OTHER RELATIONSHIP THAT IS BEING ESTABLISHED.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
it has reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 10.19 AND EXECUTED BY EACH OF THE PARTIES HERETO),
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR
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<PAGE>
ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.
27.20 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking and investing practices, it being
understood and agreed by Company that in any event a Lender may make disclosures
reasonably required by any bona fide assignee, transferee or participant in
connection with the contemplated assignment or transfer by such Lender of any
Loans or any participation therein or as required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that nothing herein shall prevent any Agent or any Lender from
- --------
disclosing any such information (i) to the Administrative Agent or any other
Lender, (ii) any of its employees, directors, officers, agents or affiliates who
need to know such information in accordance with customary safe and sound
banking or commercial lending practices who receive such information having been
made aware of the confidential nature thereof, (iii) upon the request or demand
of any Governmental Authority having jurisdiction over it, (iv) in response to
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Applicable Laws, (v) if required to do so in connection
with any litigation or similar proceeding, (vi) which has been publicly
disclosed other than in breach of this subsection 10.20 or (vii) to the National
Association of Insurance Commissioners or any securities exchange or any similar
organization, or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender. In the event that any Lender discloses any
information pursuant to clauses (iv) or (v) of the preceding sentence, such
Lender will, before such disclosure, give notice thereof to Company if such
Lender is lawfully permitted to do so; and provided, further that in no event
-------- -------
shall any Lender be obligated or required to return any materials furnished by
Company or any of its Subsidiaries unless requested by Company or any of its
Subsidiaries to do so.
27.21 Counterparts; Effectiveness.
---------------------------
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
COMPANY: INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/Rudolf S. Gassner
_________________________________________
Name: Rudolf S. Gassner
Title:Chairman of the Board
Notice Address:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Hock Tan
Justine Lien
Telephone: (610) 630-5300
Facsimile: (610) 630-3385
with a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attn: Michael Krupka
Yoo Jin Kim
Telephone: (617) 572-3000
Facsimile: (617) 572-3274
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Linda Myers
Telephone: (312) 861-2000
Facsimile: (312) 861-2200
S-1
<PAGE>
AGENTS AND LENDERS: CREDIT SUISSE FIRST BOSTON,
individually and as the Administrative Agent,
Sole Lead Arranger and the Collateral Agent
By: /s/Robert Hetu
________________________________________
Name: Robert Hetu
Title:Vice President
By: /s/WM. Matthew Carter
________________________________________
Name:WM. Matthew Carter
Title:Assistant Vice Prestident
S-2
<PAGE>
SCHEDULE 1.1(I)
Certain Adjustments to EBITDA/Consolidated Interest Expense
-----------------------------
A. Without duplication and to the extent otherwise deducted in determining
Consolidated Net Income:
(i) items classified as unusual or nonrecurring gains and losses
(including restructuring costs, severance and relocation costs,
any one-time expenses related to (or resulting from) any merger,
recapitalization or Permitted Acquisition);
(ii) one-time compensation charges, including any arising from any
recapitalization of Company's bonus program or existing stock
options, performance share or restricted stock plans resulting
from any merger or recapitalization transaction or expended in
any period prior to the consummation of the transactions
contemplated by the Transaction Documents;
(iii) non-recurring cash charges and transaction expenses incurred
in connection with the transactions contemplated by the
Transaction Documents and related transactions to the extent
deducted in determining Consolidated Net Income;
(iv) non-recurring cash charges and transaction expenses incurred in
connection with Permitted Acquisitions to the extent deducted in
determining Consolidated Net Income;
(v) management and other fees paid to Bain during such period
under the Bain Advisory Services Agreement;
(vi) cash items relating to the sale by Company of the Datacom
business; and
(vii) any gain or expense incurred or recognized in connection
with the sale and lease-back of Company's facilities in
Valley Forge, Pennsylvania.
B. Consolidated Adjusted EBITDA for the Second Fiscal Question and Third
Fiscal Quarter of Fiscal Year 1999 shall be deemed to be the following
amounts:
<PAGE>
Second Fiscal Quarter: $10,600,000
Third Fiscal Quarter: $12,700,000
Consolidated Interest expense for each of the second, third and fourth
Fiscal Quarter of Fiscal Year 1999 shall be deemed to be $4,370,000.
<PAGE>
EXHIBIT 10.6
MASTER LEASE
between
BET INVESTMENTS IV
a Pennsylvania limited partnership
("Landlord")
and
INTEGRATED CIRCUIT SYSTEMS, INC.
a Pennsylvania corporation
("Tenant")
----------------
January 29, 1999
----------------
<PAGE>
TABLE OF CONTENTS
Page(s)
-------
ARTICLE I: Leased Premises ................................................ 1
ARTICLE II: Term .......................................................... 2
ARTICLE III: Rent, Lease Security ......................................... 2
ARTICLE IV: Taxes, Assessments, and Utilities ............................. 4
ARTICLE V: Alterations and Improvements to Premises ....................... 6
ARTICLE VI: Title to Property and Fixtures ................................ 7
ARTICLE VII: Quiet Enjoyment of the Premises .............................. 7
ARTICLE VIII: Use of Premises: Compliance With Laws ....................... 8
ARTICLE IX: Inspection .................................................... 9
ARTICLE X: Maintenance of Premises ........................................ 9
ARTICLE XI: Damage to Premises ............................................ 9
ARTICLE XII: Insurance on Premises ........................................ 10
ARTICLE 13: Liability and Indemnification ................................. 11
ARTICLE XIV: Mechanics' and Other Liens ................................... 12
ARTICLE XV: Signage ....................................................... 13
ARTICLE XVI: Brokerage Commission ......................................... 13
ARTICLE XVII: Environmental Compliance .................................... 13
ARTICLE XVIII: Assignment or Subletting of Premises ....................... 15
ARTICLE XIX: Holding Over ................................................. 15
ARTICLE XX: Surrender of Premises ......................................... 16
-i-
<PAGE>
ARTICLE XXI: Condenmation ................................................. 16
ARTICLE XXII: Waiver of Landlord .......................................... 17
ARTICLE XXII: Events of Default by Tenant ................................. 17
ARTICLE XXIV: Landlord's Remedies ......................................... 18
ARTICLE XXV: Landlord's Cure of Default by Tenant;
Reimbursement of Expenses .................................... 21
ARTICLE XXVI: Subordination ............................................... 21
ARTICLE XXVII: Estoppel Certificates ...................................... 22
ARTICLE XXIII: Succession ................................................. 22
ARTICLE XXIX: Notices ..................................................... 23
ARTICLE XXX: No Partnership ............................................... 23
ARTICLE XXXI: No Representations by Landlord .............................. 23
ARTICLE XXXII: Necessary Approvals and Lease Modifications ................ 24
ARTICLE XXXIII: Miscellaneous ............................................. 24
EXHIBIT "A-1": Premises ................................................... 27
EXHIBIT "A-2": Land ....................................................... 28
-ii-
<PAGE>
BASIC LEASE INFORMATION
The Basic Lease Information is set forth below for the convenience of the
Landlord and Tenant and shall not be deemed to be incorporated into or made a
part of the attached Lease for any reason. In the event of any conflict between
the Basic Lease Information set forth below and the Lease, the Lease shall
control.
Landlord: BET Investments IV, a Pennsylvania limited
partnership
Landlord's Address: 2600 Philmont Avenue, Suite 212 Huntingdon Valley,
PA 19006
Tenant: Integrated Circuit Systems, Inc., a Pennsylvania
corporation
Tenant's Address: 2435 Boulevard of the Generals, Norristown, PA
Building Address: 2435 Boulevard of the Generals, Norristown, PA
Premises: An Office Building/Laboratory Facility
County: Montgomery
Term: Eight Years
Estimated Commencement Date: March 1, 1999
Actual Commencement Date:
Expiration Date: February 28, 2007 Renewal Option:
Annual Base Rent: Year 1: $610,000 per annum; $50,833.33 per month
Year 2: $628,300 per annum; $52,358.33 per month
Year 3: $647,149 per annum; $53,929.08 per month
Year 4: $666,563 per annum; $55,546.92 per month
Year 5: $686,560 per annum; $57,213.33 per month
Year 6: $707,157 per annum; $58,929.75 per month
Year 7: $728,372 per annum; $60,697.67 per month
Year 8: $750,223 per annum; $62,518.58 per month
Security Deposit: $101,666.66
Rentable Area of the
Premises: Approximately 61,000 Square Feet
<PAGE>
MASTER LEASE
This MASTER LEASE (the "Lease") is made this 29th day of January, 1999
between BET Investments IV, a Pennsylvania limited partnership (the "Landlord")
and INTEGRATED CIRCUIT SYSTEMS, Inc. a Pennsylvania corporation (the "Tenant").
BACKGROUND
A. The Landlord and Tenant are parties to an Agreement Of Sale dated
January 15, 1999 whereby the Landlord is purchasing from the Tenant a certain
office building containing approximately sixty one thousand (61,000) rentable
square feet of building, as more particularly described in Exhibit "A-l"
attached hereto (the "Building"), located on certain real property more
particularly described on Exhibit "A-2 " attached hereto (the "Land"). The Land
and the Building are collectively referred to herein as the "Premises".
B. Tenant has proposed to lease back the Premises from the Landlord so that
the Tenant may at its election (but subject to the terms set forth herein)
occupy a portion thereof and, subject to the terms of Article 18, sublease
portions of the Premises to other tenants.
C. Landlord and Tenant have agreed to enter into this Lease which will set
forth the rights and obligations of Landlord and Tenant regarding the use and
occupancy of the Premises as of the date hereof.
AGREEMENT
NOW THEREFORE, in consideration of the rent hereafter to be paid and the
mutual covenants and agreements contained herein, Landlord and Tenant, intending
to be legally bound, hereby covenant and agree as follows:
ARTICLE I: Leased Premises
Section 1.1. Landlord does hereby lease and demise unto Tenant and Tenant
does hereby rent from Landlord, subject to the terms and conditions of this
Lease, the Premises, together with all rights, privileges, easements, existing
leasehold interests and appurtenances thereto, including, but not limited to,
the right to use at all times the common entrance ways, lobbies and elevators,
and all of the improvements, fixtures, and equipment therein located and the
right to collect rent from existing leases and subleases of the Premises and
otherwise master lease the Premises in accordance with the terms set forth
herein.
Section 1.2. Tenant and Tenant's agents, employees and invitees shall have
the right to use at all times, in common with all others granted such rights by
Landlord or Tenant, pursuant to a sublease executed by Tenant, in a proper and
lawful manner, the common sidewalks, access roads and parking facilities located
upon the Land.
ARTICLE II: Term
Section 2.1. This Lease shall be for a term of eight (8) years commencing
on the Commencement Date (as defined below) and ending on that date which is the
last day
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of the ninety sixth (96th) month following the Commencement Date (the
"Termination Date"), unless sooner terminated or extended in accordance with the
terms of this Lease (the "Initial Term"). The Initial Term shall commence the
later of March 1, 1999 or the settlement date of the Agreement of Sale for the
Premises dated January 15, 1999, between the parties (the "Commencement Date").
In the event the Agreement or Sale is terminated or breached by either party so
as to preclude closing of the Agreement of Sale, this Lease shall also terminate
simultaneously.
Section 2.2. Upon the expiration of the Initial Term, provided that Tenant
is not then in default beyond any applicable cure period under this Lease,
Tenant may renew the Initial Term for one (1) renewal term of three (3) years
(the "Renewal Term"). Tenant may exercise its option to renew the Initial Term
by giving Landlord written notice of Tenant's intent to renew not more than
twelve (12) months and not less than nine (9) months prior to the Termination
Date. The Renewal Term shall be on the same terms and conditions set forth
herein, except that Base Rent (as defined below) for the Renewal Term shall be
as set forth in Section 3.2 hereof The Initial Term and the Renewal Term are
hereinafter collectively referred to as the "Term."
Upon the commencement of the Renewal Term (if any), Landlord shall, at its
expense, provide new paint and carpet for the Premises (of the same or similar
quality to that which presently exists in the Premises). The new carpet
installed by Landlord pursuant to the preceding sentence shall remain the
property of Landlord and shall not be removable by Tenant at the expiration of
the Term.
ARTICLE III: Rent, Lease Security
Section 3.1. During the Initial Term, Tenant shall pay annual base rent
("Base Rent") as follows:
(a) During the first year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of Year 1: $610,000 per annum; $50,833.33 per month;
(b) During the second year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $628,300 per annum; $52,358.33 per month.
(c) During the third year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $647,149 per annum; $53,929.08 per month.
(d) During the fourth year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $666,563 per annum; $55,546.92 per month.
(e) During the fifth year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $686,560 per annum; $57,213.33 per month.
(f) During the sixth year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $707,157 per annum; $58,929.75 per month.
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(g) During the seventh year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $728,372 per annum; $60,697.67 per month.
(h) During the eighth year of the Initial Term, Tenant shall pay to
Landlord the Base Rent of $750,223 per annum; $62,518.58 per month.
Section 3.2. The Base Rent during the Renewal Term shall be as follows:
(a) During the first year of the Renewal Term, Tenant shall pay to
Landlord the Base Rent of: $772,729.69 per annum; $64,394.14 per month;
(b) During the second year of the Renewal Term, Tenant shall pay to
Landlord the Base Rent of $795,911.58 per annum; $66,325.97 per month.
(c) During the third year of the Renewal Term, Tenant shall pay to
Landlord the Base Rent of $819,788.93 per annum; $68,315.74 per month.
Section 3.3. Each monthly installment of Base Rent shall be due and
payable, without notice or demand, in advance on or before the first day of each
calendar month during the Term. The Base Rent for any portion of a calendar
month at the commencement of the Term shall be prorated and paid on the
Commencement Date. Base Rent for any partial month shall be prorated at the rate
of one thirtieth of the monthly minimum annual rent per day.
Section 3.4. In addition to the Base Rent to be paid by Tenant to Landlord
as provided above, Tenant shall pay to Landlord as additional rent hereunder all
such sums as are due and payable by Tenant to Landlord pursuant to the terms of
this Lease, and the failure of Tenant to pay any sums to Landlord required
hereunder shall be deemed as a failure to pay Base Rent and shall entitle
Landlord to pursue such remedies as are hereafter provided with regard to the
failure to pay Base Rent.
Section 3.5. Tenant shall, upon execution of this Lease, deposit with
Landlord as security for the performance of all the terms, covenants, and
conditions of this Lease, the sum of One Hundred One Thousand Six Hundred Sixty
Six and 66/100 Dollars ($101,666.66). This deposit is to be retained by Landlord
until the expiration or earlier termination of this Lease and shall be
returnable to Tenant within sixty (60) days after the expiration of the Lease,
without interest, provided that (a) the Premises have been vacated, (b) Landlord
shall have inspected the Premises after such vacation and found the Premises to
be in a broom-clean and orderly condition, (c) Tenant shall have complied with
all the terms, covenants and conditions of this Lease and (d) Tenant shall have
notified Landlord, in writing, of its forwarding address. If any of the
conditions of the preceding sentence have not been satisfied by Tenant, the sum
deposited hereunder or any part thereof, up to the amount of the actual loss,
may be retained by Landlord at its option, or may be applied by Landlord against
any actual loss, damage or injury chargeable to Tenant hereunder or otherwise,
if Landlord determines that such loss, damage or injury exceeds said sum
deposited. It is understood by the parties that the said
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deposit is not to be considered as a prepayment of the Base Rent or a limit on
Tenant's liability under the Lease or liquidated damages.
Section 3.6. (a) Landlord requires as a condition to its execution of the
Lease, that Tenant provide to Landlord a current financial statement of Tenant
available to the pubic (if applicable) prepared and certified by an independent
certified accountant in accordance with generally accepted accounting
principles, consistently applied, including a balance sheet and income and
expense statement in reasonable detail and stating in comparative form the
figures as at the end of and for the previous fiscal year. Tenant shall maintain
a minimum "Liquidity Ratio" (Cash and Accounts Receivable divided by Accounts
Payable) of 1.2:1 as reported on a quarterly basis. As reported on a yearly
basis, the Tenant shall maintain a ratio or EBIDA to interest charges of 2:1.
(b) From time to time during the Term of the Lease, Tenant shall furnish
financial statements to Landlord in accordance with the following provisions:
(i) Within sixty (60) days after the fiscal year, Tenant shall provide
to Landlord the current financial statement of Tenant available to the
pubic (if applicable) prepared and certified by an independent certified
accountant in accordance with generally accepted accounting principles,
consistently applied, including a balance sheet and income and expense
statement in reasonable detail and stating in comparative form the figures
as at the end of and for the previous fiscal year.
ARTICLE IV: Taxes, Assessments, and Utilities
Section 4.1. Except as otherwise provided herein, Tenant shall pay when due
(a) all charges for all utilities (including gas and electricity) furnished to
and consumed in the operation and use of the Premises ("Utility Charges"); (b)
water rents or rates and sewerage charges ("Water Charges"); and (c) similar
charges of all kinds levied, assessed, or imposed or to be levied, assessed, or
imposed on or against the Premises. In the event that any Utility Charges or
Water Charges are billed directly to the Landlord, or collection or payment of
such charges is to be made by Landlord, Tenant shall pay Such Utility Charges or
Water Charges within ten (10) days of written demand of Landlord. The Tenant
shall have the right to request copies of all back-up documentation in such case
supporting the charge.
Section 4.2. Tenant shall pay all personal property taxes, and all business
taxes, use and occupancy taxes, licenses and fees now or hereafter levied or
imposed by any governmental authority upon the Premises or the business
operations and activities of Tenant. In the event that any such taxes are
enacted, changed or altered so that any of such taxes are levied against
Landlord, or the mode of payment of such taxes is changed so that Landlord is
responsible for collection or payment of such taxes, Tenant shall pay such taxes
within fifteen (15) days of written demand from Landlord.
Section 4.3. Tenant shall pay as additional rent all taxes, assessments,
levies
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and other charges which are assessed, levied or charged upon the Premises
(including the Land), less any abatement ("Real Estate Taxes'). Real Estate
Taxes shall not include (a) any interest or penalties caused by the acts or
omissions of the Landlord or Landlord's partners, agents of employees; (b) any
capital levy, estate, succession, inheritance, transfer, sales, use or franchise
taxes, or any income, profits, or revenue tax, assessment or charge imposed upon
the rent received as such by the Landlord under this Lease. Tenant shall
promptly reimburse Landlord for payment of such Real Estate Taxes within fifteen
(15) days of written demand, and receipt of payment, from Landlord.
Section 4.4. Landlord shall in no event be liable for any interruption or
failure of utility services or other services on the Premises unless such
interruption or failure is due to the negligence or willful act or omission of
Landlord or Landlord's partners, agents or employees. Tenant shall furnish all
replacement electric light bulbs and tubes.
Section 4.5. Subject to the conditions and provisions hereafter stated,
Tenant may, at the sole cost and expense of Tenant, contest in good faith the
validity of any Real Estate Taxes, Utility Charges, Water Charges or other
similar charges, assessments, or public dues and, subject to the conditions and
provisions hereafter stated, may defer the payment of such of them as may be so
contested until such contest is finally determined; provided however, that in
any and all such proceedings Tenant shall protect and save harmless Landlord
from all attorneys' fees, costs, and damages resulting from any such proceedings
or from the failure of Tenant to make any such payments, and Tenant shall
immediately, upon the termination of such proceedings, pay all such Real Estate
Taxes, Utility Charges, Water Charges or other similar charges or public dues,
and any and all damages, interest, penalties, costs, and expenses arising
therefrom that may be adjudged to be a charge against the Premises. During the
time that any such Real Estate Taxes, Utility Charges, Water Charges or other
similar charges, assessments or public dues are being so contested in good faith
by Tenant, and provided Landlord is notified in writing thereof and is
thereafter kept fully informed as to the outcome of the various stages of any
such contest, Landlord shall have no right, except as hereafter stated, to pay
the same; provided, however, that if Landlord shall so request, Tenant shall pay
such Real Estate Taxes, Utility Charges, Water Charges or other similar charges,
assessments or public dues prior to the imposition of interest or penalty
thereon. Landlord agrees to cooperate with Tenant to such extent as Tenant shall
reasonably request in any such contested proceeding.
Section 4.6. Notwithstanding anything contained or implied in this Article
4 to the contrary, Tenant shall not permit the Premises, or any part thereof, to
be sold, offered for sale, or advertised for sale because of nonpayment of any
such Real Estate Taxes, Utility Charges, Water Charges or other similar charges,
assessments or public dues, even though the foregoing may then be in course of
being contested as aforesaid. In the event of any such offering for sale or
advertisement of sale of the Premises, by reason of any such nonpayment thereof,
Tenant shall forthwith pay said Real Estate Taxes, Utility Charges, Water
Charges or other similar charges, assessments or public dues, together with
interest, penalties, and costs, and such other acts as are reasonably necessary
to have the offering for sale or advertisement of sale withdrawn and terminated.
In the event
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Tenant fails to comply with Tenant's obligations as set forth herein, then
Landlord may upon written notice to Tenant pay said Real Estate Taxes, Utility
Charges, Water Charges or other similar charges, assessments or public dues,
together with interest, penalties, and costs, and do whatever else may be
necessary to have the offering for sale or advertisement of sale withdrawn and
terminated, all without any duty or obligation on the part of Landlord to
inquire into the validity or legality hereof, and Tenant shall immediately
reimburse Landlord forthwith upon demand for the amount so paid by Landlord and
for all other costs, reasonable attorney fees, expenses, and damages incurred by
Landlord in connection therewith, all of which shall be additional rent due by
Tenant to Landlord.
Section 4.7. Nothing contained in this Lease shall require Tenant to pay
any franchise tax or any income, profit, estate, inheritance, succession, or
capital levy assessed against or payable by Landlord, which taxes shall be the
responsibility of Landlord.
ARTICLE V: Alterations and Improvements to Premises
Section 5.1. Tenant shall accept the Premises in their current "as is",
"where is", with all faults condition, Landlord having no obligation to make any
improvements to the Premises of any kind whatsoever, subject to the provisions
of Article X.
Section 5.2. During the Term, Tenant may make interior improvements,
alterations or additions to the Premises (hereinafter collectively referred to
as the "Leasehold Improvements") without the consent of the Landlord (including,
but not limited to, the installation of furniture, fixtures and equipment),
provided that exterior or structural improvements, alterations and additions
shall be made only with the prior written consent of Landlord, which consent
shall not be unreasonably withheld, conditioned or delayed. For purposes hereof,
"structural improvements" shall include replacements, alterations or additions
to the Premises materially affecting the roof, exterior walls, bearing walls,
support beams and foundation columns. If Tenant makes any Leasehold
Improvements, Tenant agrees to:
(a) comply with all insurance requirements and all laws, ordinances,
rules and regulations of all governmental authorities, provided that
Landlord shall cooperate with Tenant in securing any necessary permits, the
cost for such permits to be borne by Tenant;
(b) discharge by payment, bond or otherwise (determined in Tenant's
sole discretion), any mechanics' lien filed against the Premises (of which
Tenant has written notice) for work, labor, services or materials performed
at or furnished to the Premises on behalf of Tenant; and
(c) furnish Landlord with plans of such improvements, alterations or
additions.
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Section 5.3. At Tenant's sole cost and expense, Tenant shall have the right
to introduce into the Premises such other utilities as Tenant might require and
Tenant shall pay the cost of such other utilities directly to the applicable
utility companies.
ARTICLE VI: Title to Property and Fixtures
Section 6.1. All non-real estate fixtures, equipment and apparatus of any
kind or nature whatsoever installed by Tenant in the Premises shall remain the
property of Tenant and shall be removable from time to time prior to the
expiration of the Term. Any damage done to the Premises by the removal of such
property shall be repaired prior to the Termination Date at Tenant's cost and
expense.
Section 6.2. All personal property in the Premises shall be and remain at
Tenant's sole risk. Landlord shall not be liable for loss or damage to personal
property of Tenant or others arising from theft, fire, explosion, bursting,
overflowing, or leaking of the roof or of water, sewer, or steam pipes, or from
heating or plumbing fixtures or from electric wires or fixtures or from any
other cause whatsoever, unless such damage shall be caused by the negligence or
willful act or omission of Landlord or Landlord's agents or employees.
ARTICLE VII: Quiet Enjoyment of the Premises
Section 7.1. Landlord represents and warrants that Landlord is the owner of
the Premises and that Landlord has the full right and authority to lease such
Premises. So long as Tenant is not in default of Tenant's obligations under this
Lease for which it has received written notice, Tenant shall enjoy the peaceful
and quiet use and possession of the Premises, and Landlord shall warrant and
defend Tenant in such peaceful and quiet use and possession against the claims
of all persons claiming by, through, or under Landlord.
ARTICLE VIII: Use of Premises: Compliance With Laws
Section 8.1. The Premises shall be used only for general office,
laboratory, research and light manufacturing uses and for such related uses
consistent with the provisions hereof and the applicable zoning and use
regulations.
Section 8.2. Tenant shall, at Tenant's sole expense, subject to the
provisions of Article X promptly comply with all governmental laws, ordinances,
and regulations applicable to the use of the Premises and Tenant shall obtain,
at Tenant's own expense, all permits, licenses, and approvals required by any
federal, state or local governmental authority, relating to the Premises. Tenant
shall indemnify and hold Landlord harmless from all penalties, claims, or
demands by any governmental authority resulting from Tenant's failure to comply
with this section.
Section 8.3. Tenant shall not permit any objectionable or unpleasant odors,
smoke, dust, gas, noise, or vibrations to emanate from the Premises, nor take
any action that would constitute a nuisance to occupants of neighboring property
or unreasonably interfere with their use of their premises or property. Tenant
shall not permit the
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Premises to be used for any purpose or in any manner (including, without
limitation, any method of storage) that would (a) violate any local fire laws or
regulations or (b) render the insurance thereon void, or (c) increase the
premiums payable for insurance, unless Tenant agrees and actually pays for such
increased premiums. Tenant shall be fully liable for any increase in insurance
premiums or voiding of insurance caused by Tenant's acts. Landlord shall be
fully liable for any increase in insurance premiums or voiding of insurance
caused by Landlord's acts. Landlord hereby acknowledges that the Tenant's
intended use of the Premises as an office/lab/light manufacturing space using
non-combustible materials, does not violate subsections (a), (b) or (c) of this
section.
Section 8.4. Tenant shall have the right to contest the legality of laws,
ordinances, rules, regulations, and requirements (including, but not limited to,
the right to seek a zoning variance or change in zoning) affecting the Premises
and to postpone compliance with the same provided such contest shall be prompt
and diligently prosecuted by and at the expense of Tenant, and Tenant shall
protect and save Landlord harmless from any liability and claims for any such
noncompliance or postponement of compliance.
Section 8.5. Without limiting the generality of the foregoing, Tenant
shall, at Tenant's expense, subject to the Provisions of Article X, (i) maintain
the common areas of the Premises and construct all alteration and improvements
in compliance with the Americans with Disabilities Act of 1990 (as amended), the
Federal Occupational Safety and Health Act of 1970 (as amended) and all
regulations or standards as are or may be promulgated thereunder; and (ii)
procure each and every permit, license, certificate, or other authorization now
or hereafter required in connection with the lawful and proper use of the
Premises in connection with its business.
ARTICLE IX: Inspection
Section 9.1. Landlord or any agents or employees of Landlord shall have the
right to enter and inspect the Premises at any reasonable time during business
hours for the purpose of ascertaining the condition of the Premises. In making
any entry or inspection provided hereunder, Landlord shall use all commercially
reasonable efforts to protect Tenant's property and personnel from loss and
injury and to avoid interfering with the conduct of Tenant's business. Except in
the case of an emergency, the Landlord shall give the Tenant twenty four (24)
hours notice prior to entering the Premises and Landlord shall be accompanied by
a representative of the Tenant during such inspection. Landlord shall not reveal
any trade secrets disclosed during such inspection.
ARTICLE X: Maintenance of Premises
Section 10.1. Tenant shall keep the entire Premises and Land, including all
improvements thereon, together with all electrical, plumbing, and other
mechanical installations therein, in good order and repair at Tenant's own
expense. Tenant shall maintain the Premises at Tenant's own expense in a clean,
orderly, and sanitary condition
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and free of insects, rodents, vermin, and other pests. Tenant shall not permit
undue accumulation of garbage, trash, rubbish, and refuse, and shall remove the
same at Tenant's own expense. Tenant shall keep the Land in a neat, orderly
fashion (including, without limitation, upkeep of the landscaping, sidewalks
and parking areas, if any, on the Land) and shall remove all snow and ice
therefrom. Tenant acknowledges that any and all costs relating to the
maintenance, cleaning, operation and use of the Premises and the Land shall be
at Tenant's own expense.
Section 10.2. Notwithstanding the provisions of section 10.1 above,
Landlord shall be responsible for maintaining the structure of the Premises.
ARTICLE XI: Damage to Premises
Section 11.1. In the event that any portion of the Premises is damaged by
fire or other casualty, then, except as provided below, the damage shall be
promptly repaired by and at the expense of Tenant; and the Base Rent and
additional rent, as appropriate, shall abate for any portion of the Premises
which is rendered uninhabitable.
Section 11.2. If such damage occurs during the last twelve (12) months of
the Term or if Landlord obtains a reasonable professional estimate that the cost
of restoring the building would exceed twenty (20%) of the full insurable value
of the Building immediately prior to such fire or other casualty, then either
Landlord or Tenant may, by giving notice to the other within sixty (60) days
after such fire or other casualty, terminate this Lease without incurring any
liability to the other. Landlord shall inform Tenant within thirty (30) days of
such fire or other casualty of any decision by a mortgagee that such mortgagee
will not permit insurance proceeds to be used to repair all or any portion of
the damage. In the event that such mortgagee will not permit insurance proceeds
to be used to repair the damage, and Landlord does not intend to use its own
funds to repair such damage, either Landlord or Tenant may, by giving notice to
the other within thirty (30) days after Landlord has informed tenant of such
mortgagee's position and the Landlord's position, terminate this Lease without
incurring any liability to the other, except that Tenant shall pay all insurance
proceeds in connection with the Building over to the Landlord or the Landlord's
mortgagee as the case may be. If neither party so terminates this Lease, Tenant
shall use reasonable efforts to repair the Building (and the Premises, if
damaged) with reasonable dispatch, allowing for the adjustment and settlement of
insurance claims, the preparation of plans and specifications, the obtaining of
governmental approvals and certificates, the obtaining of contractors and
laborers and any other daily.
Section 11.3. Tenant shall be entitled to a rent abatement only to the
extent that a portion of the Premises is rendered untenantable because of a fire
or Other casualty and only until Landlord notifies tenant that the damages
thereto have been substantially repaired.
Section 11.4. Landlord and Tenant do each hereby release and discharge
the other party and any partner, officer, agent, employee or representative of
such party from any liability for loss or damage to property on the Premises
caused by fire or other
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casualty for which insurance (containing waiver of subrogation) is required to
be carried by either party under the terms of this Lease.
ARTICLE XII: Insurance on Premises
Section 12.1. Tenant shall maintain, at its expense, with an
insurer(s) reasonably acceptable to Landlord:
(a) standard Commercial General Liability Insurance. The limits of
liability of such insurance shall be an amount not less than Two Million
Dollars ($2,000,000) per occurrence, Personal Injury including death and
dismemberment of not less than Two Million Dollars ($2,000,000) per
occurrence, Property Damage Liability of not less than Two Million Dollars
($2,000,000) combined single limit for Personal Injury and Property Damage
Liability. Such policies shall name Landlord and any mortgagee as
additional insured;
(b) "all risk" property insurance on the Premises insuring one hundred
percent (100%) of the replacement value thereof; and
(c) "all risk" property insurance on Tenant's personal property
including furniture and furnishings or any fixtures or equipment removable
by Tenant under this Lease. This insurance shall include fire and extended
coverage perils.
Section 12.2. At Tenant's option, Tenant may provide the coverages required
under this Article 12 through blanket policies of insurance covering Tenant's
other properties or Tenant may self-insure. Tenant shall deliver a certificate
of insurance evidencing the coverages (or such other evidence as Landlord may
reasonably request) on or prior to the Commencement Date, and at such other
time, within thirty (30) days of Landlord's written request. Each policy shall
provide that Landlord and any mortgage holder shall receive at least ten (10)
days prior written notice of cancellation, material alteration or non-renewal of
the policy.
Section 12.3 The property to be insured by Tenant pursuant to Section
12.1(b) shall also include all improvements in the Premises, but shall not
include Tenant's furniture and furnishings or any fixtures or equipment
removable by Tenant under the provisions of this Lease. Such policies shall name
Landlord as an additional insured as its interests appear and shall, at the
written request of Landlord, name any mortgage holder as additional loss payee,
as its interests may appear.
ARTICLE 13: Liability and Indemnification
Section 13.1. Tenant shall defend and indemnify Landlord and save Landlord
harmless from and against any and all losses, claims, liability, expenses and
damages (other than consequential damages) which, either directly or indirectly,
in whole or in part, arise out of or result from (i) the negligence or willful
misconduct of Tenant, or Tenant's agents, contractors or employees; (ii) any act
or occurrence in the Premises,
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unless caused by the negligence or willful misconduct of Landlord, its agents,
contractors or employees; (iii) judgments, citations, fines or other penalties
rendered or assessed against Landlord (with the exception of any claims under
any worker's compensation laws) as a result of Tenant's failure to comply with
all federal, state and local laws, safety and health regulations relating to
Tenant's specific use of the Premises, provided that Landlord agrees to give
Tenant prompt notice of any such violation asserted by any government agency;
and (iv) the breach of any provision of this Lease by Tenant, its agents,
contractors or employees.
Section l3.2. Landlord shall defend and indemnify Tenant and save Tenant
harmless from and against any and all losses, claims, liability, expenses and
damages (other than consequential damages) which, either directly or indirectly,
in whole or in part, arise out of or result from (i) the negligence or willful
misconduct of Landlord, or Landlord's agents, contractors or employees; (ii)
judgments, citations, fines or other penalties rendered or assessed against
Tenant (with the exception of any claims under any worker's compensation laws)
as a result of Landlord's failure to comply with all federal, state and local
laws, safety and health regulations relating to Landlord's specific use of the
building of which the Premises are a part, provided that Tenant agrees to give
Landlord prompt notice of any such violation asserted by any government agency;
and (iii) the breach of any provision of this Lease by Landlord, its agents,
contractors or employees.
Section 13.3. The liability of Landlord and/or Landlord's Affiliates to
Tenant or anyone claiming by or through Tenant shall be limited to Landlord's
interest in the Premises. The foregoing shall be absolute and without exception
whatsoever. The term "Landlord's Affiliates" shall mean any entity affiliated
with Landlord through common ownership, Landlord's property manager and their
respective partners, officers, directors, equity members, employees, agents,
contractors and subcontractors. Without limiting the generality of the
foregoing, in no event shall the Landlord or Tenant be liable to the other for
indirect or consequential damages or for loss of business or loss of profits.
Under no circumstances shall any of the partners, directors, officers, employees
or shareholders of Landlord or Tenant, from time to time, have any personal
liability whatsoever hereunder.
Section 13.4. Nothing in this Article 13 is intended to require
indemnification for any property claim for which insurance is required to be
maintained under the terms of this Lease. The rights and obligations of Landlord
and Tenant under this Article 13 shall survive the expiration or earlier
termination of this Lease.
ARTICLE XIV: Mechanics' and Other Liens
Section 14.1.Tenant covenants and agrees to keep all of the Premises and
every part there and the building and other improvements thereon free and clear
of and from any and all mechanics', materialmens', and other liens for work or
labor done, services performed, materials, appliances, or power contributed,
used, or furnished to be used in or about the Premises for or in connection with
any operations of Tenant, any alteration, improvement, or
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repairs or additions that Tenant may make or permit or cause to be made, or any
work or construction by, for, or permitted by Tenant on or about the Premises,
and at all times reasonably promptly and fully to pay and discharge any and all
claims, upon which any such lien may or could be based, and to save and hold
Landlord and all of the Premises free and harmless of and from any and all such
liens and claims of liens and suits or other proceedings pertaining thereto.
Section 14.2. Landlord covenants and agrees to keep the building of which
the Premises are a part and other improvements thereon free and clear of and
from any and all mechanics', materialmens', and other liens for work or labor
done, services performed, materials, appliances, or power contributed, used, or
furnished to be used in or about the building for or in connection with any
operations of Landlord, any alteration, improvement, or repairs or additions
that Landlord may make or permit or cause to be made, or any work or
construction by, for, or permitted by Landlord on or about the building, and at
all times promptly and fully to pay and discharge any and all claims, upon which
any such lien may or could be based, and to save and hold Tenant and the
building free and harmless of and from any and all such liens and claims of
liens and suits or other proceedings pertaining thereto.
ARTICLE XV: Signage
Section 15.1. Tenant shall have the right to make such changes in the
signage identifying the Premises as Tenant deems necessary in Tenant's
reasonable discretion.
ARTICLE XVI: Brokerage Commission
Section 16.1 Tenant and Landlord each represents and warrants to the other
that it has not dealt with any broker or agent in the negotiation for or the
obtaining of this Lease. Tenant and Landlord each agrees to indemnify, defend
and hold the other harmless from any and all cost (including, without
limitation, all attorneys' fees and related costs) or liability for compensation
arising from a breach of the above representation.
ARTICLE XVII: Environmental Compliance
Section 17.1. Tenant shall comply with any applicable federal, state,
county, regional or local statutes, laws, regulations, rules, ordinances, codes,
standards, orders, licenses and permits of any governmental authorities relating
to environmental, health or safety matters (including, without limitation,
Hazardous Materials, as defined in Section 17.2 below) (collectively,
"Environmental Laws"). Tenant shall, at its own expense, promptly observe and
comply with all present and future Environmental Laws relating to its past
ongoing or future activities on the Premises.
Section 17.2. Without limiting the generality of Section 17.1, Tenant shall
not transport, use, store, maintain, generate, manufacture, handle, dispose,
release or discharge any "Hazardous Materials" (as defined below) upon or about
the Premises, nor permit Tenant's employees, agents, contractors, and other
occupants of the Premises to
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engage in such activities upon or about the Property. However, the foregoing
provisions shall not prohibit the transportation to and from, and use, storage,
maintenance and handling within, the Premises of substances customarily used in
offices (or such other business or activity expressly permitted to be undertaken
in the Premises under Article 8); provided that such substances shall be used
and maintained only in such quantities as are reasonably necessary for such
permitted use of the Premises, strictly in accordance with applicable law and
the manufacturers' instructions thereto, and any remaining such substances shall
be completely, properly and lawfully removed from the Premises upon expiration
or earlier termination of this Lease.
Tenant shall promptly notify Landlord of (a) any enforcement, cleanup or
other regulatory action taken or threatened by any governmental or regulatory
authority with respect to the presence of any Hazardous Materials on the
Premises or the migration thereof from or to other property, (b) any demands or
claims made or threatened by any party against Tenant or the Premises relating
to any loss or injury resulting from any Hazardous Materials, (c) any release,
discharge or non-routine, improper or unlawful disposal or transportation of any
Hazardous Materials on or from the Premises, and (d) any matters where Tenant is
required by law to give a notice to any governmental regulatory authority
respecting any Hazardous Materials on the Premises. Landlord shall have the
right (but not the obligation) to join and participate, as a party, in any legal
proceedings or actions affecting the Premises initiated in connection with any
environmental, health or safety law. At such times as Landlord may reasonably
request, Tenant shall provide Landlord with a written list identifying any
Hazardous Materials then used, stored, or maintained upon the Premises, the use
and approximate quantity of each such material, a copy of any material safety
data sheet ("MSDS") issued by the manufacturer therefor, written information
concerning the removal, transportation and disposal of the same, and such other
information as Landlord may reasonably require or as may be required by law. The
term "Hazardous Materials" as used herein, means any chemical, substance,
material or waste or component thereof which is now or hereafter listed, defined
or regulated as a hazardous toxic chemical, substance, material or waste or
component thereof by any federal, state or local governing or regulatory body
having jurisdiction, or which would trigger any employee or community
"right-to-know" requirements adopted by any such body, for which any such body
has adopted any requirements for the preparation or distribution of an MSDS.
If any Hazardous Materials are released, discharged or disposed of by
Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Premises in violation of the foregoing provisions,
Tenant shall immediately, properly and in compliance with applicable laws clean
up and remove the Hazardous Materials from the Premises and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense. Such clean up and removal work shall be
subject to Landlord's prior written approval (except in emergencies), and shall
include, without limitation, any testing, investigation, and the preparation and
implementation of any remedial action plan required by any governmental body
having jurisdiction or reasonably required by
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Landlord. If Tenant shall fail to comply with the provisions of this Article
within five (5) days after written notice by Landlord, or such shorter time as
may be required by law or in order to minimize any hazard to persons or
property, Landlord may (but shall not be obligated to) arrange for such
compliance directly or as Tenant's agent through contractors or other parties
selected by Landlord, at Tenant's expense (without limiting Landlord's other
remedies under this Lease or applicable law).
Section 17.3. The parties shall indemnify, defend and hold harmless each
other and their respective partners, employees and agents, and any successors
interest in the Premises, their directors, officers, employees and agents from
and against any and all loses, claims, damages, penalties and liability,
including all out-of-pocket litigation costs and reasonable attorneys' fees
arising out of the use, generation, storage, release or disposal of Hazardous
Materials by either party.
Section 17.4. The representations contained in this Article 17 shall
survive the expiration or earlier termination of this Lease.
ARTICLE XVIII: Assignment or Subletting of Premises
Section 18.1. Subletting. Tenant shall have the right to sublet all or any
portion of the Premises or grant licenses therein, without the consent of Land-
lord, provided (i) Tenant is not in default of the Lease beyond any applicable
cure period; (ii) Tenant provides Landlord with prior written notice of the
sublease or license, at least thirty (30) days prior to the commencement date of
the proposed sublease or license; (iii) Tenant delivers to Landlord an executed
copy of the sublease or license within fifteen days (15) of the commencement
date of the sublease or license; and (iv) Tenant remains liable to Landlord for
the obligations of Tenant under the Lease.
Section 18.2. Assignment. Tenant shall not be permitted to assign this
Lease, without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or conditioned. For purposes of this Lease, an assignment
shall not include any assignment to a parent, subsidiary or affiliate of Tenant,
or a transfer by merger, acquisition, sale, or transfer of substantially all of
its assets or operation of laws, provided that the surviving entity meets the
requirements set forth in Section 3.6 of the Lease and Tenant is not in default
of the Lease.
Section 18.3. Estoppels and Nondisturbance for Subtenant. Landlord shall,
at Tenant's reasonable request, within twenty (20) days of such request, (i)
provide Tenant with an estoppel certificate stating whether Landlord knows of
any defaults under this Lease at the time of any proposed subletting or
assignment; and (ii) provide to any subtenant to Tenant an agreement in
recordable form stating that Landlord will not disturb the possession of such
subtenant due to an early termination of this Lease.
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ARTICLE XIX: Holding Over
Section 19.1. If Tenant shall hold over after the expiration of the Term,
the tenancy shall be (i) on a month-to-month basis and shall be subject to all
of the terms, conditions, provisions and obligations of this Lease, except that,
commencing immediately following the expiration of the Term, each monthly
installment of Base Rent shall be one hundred twenty five percent (125%) of the
monthly Base Rent installment that applied to the last month of the Term and
(ii) deemed on Event of Default hereunder. In the event that the Tenant gives
the Landlord six (6) months prior written notice, it shall be permitted to hold
over for six (6) months after the expiration of the Term at a rental rate equal
to one hundred ten percent (110%) of the rent that is in effect prior to the
expiration of the Term.
ARTICLE XX: Surrender of Premises
Section 20.1. Upon the expiration or earlier termination of this Lease,
Tenant shall surrender the Premises in substantially as good condition as on the
Commencement Date except for loss or damages resulting from casualty,
condemnation, acts of God, ordinary wear and tear and such improvements,
alterations or additions made to the Premises as Tenant shall elect to
surrender. In the event any damage is done to the Premises in the removal of
Tenant's personal property from the Premises, Tenant shall promptly reimburse
Landlord for the reasonable cost of such repairs as are necessary to restore the
Premises to their original condition. Any furniture, fixtures, and machinery not
so removed upon expiration of this Lease or any extension thereof shall be
deemed to have been abandoned by Tenant and shall become Landlord's property.
ARTICLE XXI: Condemnation
Section 21.1. In the event that the whole or a substantial portion of the
Premises shall be taken under the power of eminent domain by any public or
quasi-public authority so as to preclude the use of the said Premises by Tenant
in the conduct of Tenant's business (in Tenant's reasonable judgment), then this
Lease shall terminate on the day that Tenant is required to transfer possession
of the Premises.
Section 21.2. In the event that a portion of the Premises shall be taken
under the power of eminent domain by a public or quasi-public authority, and
such taking does not substantially impair the usefulness of the Premises for the
purposes for which the same are hereby demised, (in Tenant's reasonable
judgment) Landlord shall make such repairs and alterations that may be necessary
in order to restore the Premises to a useful condition to Tenant, provided that
the total cost of such repairs, alterations, and restoration to be performed by
Landlord shall not exceed the amount of compensation awarded to Landlord in
connection with the taking under the power of eminent domain of the portion of
the Premises as hereinbefore provided. The Base Rent shall be reduced in
proportion to the portion of the Premises so taken until and unless subsequently
restored or repaired. The adjustment of rent to be made hereunder shall be made
as of the date Tenant is required to yield possession of a portion of the
Premises as hereinbefore provided.
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Section 21.3. All compensation awarded for any such taking of the fee and
the leasehold shall belong to and be the property of the Landlord; provided,
however, that the Tenant shall be entitled to any portion of the award made to
the Landlord or Tenant for loss of business and for the cost of removal of stock
and fixtures or any equipment installed at the cost and expense of Tenant or the
unamortized cost of any leasehold improvement made prior to the date of this
Lease.
Section 21.4. Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust covering
the Premises requires that the condemnation proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within thirty (30) days after
written notice of such requirement is delivered by any such holder, whereupon
all rights and obligations under this Lease shall terminate.
ARTICLE XXII: Waiver of Landlord
Section 22.1 If any action or proceeding is instituted or if other measures
are taken by Landlord and a compromise, part payment, or settlement thereof
shall be made, either before or after judgment, the same shall not constitute or
operate as a waiver by Landlord of any right, covenant, or provision of or under
this Lease or of any subsequent breach or breaches thereof nor of the Lease
itself Non-waiver of any default under or breach or violation of any provision
or covenant of this Lease shall constitute or operate as a waiver of such
provisions or covenant or of any subsequent default thereunder or breach or
violation thereof, and no delay, failure, or omission in exercising or enforcing
any right, privilege, or option under this Lease shall constitute a waiver,
abandonment, or relinquishment thereof or prohibit or prevent any election under
or enforcement or exercise of any provision, right, privilege, or option herein
contained or granted. No waiver of any provision hereof by Landlord shall be
deemed to have been made unless and until such waiver shall have been reduced to
writing and signed by Landlord. The receipt by Landlord of Base Rent with
knowledge of any breach or violation of or default under this Lease shall not
constitute or operate as a waiver of such breach, violation, or default. Payment
by Tenant or receipt by Landlord of a lesser amount than the Base Rent or other
sums due the Landlord shall operate only as a payment on account of Base Rent or
other sums. No endorsement or statement on any check or other remittance or in
any communication accompanying or relating to such payment shall operate as a
compromise or accord and satisfaction unless the same is approved in writing by
Landlord, and Landlord may accept such check, remittance, or payment without
prejudice to Landlord's right to recover the balance of said rent or other sums
due by Tenant and pursue any other remedy allowable by law or under this Lease.
ARTICLE XXII: Events of Default by Tenant
Section 23.1. The following events shall be deemed to be events of default
(each, an "Event of Default') by Tenant under this Lease:
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(a) If Tenant shall fail to pay any installment of the rent, or any
other payment or reimbursement to Landlord required herein, and shall not
cure such failure to make payment within ten (10) days after written notice
from landlord.
(b) If Tenant shall file a voluntary petition in bankruptcy or shall
be adjudicated a bankrupt or insolvent or, in any action or proceeding, if
Tenant shall file any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future applicable federal, state or other
statute or law, or if Tenant shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant or of all or
substantially all of its properties;
(c) If, within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization, readjustment,
liquidation, dissolution or similar relief under any present or future
federal bankruptcy act or any other present or future applicable federal,
state or other statute or law, such proceeding shall not have been
dismissed, or if, within sixty (60) days after the appointment, without
consent or acquiescence of Tenant, of any trustee, receiver or liquidator
of Tenant or of all or substantially all of its properties, such
appointment shall not have been vacated or stayed on appeal or otherwise or
if, within sixty (60) days after the expiration of any such stay, such
appointment shall not have been vacated;
If Tenant shall fail to comply with any term, provision, or covenant
of this Lease, other than the payment of rent and other charges, and shall
not cure such failure within thirty (30) days after written notice thereof
from Landlord, or if cure cannot be made within thirty (30) days, if Tenant
shall fail to begin curing such failure within the thirty (30) days and
shall fail to pursue diligently the cure of such failure; and
If Tenant fails to provide a financial statement to Landlord as
required by Section 3.6 or if Tenant's Liquidity ratio is less than 1.2:1
as reported on a quarterly basis or if Tenant fails to maintain a ratio of
EBIDA to interest charges of 2.1 as reported on a yearly basis.
ARTICLE XXIV: Landlord's Remedies
Section 24.1. If an Event of Default shall have occurred and shall be
continuing, then or at any time thereafter:
(a) The present worth of the Base Rent for the entire unexpired
balance of the term of this Lease, as well as all other charges, payments,
costs and expenses herein agreed to be paid by Tenant, or at the option of
Landlord any part thereof, and also all costs and brokerage commissions (if
any) shall, in addition to any and all installments of Base Rent already
due and payable and in arrears and/or any other charge or payment therein
reserved, included or agreed to be treated or collected as Base Rent and/or
any other charge, expense or cost herein agreed to be paid by Tenant which
may be due and payable and in arrears, be taken to be due and payable and
in arrears as if by the terms and provisions of this Lease the whole
balance of unpaid Base Rent and other charges, payments, impositions, costs
and expenses were on that date payable in advance. "Present worth" shall be
computed by discounting the amount of the Base Rent
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which would have become due during the remainder of the Term to present
value at a rate equal to one percentage point above the discount rate then
in effect at the Federal Reserve Bank;
(b) Landlord may give Tenant notice of Landlord's intention to
terminate this Lease, without any right by Tenant to reinstate its rights
by payment of Base Rent due or other performance of the terms and
conditions hereof, on a date specified in such notice, which date shall not
be less than fifteen (15) days after the date of giving of such notice, and
upon the giving of such notice, the Term and the estate hereby granted
shall expire on the date so specified in said notice with the same effect
as if the date specified in said notice were the date hereinbefore fixed
for the expiration of the Lease Term.
(c) With or without terminating the Lease, the Landlord may reenter
and repossess the Premises, or any part thereof, and lease them to any
other person or entity upon such terms as Landlord shall deem reasonable,
for a term within or beyond the term of this Lease; provided, that any such
reletting prior to termination shall be for the account of Tenant, and
Tenant shall remain liable for (a) all Base Rent, reasonable out-of-pocket
or other sums which would be payable under this Lease by Tenant in the
absence of such expiration, termination or representation, less (b) the net
proceeds, if any, of any reletting effected for the account of Tenant after
deducting from such proceeds all of Landlord's reasonable out-of-pocket
expense in connection with such reletting (including, without limitation,
all repossession costs, brokerage commissions, legal expenses, attorneys'
fees and expenses, reasonable alteration costs, and expenses of preparation
of such reletting).
(d) In addition to, and not in lieu of any of the foregoing rights
granted to Landlord;
(i) When this Lease or Tenant's right of possession shall be
terminated by covenant or condition broken, or for any other reason,
either during the Initial Term of this Lease or any renewal or
extension thereof, and also when and as soon as the term hereby
created or any extension thereof shall have expired, and upon twenty
(20) days prior written notice to Tenant by Landlord, it shall be
lawful for any attorney as attorney for Tenant to file an agreement
for entering in any competent Court an action to confess judgment in
ejectment against Tenant and all persons claiming under Tenant,
whereupon, if Landlord so desires, a writ of Execution or of
Possession may issue forthwith, without any prior writ of proceedings,
whatsoever, and provided that if for any reason after such action
shall have been commenced the same shall be determined and the
possession of the Premises hereby demised remain in or be restored to
Tenant, Landlord shall have the right upon any subsequent default or
defaults, or upon the termination of this Lease as hereinbefore set
forth, to bring one or more action or actions as hereinbefore set
forth to recover possession of the said Premises.
In any action to confess judgment in ejectment, Landlord shall
first cause to be filed in such action an affidavit made by it or
someone acting for it setting forth the facts necessary to authorize
the entry of judgment, of which facts such affidavit shall be
conclusive evidence, and if a true copy of this Lease (and of the
truth of the copy
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such affidavit shall be sufficient evidence) be filed in such action,
it shall not be necessary to file the original as a warrant of
attorney, any rule of Court, custom or practice to the contrary
notwithstanding.
______(INITIAL). TENANT WAIVER. TENANT SPECIFICALLY ACKNOWLEDGES THAT
TENANT HAS VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVED CERTAIN DUE PROCESS
RIGHTS TO A PREJUDGMENT HEARING BY AGREEING TO THE TERMS OF THE FOREGOING
PARAGRAPHS REGARDING CONFESSION OF JUDGMENT. TENANT FURTHER SPECIFICALLY AGREES
THAT IN THE EVENT OF DEFAULT, LANDLORD MAY PURSUE MULTIPLE REMEDIES INCLUDING
OBTAINING POSSESSION PURSUANT TO A JUDGMENT BY CONFESSION. FURTHERMORE, TENANT
SPECIFICALLY WAIVES ANY CLAIM AGAINST LANDLORD AND LANDLORD'S COUNSEL FOR
VIOLATION OF TENANT'S CONSTITUTIONAL RIGHTS IN THE EVENT THAT JUDGMENT IS
CONFESSED PURSUANT TO THIS LEASE.
Section 24.2. If this Lease is assigned or if the Premises, or any part
thereof, are at the time of default sublet or leased by Tenant to others,
Landlord may, as Tenant's agent, collect rents due from any subtenant or other
tenant and apply such rents to the Rent, and other amounts due hereunder without
in any way affecting Tenant's obligation to Landlord hereunder. Such agency,
being given for security, is hereby declared to be irrevocable.
Section 24.3. No expiration or termination of this Lease Term pursuant to
subsection 24.1 (b) above or by operation of law or otherwise (except as
expressly provided herein), and no repossession of the Premises or any part
thereof pursuant to subsection 24.1 (b) above or otherwise shall relieve Tenant
of its liabilities and obligations hereunder, all of which shall survive such
expiration, termination or repossession, and Landlord may, at its option,
institute an action to collect Base Rent and other charges due hereunder at any
time and from time to time as and when such charges accrue.
Section 24.4. With respect to any portion of the Premises which is vacant
or which is physically occupied by Tenant, Landlord may remove all persons and
property therefrom, and store such property in a public warehouse or elsewhere
at the cost of and for the account of Tenant (all of which Tenant expressly
waives) and without being deemed guilty of trespass or becoming liable for any
loss or damage which may be occasioned thereby.
Section 24.5. Upon the occurrence of any Event of Default, Landlord shall
have the option to pursue any and all rights and remedies available hereunder or
at law or in equity. All remedies available to Landlord hereunder and otherwise
available at law or in equity shall be cumulative and concurrent. No
determination of this Lease nor taking or recovering possession of the Premises
shall deprive Landlord of any remedies or actions against Tenant for rent, for
charges, or for damages for the breach of any term, covenant or condition herein
contained, nor shall the bringing of any such action for rent, charges
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or breach of term, covenant or condition, nor the resort to any other remedy or
right for the recovery of rent, charges or damages for such breach be construed
as a waiver or release of the right to insist upon the forfeiture and to obtain
possession.
Section 24.6. Any Base Rent or additional rent (including charges
collectible as Real Estate Taxes) which is overdue for a period of more than
twenty (20) days and for which Tenant has received written notice and
opportunity to cure, shall bear interest at the rate of ten (10%) per annum
until paid.
Section 24.7. With respect to an exercise of Landlord's rights hereunder,
Landlord shall use all commercially reasonable efforts to mitigate its damage.
Section 24.8. Notwithstanding anything contained herein to the contrary,
the Landlord Shall give Tenant twenty (20) days prior written notice before
exercising any self-help remedies.
ARTICLE XXV: Landlord's Cure of Default by Tenant; Reimbursement of Expenses
Section 25.1. If Tenant defaults in making any payment or in doing any act
herein required, then Landlord may, but need not, make such payment or do such
act. If Landlord makes any such payment or incurs any charge or expense on
behalf of Tenant under the terms of this Lease, the amount of the payment or
expense, with interest thereon at ten percent (10%) per annum, beginning thirty
(30) days after a written invoice therefor is sent by Landlord, shall be paid
by Tenant to Landlord, shall constitute additional rent hereunder, and shall be
due and payable immediately when Landlord sends a written invoice therefor;
provided, however, that the making of any such payment or the doing of such act
by Landlord shall not cure such default by Tenant, or estop Landlord from
pursuing any remedy to which Landlord would otherwise be entitled, provided
however, that the payment of such invoice hereunder by Tenant shall cure such
default.
ARTICLE XXVI: Subordination
Section 26.1.Tenant shall subordinate this Lease to any recorded existing
or future first mortgage or first deed of trust (which terms shall include both
construction and permanent financing) that now or hereafter encumber the
Premises, and to all renewals, extensions, modifications, consolidations,
replacements, recastings, and/or refinancings thereof by executing and
delivering to Landlord a non-disturbance, subordination and attornment
agreement in recordable form and otherwise in form and substance reasonably
satisfactory to Tenant.
Section 26.2. Tenant agrees that in the event that any proceedings are
brought for the foreclosure of such mortgage or deed of trust, Tenant shall
attorn to the purchaser at such foreclosure sale, if requested to do so by the
purchaser, and to recognize the purchaser as Landlord under this Lease.
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Section 26.3. Notwithstanding the foregoing, Landlord shall cause any
trustee or mortgagee to execute a non-disturbance, subordination and attornment
agreement granting unto Tenant the right to continue peacefully in possession of
the Premises in the event of foreclosure under any such deed of trust or
mortgage so long as Tenant is not in default under this Lease, for which it has
received written notice. Such agreement shall be contingent upon Tenant's (or
Tenant's successor or assigns) agreement to atom to and recognize any such
trustee, mortgagee, or purchaser in foreclosure, as the successor in interest to
the Landlord in the event of such foreclosure.
ARTICLE XXVII: Estoppel Certificates
Section 27.1. Tenant agrees, upon no less than thirty (30) days written
notice by Landlord, to execute, acknowledge, and deliver to Landlord, a
statement in writing certifying (i) that this Lease is unmodified and in full
force and effect, or, if there have been modifications, that this Lease is in
full force and effect as modified, and stating any such modifications; (ii)
certifying that Tenant has accepted possession of the Premises, and that any
improvements required by the terms of this Lease to be made by Landlord have
been completed to the satisfaction of Tenant; (iii) that no rent under this
Lease has been paid more than thirty (30) days in advance of its due date; (iv)
the address to which notices to Tenant should be sent; (v) certifying that
Tenant, as of the date of any such certification, has no charge, lien, or claim
of set-off under this Lease, or otherwise, against rents or other charges due or
to become due hereunder; and (vi) stating whether or not, to the best of
Tenant's knowledge, Landlord is in default in the performance of any covenant,
agreement, or condition contained in this Lease, and if so, specifying each such
default of which Tenant may have knowledge. Any such statement delivered
pursuant hereto may be relied upon by any owner of the Premises, any prospective
purchaser of the Premises, any mortgagee or prospective mortgagee of the
Premises or of Landlord's interest, or any prospective assignee of any such
mortgagee.
ARTICLE XXIII: Succession
Section 28.1. This Lease and all of the covenants, agreements, conditions,
and provisions herein contained shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors, and assigns, as
the case may be. The term "Landlord" as used herein shall include the heirs,
successors, and assigns of Landlord and assigns of the reversionary estate under
this Lease. The term "Tenant" as used herein shall include the permitted
successors of Tenant and the permitted assigns of the entire leasehold estate
under this Lease.
ARTICLE XXIX: Notices
Section 29.1. Any notices required or permitted by this Lease to be given
by either party to the other shall be in writing and shall be either personally
delivered or sent by registered or certified mail properly addressed, or by
nationally recognized overnight courier such as Federal Express, to the said
parties, their agents, representatives,
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successors, or assigns, at the last known address of such addressee, and the
date of so depositing in the U.S. mail, personal delivery, or delivery by such
common carrier shall be deemed the date of giving such notices. Until further
notice in writing to the contrary, all notices to Landlord and Tenant shall be
sent to the following addresses:
If to Landlord: BET Investments IV, Inc.
2600 Philmont Avenue, Suite 212
Huntingdon Valley, PA 19006
Attn: Mr. Bruce E. Toll
With a copy to: Michael P. Markman, Esquire
(at the same address)
If to Tenant: Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Norristown, PA
With a copy to: Scott J. Ciocco, Esquire
Pepper Hamilton LLP
Liberty View Building, Suite 500
457 Haddonfield Road
Cherry Hill, NJ 08002
ARTICLE XXX: No Partnership
Section 30.1. Nothing contained in this Lease shall be construed to create
a partnership or joint venture of or between Landlord and Tenant, or create any
other relationship between those parties other than that of Landlord and Tenant.
ARTICLE XXXI: No Representations by Landlord
Section 31.1 Neither Landlord nor any agent or employee of Landlord has
made any representations or promises with respect to the Premises except as
herein expressly set forth, and no rights, privileges, easements, or licenses
are acquired by Tenant except as herein set forth.
ARTICLE XXXII: Necessary Approvals and Lease Modifications
Section 32.1. Should any of Landlord's present or future mortgagees require
modification of this Lease's terms in connection with any financing of any
portion of the Premises or improvements thereto, Tenant agrees, at no cost to
Landlord and without demand for consideration of any kind, except as offered by
Landlord, to execute an amendment to this Lease incorporating such reasonable
mortgagee's modifications provided, however, that Tenant shall not be required
to modify any provision of this Lease increasing the sums payable by Tenant
under this Lease, reducing or extending the Term, reducing or increasing the
area of the Premises
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<PAGE>
or increasing any of Tenant's material obligations under the Lease, or
materially affecting Tenant's use of the Premises or rights hereunder.
ARTICLE XXXIII: Miscellaneous
Section 33.1. Words of any gender used in this Lease shall be construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
Section 33.2. Each party agrees to furnish to the other, promptly upon
demand, both appropriate documentation evidencing the valid creation and
existence of such party and a corporate resolution, proof of due authorization
by partners, or other appropriate documentation evidencing the due authorization
of such party to enter into this Lease.
Section 33.3. The captions inserted in this Lease are for convenience only
and in no way define, limit, or otherwise describe the scope or intent of any
provision hereof
Section 33.4. Within ten (10) days following any transfer by Landlord of
its ownership interest in the Property, Landlord shall provide Tenant with
written notice of such transfer of the Property and the name and address of the
successor Landlord to whom Tenant should send future rent payments and notices
(the "Transfer Notice"). In the event that a predecessor Landlord fails to
provide the Transfer Notice, (a) Tenant shall not be liable to any successor
Landlord for any rent payments paid to a predecessor Landlord; and (b) any
successor Landlord shall be bound by any notice sent to a predecessor Landlord.
Section 33.5. This Lease may be executed in several counterparts, all of
which constitute one and the same instrument.
Section 33.6. The language of this Lease shall be construed according to
its normal and usual meaning and not strictly for or against either Landlord or
Tenant. The rule of construction which allows a court to construe a document
more strictly against its author shall not govern the interpretation of this
Lease.
Section 33.7. No right or remedy herein conferred upon or reserved to
either party is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to any other right or
remedy given by this Lease or now or hereafter existing at law or in equity. The
failure of either party to insist upon the strict performance of any obligation
shall not be deemed a waiver thereof.
Section 33.8. If any provision of this Lease, or its application to any
situation, shall be invalid or unenforceable to any extent, the remainder of
this Lease, or the application thereof to situations other than as to which it
is invalid or unenforceable, shall not be affected thereby, and every provision
of this Lease shall be valid and enforceable to the fullest extent permitted by
law.
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<PAGE>
Section 33.9. This Lease constitutes the entire agreement between the
parties and may be amended only by written agreement of the parties. No
representations, inducements, promises or agreements, oral or otherwise,
between Landlord and Tenant or any of their respective brokers, employees or
agents, not embodied herein, shall be of any force or effect.
Section 33.10. Landlord and Tenant agree that in fulfilling all terms and
conditions of this Lease, time is of the essence.
Section 33.11. This Lease shall be governed and construed under the laws of
the Commonwealth of Pennsylvania. The parties acknowledge that this Lease has
been drafted, negotiated, made, delivered and consummated in the Commonwealth of
Pennsylvania. The parties hereby waive any objection to the venue of any action
filed in any state or federal court of Montgomery or Philadelphia County in the
Commonwealth of Pennsylvania and waive any claim of forum non convenience or for
transfer of any such action to any other court.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound
hereby, have signed this Lease as of the day and year first above written.
LANDLORD
BET INVESTMENTS IV, L.P.
By Its Sole General Partner
BET Investments IV, Inc.
By: /s/ Michael Markman
----------------------------
Name: Michael Markman
Title: Executive Vice President
TENANT
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Justine Lien
----------------------------
Name: Justine Lien
Title: Dir of Finance and Admin
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<PAGE>
EXHIBIT "A-1": Premises
A one and two story building containing approximately 61,000 square feet.
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<PAGE>
EXHIBIT "A-2": Land
The Property known as 2435 Boulevard Of Generals, Norristown, PA,
known as West Norriton Township, Block 38, Unit 88
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<PAGE>
FIRST AMENDMENT TO MASTER LEASE
THIS FIRST AMENDMENT TO MASTER LEASE dated this 23rd day of February, 1999, by
and between BET INVESTMENTS IV, a Pennsylvania limited partnership ("Landlord")
INTEGRATED CIRCUIT SYSTEMS, INC., a Pennsylvania corporation
("Tenant")
WHEREAS, Landlord and Tenant desire to amend certain terms, covenants and
conditions of the Lease as set forth in the recitals as stated more specifically
below with all other terms and conditions remaining in full force and effect
throughout the entire term of this Second Amendment To Lease.
WITNESSETH:
NOW THEREFORE, in consideration of the foregoing and of the mutual promises
hereinafter contained, Landlord and Tenant, intending to be legally bound,
hereby agree with each other as follows:
1. The preamble of this Agreement is hereby incorporated herein as though
rewritten at length.
2. The following language is hereby inserted at the end of Section 10.1 of the
Lease:
Notwithstanding anything to the contrary set forth in the Lease, the Tenant
shall be solely responsible for the repairs to the Building and the Land listed
on Exhibit B attached hereto and shall complete such repairs and replacements at
its sole cost and expense on or before December 31, 1999. If the Tenant fails to
comply with foregoing it shall a default under the Lease.
3. The following language is hereby inserted at the end of Section 10.2 of the
Lease:
Notwithstanding anything to the contrary set forth in the Lease, it is
understood and agreed that roof repairs shall not be considered structural in
nature and the Landlord shall not be responsible for roof repairs to the
Premises. In the event that the Landlord is required to replace the entire roof,
the Landlord shall proceed accordingly, but the Tenant shall be responsible for
reimbursing the Landlord the actual costs allocable to the period in which the
tenant occupies the Premises following such repairs, such allocation determined
by amortizing such costs over the useful life of the new roof, not to exceed
twelve (12) years.
<PAGE>
Except as otherwise provided in the Lease, the Landlord and Tenant intend
this to be a "net" lease pursuant to which the Rent payable hereunder shall be
absolutely net return to the Landlord for the term of this Lease, undiminished
by Real Estate Taxes, insurance expenses, operating expenses, maintenance or
repair expenses or any other charges of any kind or nature whatsoever.
4. All other terms and conditions of the Lease not modified herein shall remain
unchanged.
IN WITNESS WHEREOF, the parties hereto have duly this Agreement as of the
date and year above written.
LANDLORD
BET INVESTMENTS IV, L.P.
By Its Sole General Partner
BET Investments IV, Inc.
By: /s/ Michael Markman
----------------------------
Name: Michael Markman
Title: Executive Vice President
TENANT
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Justin Lien
----------------------------
Name: Justin Lien
Title: Director of Finance and Admin
<PAGE>
Exhibit B
(See Attached Summaries)
<PAGE>
Immediate Repairs Cost Estimate Total GSF: 61,000 Square feet
The Valley Forge Business Center No of Bldgs: 1
Norristown, Pennsylvania Reserve Term: 12 years
52702 Property Age: 13 years
January 27, 1999
<TABLE>
<CAPTION>
See Item Description Quantity U Cost I-Totals Comments
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<S> <C> <C> <C> <C> <C>
3.2 Itemized costs are provided in
Section 3.2 of the report.
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5.2 Asphalt pavement (initial seal coat) 52,000 SF $0.11 $5,720
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5.3 Earthwork, grading & erosion control 1 LS $250.00 $250
- ------------------------------------------------------------------------------------------------------------------------------------
5.3 Stormwater retention basin maintenance 1 LS $1,500.00 $1,500
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6.4 Exterior walls, stucco or EIFS 10,800 SF $1.25 $13,500
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6.4 Exterior walls, masonry cleaning/repointing 2,000 SF $0.50 $1,000
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total Immediate Repairs $21,970
- -------------------------------------------------------------------------------------------
Cost per square foot
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (the "Amendment"), is made this 13th day of
April, 1999, by and between BET Investments, IV, a Pennsylvania limited
partnership with an address of 2600 Philmont Avenue, Suite 212, Huntingdon
Valley, Pennsylvania (the "Landlord"), and Integrated Circuit Systems, Inc., a
Pennsylvania corporation with an address of 2435 Boulevard of the Generals,
Norristown, Pennsylvania ("Tenant"), and amends that certain Lease between
Landlord and Tenant dated as of January 29, 1999, for the property commonly
known as 2435 Boulevard of the Generals, Norristown, Pennsylvania (the
"Property").
WITNESSETH:
WHEREAS, Landlord by way of assignment dated April 12, 1999, from BET
Investments, III, a Pennsylvania limited partnership with an address of 2600
Philmont Avenue, Suite 212, Huntingdon Valley, Pennsylvania, and Tenant are
parties to a certain Agreement of Sale dated as of January 18, 1999, amended by
way of letter Amendment dated February 12, 1999, Second Amendment to Agreement
of Sale dated March 5, 1999, Third Amendment to Agreement of Sale dated March
15, 1999, and Fourth Amendment to Agreement of Sale dated the same date herewith
(the "Agreement"), wherein Landlord has agreed to purchase from Tenant and lease
back to the Tenant, the Property, subject to the terms and conditions of the
Agreement; and
WHEREAS, the Tenant is the owner of the Property and occupying the Property
pursuant to an Installment Sale Agreement dated September 25, 1992, as amended
and restated April 29, 1994 (the "Installment Agreement"), wherein the
Montgomery County Industrial Development Corporation, a Pennsylvania nonprofit
corporation ("Montgomery County") agreed to sell to Tenant, and Tenant agreed to
purchase from Montgomery County, the Property pursuant to the terms thereof; and
WHEREAS, the Property is currently the subject of an Open-End Mortgage
dated April 29, 1994, by and between Montgomery County and The Pennsylvania
Industrial Development Authority, a Pennsylvania public body corporate and
politic ("PIDA"), wherein Montgomery County mortgaged the Property to PIDA, to
secure a Note dated the same date therewith between PIDA and Montgomery County,
pursuant to a Loan Agreement between PIDA and Montgomery County dated the same
date therewith (the Note, Open-End Mortgage, Loan Agreement, Installment
Agreement and all other documents connected therewith are hereinafter
collectively referred to as the "Loan Documents" or the "PIDA Loan"); and
WHEREAS, in connection with the closing under the Agreement, the Landlord
and Tenant have entered into a Fourth Amendment to Agreement of Sale dated the
same date herewith wherein Landlord agreed to assume all of the rights,
responsibilities, obligations and liabilities of Seller under the Loan
Documents, and obtained a full release of all obligations and
<PAGE>
liabilities of Tenant under the Loan Documents as partial payment of the
Purchase Price (the "Assignment"); and
WHEREAS, pursuant to and as a condition to the Agreement, and specifically
in consideration of Tenant's execution of the Fourth Amendment to Agreement of
Sale, the parties have agreed to enter into this Amendment;
NOW THEREFORE:
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by Landlord and Tenant, and intending to be legally bound
hereby, Landlord and Tenant hereby agree as follows:
1. The Lease is hereby amended to reflect that the Annual Base Rental for
Year 1 shall be Five Hundred Eighty Five Thousand Dollars and No/100
($585,000.00) and as a result the first month's rental shall be reduced to
Twenty Five Thousand Eight Hundred Thirty Three Dollars and Thirty Three Cents
($25,833.33) pro rated from April 13, 1999.
2. The Lease is hereby amended to reflect that provided that the Tenant is
not in default of the Lease for which it has received appropriate notice and/or
opportunity to cure, and in the event that PIDA has not in connection with the
Assignment required that the PIDA Loan be paid in full prior to March 1, 2007,
the Tenant shall have the right to deduct Fifty Five Thousand Dollars and No/100
from the Annual Base Rent that would otherwise be due for the month of March,
2007. In the event that PIDA has required that the PIDA Loan be terminated, paid
off or released prior to such date, this Section shall be null and void and of
no further force or effect and the Tenant shall not have the right to deduct
such amount from the Annual Base Rent.
3. Except as modified by this Amendment, the Lease shall remain unmodified,
in full force and effect. If there is any conflict between the terms and
provisions of this Amendment and the terms and provisions of the Lease, the
terms and provisions of this Amendment shall prevail.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on
the date first above written.
WITNESS/ATTEST: SELLER:
Integrated Circuit Systems, Inc.,
a Pennsylvania corporation
____________________ By: /s/ Justine Lien
--------------------------------------------
Justine Lien, Director of
Administration and Finance
BUYER:
BET Investments, IV, L.P.,
a Pennsylvania limited partnership
By: BET Investments IV, Inc., a Pennsylvania
corporation, its general partner
____________________ By: /s/ Michael P. Markman
---------------------------------------------
Michael P. Markman, Executive Vice President
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<PAGE>
EXHIBIT 10.7
------------------------------------------
------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ICS MERGER CORP.
AND
INTEGRATED CIRCUIT SYSTEMS, INC.
January 20, 1999
------------------------------------------
------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
THE MERGER.................................................................... 1
Section 1.1 The Merger...................................................... 1
Section 1.2 Closing and Effective Time...................................... 2
Section 1.3 Effects of the Merger........................................... 2
Section 1.4 Articles of Incorporation and By-Laws of the Surviving
Corporation..................................................... 2
Section 1.5 Directors....................................................... 2
Section 1.6 Officers........................................................ 2
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE COMPANY....................... 3
Section 2.1 Effect on Capital Stock.......................................... 3
(a) Merger Consideration............................................. 3
(b) Conversion of Shares............................................. 3
(c) Cancellation of Treasury Stock................................... 3
(d) Dissenting Shares................................................ 3
Section 2.2 Options; Stock Plans............................................. 4
Section 2.3 Payment for Common Shares........................................ 4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 6
Section 3.1 Organization and Qualification; Subsidiaries..................... 6
Section 3.2 Capitalization; Subsidiaries..................................... 7
Section 3.3 Authority Relative to this Agreement............................. 7
Section 3.4 No Violation..................................................... 8
Section 3.5 SEC Reports and Financial Statements............................. 9
Section 3.6 Compliance with Applicable Laws.................................. 9
Section 3.7 Litigation....................................................... 10
Section 3.8 Information...................................................... 10
Section 3.9 Certain Approvals................................................ 10
Section 3.10 Employee Benefit Plans........................................... 10
Section 3.11 Taxes............................................................ 11
Section 3.12 Environmental Matters............................................ 12
Section 3.13 Absence of Certain Changes....................................... 14
Section 3.14 Brokers.......................................................... 15
Section 3.15 Opinion of Investment Banker..................................... 15
Section 3.16 Material Contracts............................................... 16
Section 3.17 Board Recommendation............................................. 16
Section 3.18 Required Company Vote............................................ 17
Section 3.19 Intellectual Property............................................ 17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.20 Related Party Transactions....................................... 18
Section 3.21 State Takeover Statutes.......................................... 18
Section 3.22 Labor Relations and Employment................................... 18
Section 3.23 Year 2000........................................................ 19
Section 3.24 Real Estate...................................................... 19
(a) Owned Properties................................................. 19
(b) Leased Properties................................................ 20
(c) Real Property Disclosure......................................... 20
(d) No Proceedings................................................... 20
(e) Current Use...................................................... 20
(f) Condition and Operation of Improvements.......................... 21
(g) Permits.......................................................... 21
Section 3.25 Absence of Certain Changes or Events with Respect to the Company. 21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ICS.......................................... 21
Section 4.1 Organization and Qualification................................... 21
Section 4.2 Authority Relative to this Agreement............................. 22
Section 4.3 No Violation..................................................... 22
Section 4.4 Information...................................................... 22
Section 4.5 Financing........................................................ 22
Section 4.6 Pennsylvania Law................................................. 23
Section 4.7 Beneficial Ownership of Shares................................... 23
Section 4.8 Brokers.......................................................... 23
Section 4.9 Formation of ICS; No Prior Activities............................ 23
Section 4.10 Litigation....................................................... 23
ARTICLE 5
COVENANTS...................................................................... 23
Section 5.1 Conduct of Business of the Company............................... 23
Section 5.2 Access to Information............................................ 25
Section 5.3 Efforts.......................................................... 25
Section 5.4 Title Insurance and Surveys...................................... 27
Section 5.5 Public Announcements............................................. 27
Section 5.6 Employee Benefit Arrangements.................................... 28
Section 5.7 Indemnification; Directors' and Officers' Insurance.............. 28
Section 5.8 Notification of Certain Matters.................................. 29
Section 5.9 State Takeover Laws.............................................. 29
Section 5.10 No Solicitation.................................................. 29
Section 5.11 Interim Liabilities.............................................. 31
Section 5.12 Reports.......................................................... 31
Section 5.13 Shareholders' Meeting............................................ 31
Section 5.14 Conveyance Taxes................................................. 32
Section 5.15 Delisting........................................................ 32
Section 5.16 Solvency Letters................................................. 32
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER..................................... 32
Section 6.1 Conditions...................................................... 32
(a) Shareholder Approval............................................ 32
(b) Solvency Letters................................................ 32
(c) Orders and Injunctions.......................................... 33
(d) Illegality...................................................... 33
(e) HSR Act......................................................... 33
Section 6.2 Conditions to Obligations of ICS................................ 33
(a) Representations and Warranties.................................. 33
(b) Performance of Obligations of the Company....................... 33
(c) Consents, Etc................................................... 33
(d) No Litigation................................................... 34
(e) Financing....................................................... 34
Section 6.3 Conditions to Obligation of the Company......................... 34
(a) Representations and Warranties.................................. 34
(b) Performance of Obligations of ICS............................... 34
ARTICLE 7
TERMINATION; AMENDMENTS; WAIVER.............................................. 35
Section 7.1 Termination..................................................... 35
Section 7.2 Effect of Termination........................................... 36
Section 7.3 Fees and Expenses............................................... 36
Section 7.4 Amendment....................................................... 37
Section 7.5 Extension; Waiver............................................... 37
ARTICLE 8
MISCELLANEOUS................................................................ 37
Section 8.1 Non-Survival of Representations and Warranties.................. 37
Section 8.2 Entire Agreement; Assignment.................................... 37
Section 8.3 Validity........................................................ 38
Section 8.4 Notices......................................................... 38
Section 8.5 Governing Law................................................... 39
Section 8.6 Descriptive Headings............................................ 39
Section 8.7 Counterparts.................................................... 39
Section 8.8 Parties in Interest............................................. 39
Section 8.9 Certain Definitions............................................. 39
Section 8.10 Specific Performance............................................ 40
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January
20, 1999, by and between ICS Merger Corp., a Pennsylvania corporation ("ICS"),
and Integrated Circuit Systems, Inc., a Pennsylvania corporation (the
"Company").
WHEREAS, the respective Boards of Directors of ICS and the Company
have approved the merger of ICS with and into the Company, as set forth below
(the "Merger"), in accordance with the Business Corporation Law of the
Commonwealth of Pennsylvania (the "BCL") and upon the terms and subject to the
conditions set forth in this Agreement, holders of shares of common stock, no
par value, of the Company (the "Common Shares") issued and outstanding
immediately prior to the Effective Time (as defined below) will be entitled,
subject to the terms hereof and other than as set forth herein, the right to
receive cash in this Agreement or, in the case of certain specifically
designated holders of Common Shares, the right to receive shares of common stock
of the Surviving Corporation (as defined below) (the "Rollover Shares");
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, in light of and subject to the terms and conditions set forth herein, (i)
determined that (A) the consideration to be paid for each Common Share (except
for Rollover Shares) in the Merger (as hereinafter defined) is fair to the
shareholders of the Company, and (B) the Merger is otherwise in the best
interests of the Company and its shareholders, and (ii) resolved to approve and
adopt this Agreement and the transactions contemplated hereby and to recommend
approval and adoption by the shareholders of the Company of this Agreement;
WHEREAS, the Merger requires the vote of a majority of the votes cast
by all of the issued and outstanding Common Shares entitled to vote for the
approval thereof (the "Company Shareholder Approval");
WHEREAS, ICS and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger, and also to
prescribe various conditions to the Merger; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, ICS and
the Company agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the BCL, at the Effective Time ICS
shall be merged with and into the Company. Following the Merger,
<PAGE>
the separate corporate existence of ICS shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation").
Section 1.2 Closing and Effective Time. The closing of the Merger
(the "Closing") will take place at 10:00 a.m., local time, on the fifth business
day after satisfaction or waiver of all of the conditions set forth in Article 4
of this Agreement (other than conditions that are to be satisfied at the
Closing, which shall be satisfied or waived at the Closing) or such other date
and time as ICS and the Company may agree upon (the "Closing Date"), at the
offices of Kirkland & Ellis, New York, New York. Immediately following the
Closing the parties hereto shall cause the Merger to become effective by filing
Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania in accordance with the relevant provisions of the BCL, and the
parties shall take such other and further actions as may be required by law to
make the Merger effective. The time the Merger becomes effective in accordance
with applicable law is referred to herein as the "Effective Time."
Section 1.3 Effects of the Merger. The Merger shall have the
effects set forth in the BCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and ICS shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
ICS shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Articles of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Articles of Incorporation, as amended, of the
Company, as in effect immediately prior to the Effective Time and as further
amended to provide for the number and types of shares of capital stock
designated on the Rollover Schedule (as hereinafter defined), shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
in accordance with the provisions thereof and hereof and applicable law.
(b) The By-Laws of the Company in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation until amended, subject to
the provisions of Section 5.7 of this Agreement, in accordance with the
provisions thereof and applicable law.
Section 1.5 Directors. Subject to applicable law, the directors of
ICS immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
Section 1.6 Officers. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
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<PAGE>
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE COMPANY
Section 2.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Common Shares or any shares of capital stock of ICS:
(a) Merger Consideration. The Merger Consideration shall be
equal to $21.25 per share (the "Merger Consideration").
(b) Conversion of Shares.
(i) Each issued and outstanding Common Share (except
for (x) Dissenting Shares (as defined herein) and (y) those Common Shares held
by those holders of record listed in the Rollover Schedule, but only up to the
aggregate levels indicated in such Rollover Schedule (the "Rollover Shares"))
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive from ICS the Merger
Consideration without interest upon surrender of the certificate formerly
representing such Common Share in the manner provided in, and otherwise in
accordance with, Section 2.3 hereof. All such Common Shares, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
Common Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor upon the surrender of such
certificate in the manner provided in, and in accordance with, Section 2.3
hereof.
(ii) At the Effective Time, (i) each Rollover Share
and (ii) each share of common stock, par value $.01 per share, of ICS issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become such number and type of shares of the Surviving Corporation as
shall be designated on a schedule (the "Rollover Schedule") to be provided by
ICS to the Company and consented to in writing by each shareholder listed
thereon as to such shareholder's shares, prior to February 10, 1999.
(c) Cancellation of Treasury Stock. Each Common Share that
is owned by the Company or by any wholly owned subsidiary of the Company shall
automatically be canceled and retired and shall cease to exist, and no cash or
other consideration shall be delivered or deliverable in exchange therefor.
(d) Dissenting Shares. Common Shares issued and outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
payment of the fair value for such holder's Common Shares as determined by
appraisal for such Common Shares in accordance with the BCL prior to the
Effective Time ("Dissenting Shares") shall not be converted into, or be
exchangeable for, a right to receive the Merger Consideration, unless and until
such holder shall have failed to perfect or shall have withdrawn or otherwise
lost such holder's right to appraisal. If after
-3-
<PAGE>
the Effective Time such holder shall have failed to perfect or shall have
withdrawn or lost such holder's right to appraisal, such Common Shares shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Consideration. The Company shall give ICS prompt notice of
any demands received by the Company for appraisal of Common Shares, and ICS
shall have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of ICS, make any payment with respect to, or settle or offer to settle,
any such demands.
Section 2.2 Options; Stock Plans. Immediately prior to the
Effective Time, each holder of a then-outstanding employee stock option, whether
or not fully exercisable, to purchase Common Shares (an "Option") granted under
the Company's 1991 and 1992 Stock Option Plan and 1997 Equity Compensation Plan
(the "Stock Plans") will be entitled to receive in settlement of such Option a
cash payment from the Company equal to the product of (i) the total number of
Common Shares previously subject to such Option and (ii) the excess of the
Merger Consideration over the exercise price per Common Share subject to such
Option, subject to any required withholding of taxes. If necessary or
appropriate, the Company will, upon the request of ICS, use reasonable efforts
to obtain the written acknowledgment of each employee holding an Option that the
payment of the amount of cash referred to above will satisfy in full the
Company's obligation to such employee pursuant to such Option and take such
other action as is necessary to effect the provisions of this Section 2.2. The
amounts payable pursuant to this Section 2.2 shall be paid as soon as reasonably
practicable following the Closing Date and shall be subject to and made net of
all applicable withholding taxes. The Company will solicit from each Retained
Employee, as such term is defined in that certain asset purchase agreement among
3COM Corporation, the Company and ICS Technologies, Inc., an agreement by each
such employee who owns an Option (as defined in such agreement) to accept, in
lieu of stock upon the exercise of the Option, the amount of cash such employee
would have received if they received the cash payments described in this Section
2.2 (the "Option Payment") which shall be a condition to any agreement by the
Company to pay such Option Payment in respect of such Options.
Section 2.3 Payment for Common Shares.
(a) Prior to the Effective Time, ICS and the Company shall
designate the Company's registrar and transfer agent or such other bank or trust
company as may be approved by ICS and the Company Board, to act as exchange
agent for the holders of Common Shares in connection with the Merger, pursuant
to an agreement providing for the matters set forth in this Section 2.3 and such
other matters as may be appropriate and the terms of which shall be reasonably
satisfactory to the Company and ICS (the "Exchange Agent"), to receive the funds
to which holders of Common Shares shall become entitled pursuant to Section
2.1(b) hereof. At the Effective Time, ICS shall deposit, or ICS shall otherwise
take all steps necessary to cause to be deposited, in trust with the Exchange
Agent in an account for the benefit of holders of Common Shares (the "Exchange
Fund") the aggregate Merger Consideration to which holders of Common Shares
shall be entitled at the Effective Time pursuant to Section 2.1(b) hereof.
(b) Promptly after the Effective Time, and in any event not
later than three business days following the Effective Time, ICS shall cause the
Exchange Agent to mail to each
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record holder of certificates (the "Certificates") that immediately prior to the
Effective Time represented Common Shares a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates or an
Affidavit of Loss in Lieu of Lost Certificate (as defined below) to the Exchange
Agent and instructions for use in surrendering such Certificates and receiving
the Merger Consideration in respect thereof.
(c) In effecting the payment of the Merger Consideration in
respect of Common Shares represented by Certificates entitled to payment of the
Merger Consideration pursuant to Section 2.1(b) hereof, upon the surrender of
each such Certificate, together with a letter of transmittal duly executed, the
Exchange Agent shall promptly, and in any event not later than three business
days following receipt of such Certificates and letter of transmittal, pay the
holder of such Certificate the Merger Consideration multiplied by the number of
Common Shares represented by such Certificate, in consideration therefor. Upon
such payment such Certificate shall forthwith be canceled.
(d) Until surrendered in accordance with paragraph (c)
above, each such Certificate (other than Certificates representing Common Shares
held by ICS or any of its affiliates, in the treasury of the Company or by any
wholly owned subsidiary of the Company or Dissenting Shares or Rollover Shares)
shall represent solely the right to receive the aggregate Merger Consideration
relating thereto. No interest or dividends shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion thereof) is to
be delivered to any person other than the person in whose name the Certificate
formerly representing Common Shares surrendered therefor is registered, it shall
be a condition to such right to receive such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person surrendering such Common Shares shall pay
to the Exchange Agent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(e) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
(who shall be the record owner of such Certificate) claiming such Certificate to
be lost, stolen or destroyed (an "Affidavit of Loss in Lieu of Lost
Certificate"), the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration deliverable in respect
thereof, provided that the Person to whom the Merger Consideration is paid
shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
(f) No dividends or other distributions with respect to
Common Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Common Shares
represented thereby until the surrender of such Certificates or delivery of an
Affidavit of Loss in Lieu of Lost Certificate in accordance with this Section
2.3.
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(g) Promptly following the date which is 180 days after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly representing a
Common Share may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Consideration relating thereto,
without any interest or dividends thereon.
(h) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any Common Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing Common Shares (other than the
Rollover Shares) are presented to the Surviving Corporation or the Exchange
Agent, they shall be surrendered and canceled in return for the payment of the
aggregate Merger Consideration relating thereto, as provided in this Article 2.
(i) None of ICS, the Company or Exchange Agent shall be
liable to any person in respect of any cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to seven
years after the Effective Time, any such shares, cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to ICS as follows:
Section 3.1 Organization and Qualification; Subsidiaries. The
Company and each of its Subsidiaries (as hereinafter defined) is a corporation
duly organized, validly existing and in good standing under the laws of its
state or jurisdiction of incorporation and has all requisite corporate power and
corporate authority to own, lease and operate its properties and to carry on its
business as now being conducted and is in good standing as a foreign corporation
in each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification and where failure to be in
good standing or to so qualify would have a Material Adverse Effect on the
Company. The term "Material Adverse Effect on the Company," as used in this
Agreement, means any effect, event, occurrence, change or state of facts that,
or aggregated with other effects, events, occurrences, changes or states of
facts, is, or is reasonably likely to be, materially adverse to (i) the assets,
liabilities, business, property, operations, condition as a whole (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, or (ii) the
ability of the Company and its Subsidiaries to perform in all material respects
their obligations under this Agreement. The Company has heretofore made
available to ICS a complete and correct copy of its Articles of Incorporation,
as amended, and By-Laws. Set forth on Section 3.1 of the Disclosure Schedule is
a list of every corporation, limited liability company, partnership or other
business organization or entity of which the Company owns either directly or
through its Subsidiaries, (a)
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more than 50% of (i) the total combined voting power of all classes of voting
securities of such entity, (ii) the total combined equity interests therein, or
(iii) the capital or profit interests therein, in the case of a partnership; or
(b) or otherwise has the power to vote or direct the voting of sufficient
securities to elect a majority of the board of directors or similar governing
body of such entity (the "Subsidiaries").
Section 3.2 Capitalization; Subsidiaries. The authorized capital
stock of the Company consists of 50,000,000 Common Shares and 5,000,000 shares
of preferred stock, no par value ("Preferred Stock"). As of the close of
business on January 19, 1999, 12,298,425 Common Shares were issued and
outstanding (which includes certain treasury shares), all of which are entitled
to vote on this Agreement except for those shares held in treasury. The Company
has no shares of Preferred Stock issued and outstanding. As of January 18,
1999, except for (i) 2,396,646 Common Shares reserved for issuance pursuant to
outstanding Options and rights granted under the Stock Plans, there are not now,
and at the Effective Time there will not be, any existing options, warrants,
calls, subscriptions, or other rights, or other agreements or commitments,
obligating the Company to issue, transfer or sell any shares of capital stock of
the Company or any of its Subsidiaries. Section 3.2 of the Disclosure Schedule
sets forth the name of each holder of an outstanding Option under the Stock
Plans, and with respect to each Option held by any such holder, the grant date,
vesting schedule, exercise price and number of Common Shares for which such
Option is exercisable. All issued and outstanding Common Shares are, and all
Common shares which may be issued pursuant to the exercise of outstanding
Options will be, when issued in accordance with the respective terms thereof,
validly issued, fully paid, nonassessable and free of preemptive rights. All of
the outstanding shares of capital stock of each of the Company's Subsidiaries
have been validly issued and are fully paid and non-assessable and, except as
set forth on Section 3.2 of the Disclosure Schedule, are owned by either the
Company or another of its Subsidiaries free and clear of all liens, charges,
claims or encumbrances. There are no outstanding options, warrants, calls,
subscriptions, or other rights, or other agreements or commitments, obligating
any Subsidiary of the Company to issue, transfer or sell any shares of its
capital stock.
Section 3.3 Authority Relative to this Agreement.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, except for the approval of
this Agreement by the shareholders of the Company, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Company Board and no other corporate proceedings on
the part of the Company or on the part of the shareholders of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated, other than the approval of this Agreement by the holders of a
majority of the outstanding Common Shares of the Company. This Agreement has
been duly and validly executed and delivered by the Company, and, assuming this
agreement constitutes a valid and binding obligation of ICS, this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the rights of creditors generally, general
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equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(b) Except as set forth in Section 3.3 of the Disclosure
Schedule, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of consent, termination, purchase, cancellation
or acceleration of any obligation or to loss of any property, rights or benefits
under, result in the imposition of any additional obligation under, or result in
the creation of any Lien (as defined herein) upon any of the properties or
assets of the Company or any of its Subsidiaries under or constitute a "change
of control" under, require the consent from, or the giving of notice to, a third
party pursuant to (i) the organizational documents of the Company or any of its
Subsidiaries, (ii) any contract, instrument, permit, concession, franchise,
license, loan or credit agreement, note, bond, mortgage, indenture, lease or
other property agreement, partnership or joint venture agreement or other
legally binding agreement or obligation, whether oral or written (a "Contract"),
applicable to the Company or any of its Subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following paragraph, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, Liens, adverse consequences resulting from such change of control or
where the failure to obtain such consents or provide such notices that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. For purposes of this Agreement, "Lien" shall mean, with respect to
any asset, any imperfection of title, lien, lease, pledge, encumbrance,
mortgage, claim, option, voting trust, preemptive right, attachment,
encroachment or other charge or security interest in or on such asset.
(c) Other than in connection with, or in compliance with,
the provisions of the BCL with respect to the transactions contemplated hereby,
the Securities Exchange Act of 1934 (the "Exchange Act"), the securities laws of
the various states and the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), no authorization, consent or approval of, or filing
with, any Governmental Entity (as hereinafter defined) is necessary for the
consummation by the Company of the transactions contemplated by this Agreement
other than authorizations, consents and approvals the failure to obtain, or
filings the failure to make, which would not, in the aggregate, have a Material
Adverse Effect on the Company. As used in this Agreement, the term "Governmental
Entity" means any government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or regulatory authority,
agency, commission, tribunal or body, domestic, foreign or supranational.
Section 3.4 No Violation. Neither the execution or delivery of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) constitute a breach or violation of
any provision of the Articles of Incorporation, as amended, or By-Laws of the
Company or (ii) except as set forth on Section 3.4 of the Disclosure Schedule,
constitute a breach, violation or default (or any event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance
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required by, or permit a third party to terminate or accelerate vesting or
repurchase rights, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries, or any other
detriment under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which the Company or any of its
Subsidiaries is a party or by which they or any of their respective properties
or assets are bound, other than breaches, violations, defaults, terminations,
accelerations or creation of Liens which, in the aggregate, would not have a
Material Adverse Effect on the Company.
Section 3.5 SEC Reports and Financial Statements. Since January 1,
1995, the Company has filed all forms, reports and documents ("SEC Reports")
with the SEC required to be filed by it pursuant to the federal securities laws
and the SEC rules and regulations thereunder. Copies of all such SEC Reports
have been made available to ICS by the Company or are publicly available on
EDGAR. None of such SEC Reports (as of their respective filing dates) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading except as subsequently disclosed. The audited and unaudited
consolidated financial statements of the Company included in the SEC Reports
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as otherwise stated in such financial
statements, including the related notes) and fairly present the financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended, subject, in the case of the unaudited financial
statements, to year-end audit adjustments. Except as set forth in the SEC
Reports and except as disclosed in Section 3.5 of the Disclosure Schedule, at
the date of the most recent audited financial statements of the Company included
in the SEC Reports, neither the Company nor any of its Subsidiaries had, and
since such date neither the Company nor any of such Subsidiaries has incurred,
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, would be
required to be disclosed in a balance sheet of the Company prepared in
accordance with generally accepted accounted principles except liabilities
incurred in the ordinary and usual course of business and consistent with past
practice, liabilities incurred in connection with the transactions contemplated
by this Agreement, and liabilities that would not reasonably be expected to have
a Material Adverse Effect with respect to the Company.
Section 3.6 Compliance with Applicable Laws. Except as set forth
on Section 3.6 of the Disclosure Schedule and except for matters relating to
Environmental Laws (which matters are covered in Section 3.12 hereof) or matters
relating to real estate (which matters are covered in Section 3.24 hereof), (i)
the Company and its Subsidiaries possess all permits, licenses, certifications
and other governmental or regulatory authorizations and approvals necessary to
enable the Company and its Subsidiaries to carry on their business as presently
conducted except for such failures to have such permits, licenses,
certifications or regulatory authorizations or approvals that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and all such permits are valid, and in full force and effect and
there exists no default thereunder and (ii) the operations of the Company and
its Subsidiaries have been conducted in compliance with all laws, ordinances,
regulations, judgments and decrees of any Governmental Entity applicable to the
Company or such Subsidiary or by which it may be bound, except for possible
violations which
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would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 3.7 Litigation. Section 3.7 of the Disclosure Schedule
sets forth any suit, claim, action, proceeding or investigation pending or, to
the knowledge of the Company, threatened, at law or in equity, or before any
Governmental Entity, against the Company or any of its Subsidiaries, none of
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company or would reasonably be expected to
prevent or materially delay the consummation of the transactions contemplated by
this Agreement. Except as disclosed in the SEC Reports filed prior to the date
of this Agreement, neither the Company nor any of its Subsidiaries is subject to
any outstanding order, writ, injunction or decree which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on the
Company or could prevent or materially delay the consummation of the
transactions contemplated hereby.
Section 3.8 Information. None of the information supplied by the
Company in writing specifically for inclusion or incorporation by reference in
(i) the Proxy Statement (as hereinafter defined) or (ii) any other document to
be filed with the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement (the "Other Filings") will, at the
respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to shareholders, at the time of the Special Meeting (as
hereinafter defined) and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, no representation is made by the Company with respect to (i) any
forward-looking information which may have been supplied by the Company, or (ii)
statements made in any of the foregoing documents based upon information
supplied by ICS.
Section 3.9 Certain Approvals. The Company Board has taken any and
all necessary and appropriate action to approve the Merger and the transactions
contemplated by this Agreement, including for the purposes of Sections
2538(b)(1) and 2555(1) of the BCL.
Section 3.10 Employee Benefit Plans.
(a) Section 3.10(a) of the Disclosure Schedule includes a
true and complete list of all material employee benefit plans and programs
providing benefits to any employee or former employee of the Company and its
Subsidiaries sponsored or maintained by the Company or any of its Subsidiaries
or to which the Company or any of its Subsidiaries contributes or is obligated
to contribute ("Plans"). Without limiting the generality of the foregoing, the
term "Plans" includes all employee welfare benefit plans within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder ("ERISA"), and all employee pension benefit plans
within the meaning of Section 3(2) of ERISA.
(b) With respect to each Plan, the Company has made
available to ICS a true, correct and complete copy of: (i) all plan documents,
benefit schedules, trust agreements, and
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insurance contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial report,
if any; (v) the most recent actuarial report, if any; and (vi) the most recent
determination letter from the United States Internal Revenue Service (the
"IRS"), if any.
(c) The Company and each of its Subsidiaries has complied,
and is now in compliance, in all material respects with all provisions of ERISA,
the Internal Revenue Code of 1986, as amended, including the Treasury
Regulations thereunder (the "Code") and all laws and regulations applicable to
the Plans. With respect to each Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code ("Qualified Plans"),(i) such
Plan is a Qualified Plan within the meaning of Section 401(a) of the Code, (ii)
such Qualified Plans are within the remedial amendment period and (iii) the
Company will submit such Qualified Plans to the IRS for a favorable
determination letter within the remedial amendment period.
(d) All contributions required to be made to any Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any Plan, for any period through the date hereof have been timely made
or paid in full or, to the extent not required to be made or paid on or before
the date hereof, have been fully reflected in the financial statements of the
Company included in the SEC Reports to the extent required under generally
accepted accounting principles.
(e) Except as set forth on Section 3.10(e) of the
Disclosure Schedule, no Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. Without limiting the generality of the
foregoing, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA and which is subject to Title IV of ERISA
(a "Multiple Employer Plan").
(f) There does not now exist, nor do any circumstances
exist that could result in, any material liability under (i) Title IV of ERISA,
(ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of section 601 et seq. of ERISA and Section
4980B of the Code, or (v) corresponding or similar provisions of foreign laws or
regulations, other than a liability that arises solely out of, or relates solely
to, the Plans, that would be a liability of the Company or any of its
Subsidiaries following the Effective Time. Without limiting the generality of
the foregoing, none of the Company, its Subsidiaries nor any ERISA Affiliate of
the Company or any of its Subsidiaries has engaged in any transaction described
in Section 4069 or Section 4204 or 4212 of ERISA. An "ERISA Affiliate" means any
entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the Company or any of its Subsidiaries, or that is a member of the same
"controlled group" as the Company or any of its Subsidiaries, pursuant to
Section 4001(a)(14) of ERISA.
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Section 3.11 Taxes.
(a) The Company and each of its Subsidiaries has timely
filed all federal, state, local and foreign income Tax Returns (as hereinafter
defined) required to be filed by it in all jurisdictions in which it is required
to do so, and all other material Tax Returns required to be filed by it, and
such Tax Returns are true and complete in all material respects, and the Company
and each of its Subsidiaries has paid or caused to be paid all Taxes (as
hereinafter defined) shown due on such Tax Returns and has made adequate
provision in the Company's financial statements for payment of all Taxes that
are not payable as of the date hereof or have not been paid, in respect of all
taxable periods or portions thereof ending on or before the date hereof, except
where the failure to so file or pay or make adequate provision would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
All Tax Returns for the Company in respect of all years not barred by the
statute of limitations have heretofore been made available by the Company to ICS
and are listed in Section 3.11 of the Disclosure Schedule. There are no
outstanding Agreements, waivers or requests for waivers extending the statutory
period of limitation applicable to any Tax Return of the Company or any of its
Subsidiaries. Except as set forth on Section 3.11 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries (i) has been a member of a group
filing consolidated returns for federal income tax purposes (except for the
group of which the Company is the common parent), (ii) is a party to or has any
liability pursuant to a Tax sharing or Tax indemnity agreement or any other
agreement of a similar nature that remains in effect or (iii) has any liability
for the Taxes of any person (other than any of the Company or its Subsidiaries)
under Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise. The
Company will attach to its June 27, 1998, Tax Return the statement required
under Treasury Regulation Section 1.1502-20(c)(3) related to the disposition of
its shares in Voyetra Technologies, Inc. Except as set forth in Section 3.11 of
the Disclosure Schedule, no claim has ever been made by a taxing authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that such person is or may be subject to taxation by such jurisdiction.
None of the Company or its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any (i)
change in method of accounting for a taxable period ending on or prior to the
Closing Date under Code (S) 481(c) (or any corresponding or similar provision of
state, local or foreign income Tax law), (ii) "closing agreement" as described
in Code (S) 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) or (iii) deferred intercompany gain or any excess loss
account described in Treasury Regulations under Code Section 1502. None of the
Company or its Subsidiaries is a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Code (S)
280G (or any corresponding provision of state, local or foreign income Tax law).
(b) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, withholding, capital stock and franchise taxes, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, including any interest, penalties or additions thereto. For purposes of
this Agreement, the
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term "Tax Return" means any report, return or other information or document
required to be supplied to a taxing authority in connection with Taxes.
Section 3.12 Environmental Matters.
Except as set forth on Section 3.12 of the Disclosure Schedule and
except for such matters that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect:
(a) with respect to the Business, the Company and its
Subsidiaries have complied and are in compliance with all Environmental and
Safety Requirements;
(b) without limiting the generality of the foregoing, the
Company and its Subsidiaries have obtained and complied with, and are in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to Environmental and Safety Requirements for the occupation of
their facilities and the operation of the Business and all such permits,
licenses and authorizations may be relied upon for the lawful operation of the
Business and such facilities on and after the Closing without transfer,
reissuance or other governmental action;
(c) neither the Company nor any Subsidiary has received
any written or oral notice, report or other information regarding any actual or
alleged violation of Environmental and Safety Requirements, or any liabilities
or potential liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to the Business or its past or current facilities and arising under
Environmental and Safety Requirements;
(d) none of the following exists at any property or
facility owned or operated by the Company or any Subsidiary in connection with
the Business: (i) underground storage tanks; (ii) asbestos-containing material
in any form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills, surface impoundments, or disposal
areas;
(e) with respect to the Business, neither the Company nor
any Subsidiary has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, or any
investigative, corrective or remedial obligations, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") or the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental and Safety Requirements;
(f) no facts, events or conditions relating to the past or
present facilities, properties or operations of the Company, any Subsidiary, or
any of their respective affiliates or predecessors the Business will prevent,
hinder or limit continued compliance by the Business with
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Environmental and Safety Requirements, give rise to any investigatory, remedial
or corrective obligations pursuant to Environmental and Safety Requirements, or
give rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental and Safety Requirements,
including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage;
(g) neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called "transaction-
triggered" or "responsible property transfer" Environmental and Safety
Requirements;
(h) with respect to the Business, neither the Company nor
any Subsidiary has, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person relating to Environmental and
Safety Requirements; and
(i) for purposes of this Agreement, "Environmental and
Safety Requirements" shall mean all federal, state, local and foreign statutes,
regulations, ordinances and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, as such of the foregoing are enacted or in
effect, prior to, on, or after the Closing Date.
Section 3.13 Absence of Certain Changes. Except as set forth in
Section 3.13 of the Disclosure Schedule, or except as disclosed in the SEC
Reports, from June 27, 1998, through the date of this Agreement the Company (a)
has conducted its business only in the ordinary course consistent with past
practice and (b) has not:
(i) incurred any indebtedness for borrowed money, except
borrowings from banks (or other financial institutions) necessary to meet
ordinary course working capital requirements and to finance ordinary course
capital expenditures;
(ii) mortgaged, pledged or subjected to any Lien, any asset
or related group of assets having a net book value in excess of $500,000;
(iii) sold, leased, assigned or transferred any tangible
asset or related group of assets having a net book value in excess of
$500,000 except for the sale of inventory and obsolete or used machinery
and equipment in the ordinary course of business consistent with past
practice;
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(iv) sold, leased, assigned or transferred any interest
in real estate having a net book value in excess of $500,000;
(v) sold, licensed, assigned or transferred any patents,
trademarks, trade names, copyrights, trade secrets or other intangible
assets having a fair market value in excess of $500,000 individually or in
the aggregate;
(vi) waived or relinquished any right or claim or related
group of rights or claims except any such item which the Company believes
has a fair value of less than $500,000 individually or in the aggregate;
(vii) (x) issued or sold any of its Common Shares or other
equity securities or any warrants, options or other rights to acquire its
Common Shares or other securities of the Company except for the issuance of
Common Shares upon exercise of Options outstanding as of June 27, 1998, or
(y) purchased or redeemed or agreed to purchase or redeem any Common Shares
or other equity securities;
(viii) made or entered into binding commitment for any
capital expenditures or related group of capital expenditures in excess of
$2,500,000;
(ix) modified or amended in any material manner or
terminated any Material Contract (as hereinafter defined) other than the
termination of any such contract by its terms;
(x) granted any increase in the base compensation of, or
made any other material change in the employments terms for, any of its
directors, officers, and employees other than normal periodic increases or
changes reflecting or based upon changed responsibilities or duties made in
the ordinary course of business consistent with past practice or changes
made pursuant to any collective bargaining agreements or existing
contracts;
(xi) adopted, modified, or terminated any bonus, profit-
sharing, incentive, severance or other plan or contract for the benefit of
any of its directors, officers, and employees, other than for changes which
do not materially increase the aggregate cost of such plan or contract or
which are required by law or a collective bargaining agreement; or
(xii) declared or paid any dividend or other distribution
with respect to the Common Shares.
Section 3.14 Brokers. Except as set forth on Section 3.14 of the
Disclosure Schedule and except for the engagement of the Investment Banker (as
defined in Section 3.15 hereof), none of the Company, any of its Subsidiaries,
or any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement.
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Section 3.15 Opinion of Investment Banker. The Company has
received the written opinion of Pennsylvania Merchant Group (the "Investment
Banker") to the effect that, as of the date hereof and subject to certain
matters stated in such opinion, the consideration to be received by the holders
of Common Shares pursuant to the Merger is fair to the Company's shareholders
from a financial point of view.
Section 3.16 Material Contracts. Except as set forth on Section
3.16 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to any: (i) collective bargaining agreement or contract with any
labor union; (ii) bonus, pension, profit sharing, retirement or other form of
deferred compensation plan; (iii) stock purchase, stock option, stock
appreciation or similar plan; (iv) contract for the employment of any officer,
individual employee or other person on a full-time or consulting basis involving
an annual compensation commitment by the Company or a Subsidiary in excess of
$200,000; (v) agreement or indenture relating to the borrowing of money in
excess of $1,000,000 or to mortgaging, pledging or otherwise placing a Lien
(other than a Permitted Lien (as defined herein)) on any material portion of the
Company's assets; (vi) guaranty of any obligation for borrowed money in excess
of $1,000,000; (vii) lease or agreement under which it is lessee of, or holds or
operates any personal property owned by any other party, for which the annual
rental exceeds $250,000, (viii) contract or group of related contracts with the
same party for the purchase of inventories, supplies or services, under which
the undelivered balance of such inventories, supplies or services has a selling
price in excess of $1,000,000; (ix) contract or group of related contracts with
the same party for the sale of products or services under which the undelivered
balance of such products or services has a sales price in excess of $1,000,000;
(x) agreement pertaining to Intellectual Property (as hereinafter defined)
including, license agreements or similar arrangements; or (xi) contract which
prohibits or materially limits the Company or a Subsidiary in any material
respect from freely engaging in business in the United States or anywhere else
in the world (all such contracts and agreements, "Material Contracts"). The
Company has provided or made available to ICS (i) true and complete copies of
all written Material Contracts, or (ii) with respect to such Material Contracts
that have not been reduced to writing, a written description thereof, each of
which is listed on Section 3.16 of the Disclosure Schedule. Neither the Company
nor any of its Subsidiaries is, or has received any notice or has any knowledge
that any other party is, in default in any respect under any such Material
Contract, except for those defaults which would not reasonably be likely, either
individually or in the aggregate, to have a Material Adverse Effect with respect
to the Company; and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a material default.
For purposes of this Agreement, "Permitted Liens" shall mean (i) Liens for Taxes
(other than those pursuant to Section 412 of the Code) or governmental
assessments, charges or claims, the payment of which is not yet due, or for
Taxes, the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith; (iii) Liens relating to
deposits made in the ordinary course of business; and (iv) Liens which do not
individually or in the aggregate materially interfere with or materially impair
the conduct of the Business as it is currently being conducted, or the value,
marketability, use or ownership of the asset to which it attaches.
Section 3.17 Board Recommendation. The Company Board, at a meeting
duly called and held, has (a) determined that this Agreement and the
transactions contemplated hereby,
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taken together, are advisable and in the best interests of the Company and its
shareholders, and (b) subject to the other provisions hereof, resolved to
recommend that the holders of the Common Shares approve this Agreement and the
transactions contemplated hereby, including the Merger.
Section 3.18 Required Company Vote. The Company Shareholder
Approval, being the affirmative vote of a majority of the votes cast by Common
Shares entitled to vote, is the only vote of the holders of any class or series
of the Company's securities necessary to approve this Agreement, the Merger and
the other transactions contemplated hereby.
Section 3.19 Intellectual Property.
(a) Section 3.19 of the Disclosure Schedule contains a
complete and accurate list of all (i) patented or registered Intellectual
Property owned or filed by the Company or any Subsidiary, (ii) pending patent
applications and applications for registration of other Intellectual Property
filed by or on behalf of the Company or any Subsidiary, (iii) material
unregistered trade names, corporate names, or Internet domain names owned or
used by the Company or any Subsidiary, (iv) material unregistered trademarks,
service marks, copyrights and mask works owned or used by the Company or any
Subsidiary, (v) all computer software owned and/or used by the Company or any of
its Subsidiaries (other than mass-marketed software with a license fee of less
than $10,000) that is material to the Business, and (vi) all material licenses
or similar agreements or arrangements pertaining to Intellectual Property to
which the Company or its Subsidiaries is a party, either as licensee or
licensor.
(b) Except as set forth on Section 3.19 of the Disclosure
Schedule, (i) the Company or one of its Subsidiaries owns all right, title and
interest to, or has a valid and enforceable license to use, all Intellectual
Property necessary for the operation of the businesses of the Company and its
Subsidiaries as presently conducted and free and clear of all Liens or other
encumbrances or restrictions; (ii) no claim by any other Person contesting the
validity, enforceability, use or ownership of any of the Intellectual Property
owned or used by the Company or any of its Subsidiaries (the "Company
Intellectual Property") has been made, is currently outstanding or, to the
knowledge of the Company, is threatened (including, without limitation, any
demand or request that the Company or its Subsidiaries license any rights from a
third Person); (iii) neither the Company nor its Subsidiaries have received any
notices of, nor are aware of any facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third Person with
respect to the Company Intellectual Property that would reasonably be expected
to have a Material Adverse Effect; (iv) to the knowledge of the Company, neither
the Company nor its Subsidiaries have infringed, misappropriated, or otherwise
conflicted with any Intellectual Property or other rights of any third Persons
and neither the Company nor its Subsidiaries is aware of any infringement,
misappropriation or conflict which will occur as a result of the continued
operation of the business of the Company or its Subsidiaries as currently
conducted; (v) no loss or expiration of any of the material Company Intellectual
Property is threatened, pending or reasonably foreseeable; (vi) the transactions
contemplated by this Agreement will have no Material Adverse Effect on the
right, title and interest in and to the Company Intellectual Property; and (vii)
the Company and its Subsidiaries have taken all necessary and desirable action
to maintain and protect the Company Intellectual Property and will
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continue to maintain and protect the Company Intellectual Property to ensure
that there is no affect on any of the Company Intellectual Property that would
have a Material Adverse Effect.
Section 3.20 Related Party Transactions. Except as set forth in
Section 3.20 of the Disclosure Schedule hereto, no director, officer, partner,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any of its Subsidiaries (or, with respect to
clause (i) of this sentence, to the knowledge of the Company, its employees) (i)
has borrowed any monies from or has outstanding any indebtedness or other
similar obligations to the Company or any of its Subsidiaries; (ii) owns any
direct or indirect interest of any kind in, or is a director, officer, employee,
partner, affiliate or associate of, or consultant or lender to, or borrower
from, or has the right to participate in the management, operations or profits
of, any person or entity which is (1) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company or any of its
Subsidiaries, (2) engaged in a business related to the business of the Company
or any of its Subsidiaries, (3) participating in any transaction to which the
Company or any of its Subsidiaries is a party or (iii) otherwise a party to any
contract, arrangement or understanding with the Company or any of its
Subsidiaries.
Section 3.21 State Takeover Statutes. The Company Board has taken
such action so that no statute, takeover statute or similar statute or
regulation of the Commonwealth of Pennsylvania, to the knowledge of the Company,
any other state, prevents the consummation of the Merger, or any of the other
transactions contemplated hereby on the terms and subject to the conditions of
this Agreement. Except as set forth in Section 3.21 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any rights plan, preferred
stock or similar arrangement that causes any statute, takeover statute or
similar statute or regulation of the Commonwealth of Pennsylvania, to the
knowledge of the Company, any other state that prevents the consummation of the
transactions contemplated hereby on the terms and subject to the conditions of
this Agreement.
Section 3.22 Labor Relations and Employment.
(a) Except as set forth on Section 3.22(a) of the
Disclosure Schedule and except for matters which would not (other than in the
case of clause (iii) or (iv) of this sentence) be reasonably likely to result in
a Material Adverse Effect, (i) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, and during the past
three years there has not been any such action; (ii) to the knowledge of the
Company, no union claims to represent the employees of the Company or any of its
Subsidiaries; (iii) neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company or any of its
Subsidiaries; (iv) none of the employees of the Company or any of its
Subsidiaries is represented by any labor organization and the Company does not
have any knowledge of any current union organizing activities among the
employees of the Company or any of its Subsidiaries, nor does any question
concerning representation exist concerning such employees; (v) the Company and
its Subsidiaries are, and have at all times been, in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and are not
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engaged in any unfair labor practices as defined in the National Labor Relations
Act or other applicable law, ordinance or regulation; (vi) there is no unfair
labor practice charge or complaint against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency; (vii)
there is no grievance arising out of any collective bargaining agreement or
other grievance procedure; (viii) no charges with respect to or relating to the
Company or any of its Subsidiaries are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (ix) neither the Company nor any of its
Subsidiaries has received notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company or any of
its Subsidiaries and no such investigation is in progress; and (x) there are no
complaints, lawsuits or other proceedings pending or to the knowledge of the
Company threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
(b) To the knowledge of the Company, since the enactment
of the Worker Adjustment and Retraining Notification ("WARN") Act, there has not
been (i) a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or any of its Subsidiaries; or (ii) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any of its Subsidiaries; nor has the Company or any
of its Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth in Section 3.22(b) of the
Disclosure Schedule, to the best knowledge of the Company, none of the employees
of the Company or any of its Subsidiaries has suffered an "employment loss" (as
defined in the WARN Act) since three months prior to the date of this Agreement.
Section 3.23 Year 2000. The Company and each of its Subsidiaries
have conducted a thorough inventory and assessment of the hardware, software and
embedded microcontrollers in noncomputer equipment (collectively, the "Computer
Systems") used by the Company and its Subsidiaries in its business, in order to
determine which parts of the Computer Systems are not Year 2000 Compliant (as
defined below) and to estimate the cost of rendering such Computer Systems Year
2000 Compliant prior to January 1, 2000 or such earlier date on which the
Computer Systems may shut down or may produce incorrect calculations or
otherwise malfunction without becoming totally inoperable. Based on the above
inventory and assessment, the estimated total cost of rendering the Computer
Systems Year 2000 Compliant is $200,000, which expenditure has been included in
the budget adopted by the Company. For purposes of this Agreement, "Year 2000
Compliant" means that all of the Computer Systems will correctly differentiate
between years in different centuries that end in the same two digits, and will
accurately process date/time data (including but not limited to calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries, including leap year calculations.
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Section 3.24 Real Estate.
(a) Owned Properties. Section 3.24 of the Disclosure
Schedule sets forth a list of all owned real property (the "Owned Real
Property") used by the company in the operation of the Company's business. With
respect to each such parcel of Owned Real Property: (i) such parcel is free and
clear of all encumbrances (except for Permitted Liens); (ii) except as disclosed
in Section 3.24 of the Disclosure Schedule, there are no leases, subleases,
licenses, concessions, or other agreements, written or oral, granting to any
person the right of use or occupancy of any portion of such parcel; and (iii)
there are no outstanding actions or rights of first refusal to purchase such
parcel.
(b) Leased Properties. Section 3.24 of the Disclosure
Schedule sets forth a list of all of the leases and subleases ("Leases") and
each leased and subleased parcel of real property in which the company has a
leasehold and subleasehold interest (the "Leased Real Property"). Each of the
Leases are in full force and effect, and the Company holds a valid and existing
leasehold or subleasehold interest under each of the Leases described in
Schedule 3.24. With respect to each Lease set forth on Section 3.24 of the
Disclosure Schedule: (i) the Lease is legal, valid, binding, enforceable and in
full force and effect; (ii) the Lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing; (iii) neither the Company, nor, to the Knowledge of the Company, any
other party to the Lease, is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute such a breach or default
by the Company or permit termination, modification or acceleration under the
Lease by any other party thereto; (iv) the Company has not, and, to the
Knowledge of the Company, no third party has repudiated any provision of the
Lease; (v) there are no disputes, oral agreements, or forbearance programs in
effect as to the Lease; (vi) the Lease has not been modified in any respect,
except to the extent that such modifications are disclosed by the documents
delivered to ICS; (vii) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the Lease (except for
Permitted Liens); and (viii) the Lease is fully assignable to ICS without the
necessity of any consent or the Company shall obtain all necessary consents
prior to the Closing.
(c) Real Property Disclosure. Except as disclosed on
Section 3.24 of the Disclosure Schedule, there is no Real Property leased or
owned by the Company used in the Company's business. The Owned Real Property and
Leased Real Property is referred to collectively herein as the "Real Property."
(d) No Proceedings. There are no proceedings in eminent
domain or other similar proceedings pending or, to the knowledge of the Company,
threatened, affecting any portion of the Real Property (except for Permitted
Liens). There exists no writ, injunction, decree, order or judgment outstanding,
nor any litigation, pending or threatened, relating to the ownership, lease,
use, occupancy or operation by any person of the Real Property (except for
Permitted Liens).
(e) Current Use. The current use of the Owned Real
Property does not violate in any material respect any instrument of record or
agreement affecting such Owned Real Property. There is no violation of any
covenant, condition, restriction, easement, agreement or order of any
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governmental authority having jurisdiction over any of the Owned Real Property
that affects such real property or the use or occupancy thereof (except for
Permitted Liens). No damage or destruction has occurred with respect to any of
the Owned Real Property that, individually or in the aggregate, has had or
resulted in, or will have or result in, a Material Adverse Effect on the
Company.
(f) Condition and Operation of Improvements. All
buildings and other improvements included within the Real Property (the
"Improvements") are in good condition and repair and adequate to operate such
facilities as currently used, and, to the best of the Company's knowledge and
belief, there are no facts or conditions affecting any of the Improvements which
would, individually or in the aggregate, interfere in any significant respect
with the use, occupancy or operation thereof which would reasonably be expected
to have a Material Adverse Effect on the Company as currently used, occupied or
operated or intended to be used, occupied or operated. No Improvement or portion
thereof is dependent for its access, operation or utility on any land, building
or other improvement not included in the Real Property.
(g) Permits. All required or appropriate certificates of
occupancy, permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") of all governmental authorities
having jurisdiction over the Real Property, the absence of which could have a
Material Adverse Effect on the Company, have been issued to the Company to
enable the Real Property to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are, as of the date hereof, in full force and effect. The Company has
delivered complete and correct copies of the Real Property Permits to ICS. The
Company has not received or been informed by a third party of the receipt by it
of any notice which could have a Material Adverse Effect on the Company from any
governmental authority having jurisdiction over the Real Property threatening a
suspension, revocation, modification or cancellation of any Real Property Permit
and, to the best knowledge of the Company, there is no basis for the issuance of
any such notice or the taking of any such action.
Section 3.25 Absence of Certain Changes or Events with Respect to
the Company. Except as set forth in Section 3.13 of the Disclosure Schedule,
since June 27, 1998, the Company has not (a) suffered a Material Adverse Effect
or (b) materially changed the Company's accounting principles, practices,
articles or methods, except as required by generally accepted accounting
principles or applicable law.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ICS
ICS represents and warrants to the Company as follows:
Section 4.1 Organization and Qualification. ICS is a corporation
duly organized, validly existing and in good standing under the laws of its
state or jurisdiction of incorporation and is in good standing as a foreign
corporation in each other jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification and where
failure to be in good standing or to so qualify would have a Material Adverse
Effect on ICS. The term "Material Adverse Effect on ICS", as used in this
Agreement, means any change in or effect on the
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business, financial condition, results of operations or reasonably foreseeable
prospects of ICS or any of its Subsidiaries that would be materially adverse to
ICS.
Section 4.2 Authority Relative to this Agreement.
(a) ICS has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of ICS and no other corporate proceedings on the part of ICS
are necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
ICS and, assuming this Agreement constitutes a valid and binding obligation of
the Company, this Agreement constitutes a valid and binding agreement of ICS,
enforceable against ICS in accordance with its terms.
(b) Other than in connection with, or in compliance with,
the provisions of the BCL, the Exchange Act, the securities laws of the various
states and the HSR Act, no authorization, consent or approval of, or filing
with, any Governmental Entity is necessary for the consummation by ICS of the
transactions contemplated by this Agreement other than authorizations, consents
and approvals the failure to obtain, or filings the failure to make, which would
not, in the aggregate, have a Material Adverse Effect on ICS.
Section 4.3 No Violation. Neither the execution or delivery of
this Agreement by ICS nor the consummation by ICS of the transactions
contemplated hereby will (i) constitute a breach or violation of any provision
of the Articles of Incorporation, as amended, or By-Laws of ICS or (ii)
constitute a breach, violation or default (or any event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any Lien upon any of the properties or assets of ICS under, any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument to which ICS is a party or by which it or any of its properties
or assets are bound, other than breaches, violations, defaults, terminations,
accelerations or creation of Liens which, in the aggregate would not have a
Material Adverse Effect on ICS.
Section 4.4 Information. None of the information supplied by ICS
in writing (other than projections of future financial performance) specifically
for inclusion or incorporation by reference in (i) the Proxy Statement or (ii)
the Other Filings will, at the respective times filed with the SEC or other
Governmental Entity and, in addition, in the case of the Proxy Statement, at the
date it or any amendment or supplement is mailed to shareholders, at the time of
the Special Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, no representation is made by ICS with respect to statements made in
any of the foregoing documents based upon information supplied by the Company.
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Section 4.5 Financing. Section 6.2(e) of the Disclosure Schedule
sets forth true and complete copies of written documentation from third parties
which provides for financing in amounts sufficient to consummate the
transactions contemplated hereby as contemplated by Section 6.2(e) hereof. The
commitment fees set forth in such financing documents which are due and payable
have been paid.
Section 4.6 Pennsylvania Law. ICS was not immediately prior to the
execution of this Agreement, an "interested stockholder" within the meaning of
Sections 2538 and 2553 of the BCL.
Section 4.7 Beneficial Ownership of Shares. As of the date hereof,
ICS does not "beneficially own" (as defined in Rule 13d-3 under the Exchange
Act) more than 1% of the outstanding shares of Common Shares or any securities
convertible into, or exchangeable for, Common Shares. ICS will not buy
additional Common Shares between the date of this Agreement and the Closing.
Section 4.8 Brokers. Except as set forth on Schedule 4.8 of the
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of ICS, that is or will be payable by the Company or any of its
Subsidiaries. No fee is due to any such person if the transactions contemplated
hereby are not consummated.
Section 4.9 Formation of ICS; No Prior Activities. ICS was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. As of the date hereof and the Effective Time, except for (a)
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, and (b) this
Agreement and any other agreements or arrangements contemplated by this
Agreement or in furtherance of the transactions contemplated hereby, ICS has not
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities, owned any assets or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person.
Section 4.10 Litigation. There is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of ICS, threatened, at
law or in equity, or before any Governmental Entity, against ICS, which could
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement or as expressly agreed to in writing by ICS,
during the period from the date of this Agreement to the Effective Time, the
Company will, and will cause each of its Subsidiaries to, conduct its operations
according to its ordinary and usual course of business and consistent with past
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practice and use its and their respective commercially reasonable efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them and to preserve
goodwill. Without limiting the generality of the foregoing, and except as (x)
otherwise expressly provided in this Agreement, (y) required by law, or (z) set
forth on Section 5.1 of the Disclosure Schedule, prior to the Effective Time,
the Company will not, and will cause its Subsidiaries not to, without the
consent of ICS (which consent shall not be unreasonably withheld):
(a) except with respect to annual bonuses made in the
ordinary course of business consistent with past practice, adopt or amend
in any material respect any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, pension, retirement,
employment or other employee benefit agreement, trust, plan or other
arrangement for the benefit or welfare of any director, officer or employee
of the Company or any of its Subsidiaries or increase in any manner the
compensation or fringe benefits of any director, officer or employee of the
Company or any of its Subsidiaries or pay any benefit not required by any
existing agreement or place any assets in any trust for the benefit of any
director, officer or employee of the Company or any of its Subsidiaries (in
each case, except with respect to employees and directors in the ordinary
course of business consistent with past practice);
(b) incur any indebtedness for borrowed money;
(c) expend funds for capital expenditures in excess of
$1,000,000;
(d) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
other than immaterial properties or assets (or immaterial portions of
properties or assets), except in the ordinary course of business consistent
with past practice;
(e) (x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock (except (A)
for dividends paid by Subsidiaries to the Company with respect to capital
stock), (y) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock or (z) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(f) authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell, grant or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge, dispose of or otherwise encumber any shares
of its capital stock or the capital stock of any of its Subsidiaries, any
other voting securities or any securities convertible into, or any rights,
warrants, calls, commitments or options to acquire, any such shares, voting
securities or convertible
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securities or any other securities or equity equivalents (including without
limitation stock appreciation rights) (other than issuances upon exercise
of Options or pursuant to the Stock Plans);
(g) amend its Articles of Incorporation, as amended, By-Laws
or equivalent organizational documents or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any Subsidiary of the Company;
(h) make or agree to make any acquisition of assets which is
material to the Company and its Subsidiaries, taken as a whole, except for
(x) purchases of inventory in the ordinary course of business or (y)
pursuant to purchase orders entered into in the ordinary course of business
which do not call for payments in excess of $2,500,000 per annum;
(i) settle or compromise any shareholder derivative suits
arising out of the transactions contemplated hereby or any other litigation
(whether or not commenced prior to the date of this Agreement) or settle,
pay or compromise any claims not required to be paid; provided, however,
that the Company may settle, pay and compromise claims in an aggregate
amount not in excess of $1,000,000 in consultation and cooperation with
ICS; or
(j) take any action which is not set forth on Section 3.13
of the Disclosure Schedule, if taken after June 27, 1998, but prior to the
date hereof, that would have caused the representations and warranties
contained in Section 3.13 hereof to be untrue.
Section 5.2 Access to Information. From the date of this Agreement
until the Effective Time, the Company will, and will cause its Subsidiaries, and
each of their respective officers, directors, employees, agents or other
representatives (including, without limitation, any investment banker, attorney
or accountant retained by the Company or its Subsidiaries) (the "Company
Representatives") to, give ICS and their respective officers, employees, agents
or other representatives (including, without limitation, any investment banker,
attorney or accountant retained by ICS) (the "ICS Representatives") and
representatives of financing sources identified by ICS reasonable access, upon
reasonable notice and during normal business hours, to the offices and other
facilities and to the books and records of the Company and its Subsidiaries and
will cause the Company Representatives and the Company's Subsidiaries to furnish
ICS and the ICS Representatives and representatives of financing sources
identified by ICS with such financial and operating data and such other
information with respect to the business and operations of the Company and its
Subsidiaries as ICS and representatives of financing sources identified by ICS
may from time to time reasonably request. ICS agrees that any information
furnished pursuant to this Section 5.2 will be subject to the provisions of the
letter agreement dated May 15, 1998, between Bain Capital, Inc. and the Company
(the "Confidentiality Agreement").
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Section 5.3 Efforts.
(a) Each of the Company and ICS shall, and the Company shall
cause each of its Subsidiaries to, use commercially reasonable efforts to take
all action to do all things necessary to consummate and make effective the
transactions contemplated by this Agreement (including the satisfaction, but not
waiver, of the closing conditions set forth in Article 6). In furtherance and
not in limitation of the foregoing, each of the Company and ICS shall, and the
Company shall cause each of its Subsidiaries to, make all necessary filings with
Governmental Entities as promptly as practicable in order to facilitate prompt
consummation of the transactions contemplated by this Agreement. In addition,
each of ICS and the Company will use its commercially reasonable efforts
(including, without limitation, payment of any required fees) and will cooperate
fully with each other to (i) comply as promptly as practicable with all
governmental requirements applicable to the transactions contemplated by this
Agreement, including the making of all filings necessary or proper under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, but not limited to, the
Proxy Statement or other foreign filings and any amendments to any thereof and
(ii) obtain promptly all consents, waivers, approvals, authorizations or permits
of, or registrations or filings with or notifications to (any of the foregoing
being a "Consent"), any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement (except for such Consents the
failure of which to obtain would not prevent or materially delay the
consummation of the Merger). Subject to the Confidentiality Agreement, ICS and
the Company shall furnish to one and other such necessary information and
reasonable assistance as ICS or the Company may reasonably request in connection
with the foregoing.
(b) Without limiting Section 5.3(a) hereof, ICS and the Company
shall each (i) promptly make or cause to be made the filings required of such
party under the HSR Act with respect to the Merger; (ii) use its best efforts to
avoid the entry of, or to have vacated or terminated, any decree, order, or
judgment that would restrain, prevent or delay the consummation of the Merger,
including without limitation defending through litigation on the merits any
claim asserted in any court by any third party; and (iii) take any and all steps
which, in such party's judgment, are commercially reasonable to avoid or
eliminate each and every impediment under any antitrust, competition, or trade
regulation law that may be asserted by any Governmental Entity with respect to
the Merger so as to enable con summation thereof to occur as soon as reasonably
possible. Each party hereto shall promptly notify the other parties of any
communication to that party from any Governmental Entity and permit the other
parties to review in advance any proposed communication to any Governmental
Entity. ICS and the Company shall not (and shall cause their respective
affiliates and representatives not to) agree to participate in any meeting with
any Governmental Entity in respect of any filings, investigation or other
inquiry unless it consults with the other party in advance and, to the extent
permitted by such Governmental Entity, gives the other party the opportunity to
attend and participate thereat. Subject to the Confidentiality Agreement, each
of the parties hereto will coordinate and cooperate fully with the other parties
hereto in exchanging such information and providing such assistance as such
other parties may reasonably request in connection with the foregoing and in
seeking early termination of any applicable waiting periods under the HSR Act or
in connection with other Consents. Each of the Company and ICS agrees to respond
promptly to and comply fully with any request for additional information or
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documents under the HSR Act. Subject to the Confidentiality Agreement, the
Company will provide ICS, and ICS will provide the Company, with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any Governmental Entity or members of its staff, on the other hand,
with respect to this Agreement and the transactions contemplated hereby.
(c) ICS shall use commercially reasonable efforts to cause the
financing necessary for satisfaction of the condition in Section 6.2(e) hereof
to be obtained on the terms set forth in the commitment letters attached to
Section 6.2(e) of the Disclosure Schedule; provided, however, that ICS shall be
entitled to (i) enter into commitments for equity and debt financing with other
nationally recognized financial institutions, which commitments will have
substantially the same terms as those set forth in the commitment letters and
which commitments may be substituted for such commitment letters and (ii) modify
the capital structure set forth in such commitment letters so long as (A) the
total committed common equity equals at least $50 million (including Rollover
Shares), (B) the Merger Consideration paid to all shareholders of the Company is
no less than otherwise would have been paid in accordance with this Agreement
and (C) such modified financing is no less certain than that set forth in such
commitment letter.
(d) The Company agrees to provide, and will cause its
Subsidiaries and its and their respective officers, employees and advisors to
provide, all reasonable cooperation in connection with the arrangement of any
financing in respect of the transactions contemplated by this Agreement,
including, without limitation, (i) participation in meetings, due diligence
sessions and road shows, (ii) assisting the preparation of offering memoranda,
private placement memoranda, prospectuses and similar documents, and (iii) the
execution and delivery of any commitment letters, underwriting or placement
agreements, pledge and security documents, other definitive financing documents,
or other requested certificates or documents as may be requested by ICS;
provided that the form and substance of any of the material documents referred
to in clause (ii), and the terms and conditions of any of the material
agreements and other documents referred to in clause (iii), shall be
substantially consistent with the terms and conditions of the financing required
to satisfy the condition set forth in Section 6.2(e) hereof; and provided,
further, that no such person or entity will be required to incur any costs or
expenses in connection with this Section 5.3(d) or to execute or deliver any of
the agreements or other documents referred to in clause (iii) unless Bain
Capital, Inc. and Bear, Stearns & Co., Inc. shall have agreed to indemnify such
person or entity against all costs and expenses arising in connection with this
Section 5.3(d) and any liability arising under such agreements or other
documents in the event the transactions contemplated by this Agreement are not
consummated.
Section 5.4 Title Insurance and Surveys. In the event that the
Company has not consummated the transactions related to the sale/leaseback of
the Valley Forge facility by the Closing, the Company shall use its reasonable
efforts to assist ICS in obtaining: (1) a title insurance policy of the Valley
Forge facility together with all affidavits, undertakings, endorsements and
other title clearance documents necessary to issue such title policy to ICS and
its lender and (2) an ALTA Survey certified to ICS, its lender and any other
party reasonably requested by ICS.
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Section 5.5 Public Announcements. The Company, on the one hand,
and ICS, on the other hand, agree to consult promptly with each other prior to
issuing any material press release or announcement or otherwise making any
material public statement with respect to the Merger and the other transactions
contemplated hereby, agree to provide to the other party for review a copy of
any such press release or statement, and shall not issue any such press release
or make any such public statement prior to such consultation and review, unless
required by applicable law or any listing agreement with a securities exchange
or the Nasdaq Stock Market, Inc.
Section 5.6 Employee Benefit Arrangements.
(a) The Company will honor, and, from and after the Effective
Time, the Surviving Corporation will honor, in accordance with their respective
terms as in effect on the date hereof, the employment, severance and bonus
agreements and arrangements to which the Company is a party.
(b) The Company agrees that for a period of one year following
the Effective Time, the Surviving Corporation shall continue the (i)
compensation (including bonus and incentive awards) programs and plans and (ii)
employee benefit and welfare plans, programs, contracts, agreements and policies
(including insurance and pension plans), fringe benefits and vacation policies
which are currently provided by the Company; provided that notwithstanding
anything in this Agreement to the contrary the Surviving Corporation shall not
be required to maintain any individual plan or program so long as the benefit
plan and agreements maintained by the Surviving Corporation are, in the
aggregate, not materially less favorable than those provided by the Company
immediately prior to the date of this Agreement; and, provided, further, that
nothing in this sentence shall be deemed to limit or otherwise affect the right
of the Surviving Corporation to terminate employment or change the place of
work, responsibilities, status or designation of any employee or group of
employees as the Surviving Corporation may determine in the exercise of its
business judgment and in compliance with applicable laws.
Section 5.7 Indemnification; Directors' and Officers' Insurance.
(a) The Company and, from and after the Effective Time, the
Surviving Corporation, shall indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
Subsidiaries (the "Indemnified Parties") against all judgments, fines, losses,
claims, damages, costs or expenses (including reasonable attorneys' fees) or
liabilities arising out of or related to matters, actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time whether
asserted or claimed prior to or after the Effective Time (i) to the full extent
permitted by Pennsylvania law or, if the protections afforded thereby to an
Indemnified Person are greater, (ii) to the same extent and on the same terms
and conditions (including with respect to advancement of expenses) provided for
in the Company's Articles of Incorporation, as amended, and By-Laws and
agreements in effect at the date hereof (to the extent consistent with
applicable law), which provisions will survive the Merger and continue in full
force and effect after the Effective Time. Without limiting the foregoing, (i)
ICS shall, and shall cause the Surviving Corporation to, periodically advance
expenses (including attorney's fees) as incurred by an Indemnified Person with
respect to the foregoing to the full extent permitted under applicable law,
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and (ii) any determination required to be made with respect to whether an
Indemnified Party shall be entitled to indemnification shall, if requested by
such Indemnified Party, be made by independent legal counsel selected by the
Surviving Corporation and reasonably satisfactory to such Indemnified Party.
(b) ICS agrees that the Company, and, from and after the
Effective Time, the Surviving Corporation, shall cause to be maintained in
effect for not less than six years from the Effective Time the current policies
of the directors' and officers' liability insurance maintained by the Company;
provided that the Surviving Corporation may substitute therefor other policies
of at least the same coverage amounts and which contain terms and conditions not
less advantageous to the beneficiaries of the current policies and, provided
further, that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring on or prior to the Effective Time;
and provided further, that the Surviving Corporation shall not be required to
pay an annual premium in excess of 200% of the last annual premium paid by the
Company prior to the date hereof and if the Surviving Corporation is unable to
obtain the insurance required by this Section 5.7(b) it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
(c) This Section 5.7 shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of ICS and the Surviving Corporation, and shall be enforceable by the
Indemnified Parties.
Section 5.8 Notification of Certain Matters. ICS and the Company
shall promptly notify each other of (i) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (A) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or (B)
to cause any covenant, condition or agreement under this Agreement not to be
complied with or satisfied and (ii) any failure of the Company, or ICS, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that no such
notification shall affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder. Each of the Company and
ICS shall give prompt notice to the other parties hereof of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
Section 5.9 State Takeover Laws. The Company shall, upon the
request of ICS, take all reasonable steps to assist in any challenge by ICS to
the validity or applicability to the transactions contemplated by this
Agreement, including the Merger, of any state takeover law.
Section 5.10 No Solicitation.
(a) From and after the date hereof until the termination of this
Agreement, the Company and its affiliates shall not, and shall instruct the
Company Representatives not to:
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(i) directly or indirectly solicit, initiate, or encourage
(including by way of furnishing nonpublic information or assistance), or
take any other action to facilitate, any inquiries or proposals from any
person that constitute, or may reasonably be expected to lead to, an
acquisition, purchase, merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction
involving any material portion of the assets or any securities of, any
merger, consolidation or business combination with, or any public
announcement of a proposal, plan, or intention to do any of the foregoing
by, the Company or any of its Subsidiaries (such transactions being
referred to herein as "Acquisition Proposals"); except that none of the
foregoing restrictions shall apply with respect to persons to whom the
Company or a Company Representative has already provided, within the three
months prior to the date of this Agreement, non-public written information
about the Company to facilitate an Acquisition Proposal;
(ii) enter into, maintain, or continue discussions or
negotiations with any person in furtherance of such inquiries or to obtain
an Acquisition Proposal; except that none of the foregoing restrictions
shall apply with respect to persons to whom the Company or a Company
Representative has already provided, within the three months prior to the
date of this Agreement, non-public written information about the Company to
facilitate an Acquisition Proposal;
(iii) agree to or endorse any Acquisition Proposal;
(iv) enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any
other transaction contemplated by this Agreement, or
(v) authorize or permit the Company Representatives to
take any such action except to the extent that such action may be taken
under clause (i) or (ii) of this Section 5.10(a);
provided, however, that prior to the approval of the Merger by
the shareholders of the Company nothing in this Agreement shall prohibit the
Company Board or a special committee of the Company Board (the "Special
Committee") from (A) furnishing information to, and engaging in discussions or
negotiations with, any person or entity that makes an unsolicited written, bona
fide proposal to acquire the Company and/or its Subsidiaries pursuant to a
merger, consolidation, share exchange, tender offer or other similar
transaction, but only to the extent that the Company Board or the Special
Committee determines in good faith by a majority vote, based upon advice from
independent legal counsel (who may be the Company's regularly engaged outside
legal counsel), a description of which is provided to ICS, that failure to
furnish such information or engage in such discussions or negotiations with such
person or entity would be reasonably likely to constitute a breach of the
fiduciary duties to shareholders of the Company Board or the Special Committee
under applicable law (assuming for such purpose that fiduciary duties are owed
only to shareholders), and such a proposal is, in the opinion of the Investment
Banks more favorable to the Company and the shareholders of the Company from a
financial point of view then than the transactions contemplated by this
Agreement (including any adjustment to the terms and
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conditions of such transactions proposed by ICS in response to such Acquisition
Proposal) (any such Acquisition Proposal satisfying such criteria, a "Higher
Offer"), provided that, prior to accepting the Higher Offer, the Company Board
notifies ICS of its intentions and obtains an executed confidentiality agreement
from the appropriate parties substantially similar to the Confidentiality
Agreement, (B) failing to make or withdrawing or modifying its recommendation
referred to in Section 5.13 hereof if the Company Board, after consultation with
independent legal counsel (who may be the Company's regularly engaged outside
legal counsel), determines in good faith that such action is consistent with the
Company Board's fiduciary duties to shareholders under applicable law, provided
that ICS is given five days' prior written notice of its intentions to do so,
and (C) disclosing to the Company's shareholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with respect to any
tender offer, or taking any other legally required action (including, without
limitation, the making of public disclosure as may be necessary or advisable
under applicable securities laws); and, provided further, that the Company
Board's or the Special Committee's exercise of its rights under clause (A), (B)
or (C) above shall not constitute a breach by the Company of this Agreement.
(b) The Company will promptly notify ICS of the receipt of any
Acquisition Proposal, the terms and conditions of such proposal and, if not
prohibited by the terms of such proposal, the identity of the person making it.
The Company will have no obligation to notify ICS of any change to or
modification of such Acquisition Proposal or the terms and conditions thereof,
but shall provide ICS with a reasonable opportunity to increase the Merger
Consideration in response to such Acquisition Proposal.
Section 5.11 Interim Liabilities. The Surviving Corporation will
pay, consistent with past practice, all liabilities, including all accounts
payable and other expenses, which arise in the ordinary course of business prior
to the Closing Date.
Section 5.12 Reports. The Company shall provide ICS with monthly
financial statements, broken out by business segment, no later than the fifth
business day following the end of each calendar month following the date of this
Agreement until the Effective Date.
Section 5.13 Shareholders' Meeting.
(a) The Company, acting through the Company Board, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as practicable
following the execution of this Agreement for the purpose of considering
and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
statement relating to this Agreement, and use its reasonable efforts (A) to
obtain and furnish the information required to be included by the SEC in a
definitive proxy statement (the "Proxy Statement") and, after consultation
with ICS, to respond promptly to any comments made by the SEC with respect
to the preliminary proxy statement and cause the Proxy Statement to
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be mailed to its shareholders and (B) to obtain the necessary approvals of
the Merger and this Agreement by its shareholders; and
(iii) subject to the fiduciary duties of the Company Board,
include in the Proxy Statement the recommendation of the Company Board that
shareholders of the Company vote in favor of the approval of this
Agreement.
(b) The Company covenants that the Proxy Statement will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, sent
or given to the Company's shareholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
ICS in writing for inclusion in the Proxy Statement. Each of the Company, on the
one hand, and ICS, on the other hand, agree promptly to correct any information
provided by either of them for use in the Proxy Statement if and to the extent
that it shall have become false or misleading, and the Company further agrees to
take all steps necessary to cause the Proxy Statement as so corrected to be
filed with the SEC and to be disseminated to the holders of Shares, in each
case, as and to the extent required by applicable federal securities laws.
Section 5.14 Conveyance Taxes. ICS and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value-added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
by the Company or any of its Subsidiaries in connection with the transactions
contemplated by this Agreement that are required or permitted to be filed on or
before the Effective Time.
Section 5.15 Delisting. Each of the parties agrees to cooperate
with each other in taking, or causing to be taken, all actions necessary to
delist the Common Shares from NASDAQ and to terminate registration under the
Exchange Act, provided that such delisting and termination shall not be
effective until after the Effective Time of the Merger.
Section 5.16 Solvency Letters. The Company Board or Special
Committee shall engage an independent appraisal firm to deliver a letter
addressed to the Company Board, as to the solvency of the Company and its
Subsidiaries on a consolidated basis after giving effect to the transactions
contemplated by this Agreement, including all financings contemplated hereby.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions. The respective obligations of ICS and the
Company to consummate the Merger are subject to the satisfaction, at or before
the Effective Time, of each of the following conditions:
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(a) Shareholder Approval. The shareholders of the Company shall
have duly approved the transactions contemplated by this Agreement (the
"Shareholder Approval"), if required by applicable law.
(b) Solvency Letters. The Company shall have received a solvency
letter, in form and substance and from an independent evaluation firm reasonably
satisfactory to it, as to the solvency of the Company and its Subsidiaries on a
consolidated basis after giving effect to the transactions contemplated by this
Agreement, including all financings contemplated hereby.
(c) Orders and Injunctions. No order shall have been entered in
any action or proceeding before any United States federal or state court or
governmental agency or other United States regulatory or administrative agency
or commission (an "Order"), and no preliminary or permanent injunction by a
United States court of competent jurisdiction shall have been issued and remain
in effect (an "Injunction"), which, in either case, would have the effect of (i)
preventing consummation of the Merger, or (ii) imposing material limitations on
the ability of ICS effectively to acquire or hold the business of the Company
and its Subsidiaries taken as a whole; provided, however, that in order to
invoke this condition, ICS shall have used in its judgment, its commercially
reasonable efforts to prevent such Order or Injunction or ameliorate the effects
thereof.
(d) Illegality. There shall not have been any United States
federal or state statute, rule or regulation enacted or promulgated after the
date of this Agreement that could in the reasonable judgment of ICS result in
any of the material adverse consequences referred to in paragraph (c) above.
(e) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or terminated.
Section 6.2 Conditions to Obligations of ICS. The obligations of
ICS to effect the Merger are further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in the aggregate in all material respects, as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date. For
purposes of determining whether any representation or warranty is true and
correct, any requirement that a fact or event be or not be material or have or
not have a Material Adverse Effect on the Company (a "Materiality Qualifier")
shall be ignored. The condition in the first sentence of this Section 6.2(a)
shall be deemed satisfied only if the failure of the representations and
warranties of the Company to be true and correct in the aggregate (determined
without giving effect to any Materiality Qualifier) does not constitute a
Material Adverse Effect on the Company. ICS shall have received a certificate
signed on behalf of the Company by the Chairman of the Board and the chief
financial officer of the Company to the effect set forth in this paragraph.
(b) Performance of Obligations of the Company. The Company shall
have performed the obligations required to be performed by it under this
Agreement in all material respects at or prior to the Closing Date, except for
such failures to perform as have not had or would
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not, individually or in the aggregate, have a Material Adverse Effect with
respect to the Company or materially adversely affect the ability of the Company
to consummate the transactions contemplated hereby.
(c) Consents, Etc. ICS shall have received evidence, in form and
substance reasonably satisfactory to it, that all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties set forth in Section 3.3 of the Disclosure Schedule
shall have been obtained.
(d) No Litigation. There shall not be pending by any Governmental
Entity any suit, action or proceeding (or by any other person any suit, action
or proceeding which has a reasonable likelihood of success), (i) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement or seeking to obtain from ICS
or any of their affiliates any damages that are material to any such party (ii)
seeking to prohibit or limit the ownership or operation by the Company or any of
its Subsidiaries of any material portion of the business or assets of the
Company or any of its Subsidiaries, to dispose of or hold separate any material
portion of the business or assets of the Company or any of its Subsidiaries, as
a result of the Merger or any of the other transactions contemplated by this
Agreement or (iii) seeking to impose limitations on the ability of ICS (or any
shareholder of ICS), to acquire or hold, or exercise full rights of ownership
of, any Common Shares, including, without limitation, the right to vote Common
Shares on all matters properly presented to the shareholders of the Company.
(e) Financing. The Company shall have received the proceeds of
financing pursuant to the commitment letters set forth on Section 6.2(e) of the
Disclosure Schedule on terms and conditions set forth therein (or, as modified
in accordance with Section 5.3(c) hereof) and on such other terms and conditions
consistent therewith, or involving such other financing sources, as are
reasonably satisfactory to ICS in its sole discretion, in amounts sufficient to
consummate the transactions contemplated by this Agreement, including, without
limitation: (i) to pay, with respect to all Common Shares in the Merger, the
Merger Consideration pursuant to Section 2.1(b) hereof; (ii) to refinance the
outstanding indebtedness of the Company; (iii) to pay any fees and expenses in
connection with the transactions contemplated by this Agreement or the financing
thereof; and (iv) to provide for the working capital needs of the Company
following the Merger, including, without limitation, if applicable, letters of
credit.
Section 6.3 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of ICS set forth in this Agreement shall be true and correct in all
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date. The Company shall have
received certificates signed on behalf of ICS, respectively, by an authorized
officer of ICS, respectively, to the effect set forth in this paragraph.
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<PAGE>
(b) Performance of Obligations of ICS. ICS shall have performed
the obligations required to be performed by it under this Agreement at or prior
to the Closing Date (except for such failures to perform as have not had or
could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect with respect to ICS or adversely affect the
ability of ICS to consummate the transactions herein contemplated or perform its
obligations hereunder).
ARTICLE 7
TERMINATION; AMENDMENTS; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of the Company:
(a) by the mutual written consent of ICS and the Company, by
action of their respective Boards of Directors;
(b) by ICS or the Company if the Merger shall not have been
consummated on or before May 31, 1999; provided, however, that neither ICS
nor the Company may terminate this Agreement pursuant to this Section
7.1(b) if such party shall have materially breached this Agreement;
(c) by ICS or the Company if any court of competent jurisdiction
in the United States or other United States Governmental Entity has issued
an order, decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; provided, however, that
the party seeking to terminate this Agreement shall have used its
commercially reasonable efforts to remove or lift such order, decree,
ruling or other action;
(d) by the Company if, prior to the Effective Time, any person
has made a bona fide proposal relating to an Acquisition Transaction, or
has commenced a tender or exchange offer for the Common Shares, and the
Company Board or Special Committee determines in good faith (i) after
consultation with its financial advisors, that such transaction constitutes
a Higher Offer and (ii) after consultation with counsel, that failure to
approve such proposal and terminate this Agreement could reasonably be
expected to result in a breach of fiduciary duties to shareholders
(assuming for such purpose that fiduciary duties are owed only to
shareholders), as they would exist in the absence of any limitations in
this Agreement, of the Company Board to the Company's shareholders;
provided, however, that, notwithstanding anything in this Agreement to the
contrary, the termination of this Agreement by the Company in compliance
with this Section 7.1(d) shall not be deemed to violate any other
obligations of the Company under this Agreement, and, provided further,
that the Company shall have notified ICS of its intent to terminate prior
to the effective date of such termination;
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<PAGE>
(e) by ICS, if the Company Board shall have (i) failed to
recommend to the shareholders of the Company that they give the Shareholder
Approval, (ii) withdrawn or modified in a manner adverse to ICS its
approval or recommendation of this Agreement or the Merger, (iii) shall
have approved or recommended an Acquisition Transaction, (iv) shall have
resolved to effect any of the foregoing or (v) shall have otherwise taken
steps to materially impede the Shareholder Approval; or
(f) by either ICS or the Company, if the Shareholder Approval
shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of shareholders or at
any adjournment or postponement thereof.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.1 hereof, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or shareholders, other than the provisions of the
last sentence of Section 5.2 hereof and the provisions of this Section 7.2 and
Section 7.3 hereof, which shall survive any such termination. Nothing contained
in this Section 7.2 shall relieve any party from liability for any breach of any
covenant of this Agreement or any breach of warranty or misrepresentation.
Section 7.3 Fees and Expenses.
(a) In the event that this Agreement is terminated for any reason
other than (i) on account of any of the conditions set forth in Section 6.1(c),
6.1(d), 6.1(e), 6.2(d), 6.3(a) or 6.3(b) hereof not being satisfied, (ii)
primarily as a result of material adverse changes in the economy or industry
occurring after the date hereof, or (iii) solely on account of ICS's failure to
obtain the financing described in Section 6.2(e) hereof, the Company shall
promptly reimburse ICS for all out-of-pocket expenses and fees (including,
without limitation, fees payable to all banks, investment banking firms and
other financial institutions, and their respective agents and counsel, and all
out-of-pocket fees and expenses, including bank commitment fees and expenses,
attorneys' and accountants' fees, and costs associated with financial printers,
experts and consultants to ICS and its affiliates, collectively referred to as
"Costs"), whether incurred prior to, on or after the date hereof, in connection
with the Merger and the consummation of all transactions contemplated by this
Agreement, and the financing thereof up to $3 million. Except as otherwise
specifically provided for herein, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
(b) In the event that this Agreement is terminated (i) pursuant
to Sections 7.1(d) or 7.1(f) hereof or by ICS pursuant to Section 7.1(b) hereof
based upon a material breach of this Agreement by the Company or by ICS pursuant
to Section 7.1(e) hereof, and (ii) within 12 months after the date of
termination the Company enters into a legally binding acquisition agreement for
a Business Combination (as defined herein) or a Business Combination is
consummated, the Company will, within three business days following the
consummation of such a Business Combination, pay to ICS in cash by wire transfer
in immediately available funds to an account designated by ICS a payment in an
amount equal to $6 million (the "Termination Fee"),
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<PAGE>
provided that in no event shall more than one Termination Fee be payable by the
Company. For purposes of this Section 7.3, the term "Business Combination" means
(i) a merger, consolidation, share exchange, business combination or similar
transaction involving the Company as a result of which the shareholders of the
Company prior to such transaction in the aggregate cease to own at least a
majority of the voting securities of the entity surviving or resulting from such
transaction (or ultimate parent entity thereof), (ii) a sale, lease, exchange,
transfer or other disposition of more than 50% of the assets of the Company and
its Subsidiaries, taken as a whole, in a single transaction or a series of
related transactions, or (iii) the acquisition, by a person (other than ICS or
any affiliate thereof) or group (as such term is defined under Section 13(d) of
the Exchange Act and the rules and regulation thereunder) of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 25% of
the Common Shares whether by tender or exchange offer or otherwise.
(c) The prevailing party in any legal action undertaken to
enforce this Agreement or any provision hereof shall be entitled to recover from
the other party the costs and expenses (including attorneys' and expert witness
fees) incurred in connection with such action.
Section 7.4 Amendment. This Agreement may be amended by the
Company and ICS at any time before or after any approval of this Agreement by
the shareholders of the Company but, after any such approval, no amendment shall
be made which decreases the Merger Consideration or which the Company Board or
Special Committee determines adversely affects the rights of the Company's
shareholders hereunder without the approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all the parties.
Section 7.5 Extension; Waiver. At any time prior to the Effective
Time, ICS, on the one hand, and the Company, on the other hand, may (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive any inaccuracies in the representations and warranties
contained herein of the other or in any document, certificate or writing
delivered pursuant hereto by the other or (iii) waive compliance by the other
with any of the agreements or conditions. Any agreement on the part of any party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
Section 8.2 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof.
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<PAGE>
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party (except that ICS may assign its rights, interest and obligations to any
affiliate or Subsidiary of ICS without the consent of the Company, provided that
no such assignment shall relieve ICS of any liability for any breach by such
assignee). Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 8.3 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
Section 8.4 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or telecopier to
the respective parties as follows:
If to ICS: Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Michael Krupka
Telecopier: (617) 572-3274
with a copy to: Kirkland & Ellis
655 15th Street N.W. Suite 1200
Washington, D.C. 20005
Attention: Jack M. Feder, Esq.
Telecopier: (202) 879-5200
If to the Company: Integrated Circuit Systems, Inc.
23435 Boulevard of the Generals
P.O. Box 968
Valley Forge, PA 19482
Attention: Chairman
Telecopier:
with a copy to: Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103-2799
Attention: Barry M. Abelson, Esq.
Telecopier: (215) 981-4750
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<PAGE>
and: Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: David King, Esq.
Telecopier: (215) 963-5299
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
Section 8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 8.6 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 8.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 8.8 Parties in Interest. Except with respect to Sections
2.2, 5.5 and 5.6 hereof (which are intended to be for the benefit of the persons
identified therein, and may be enforced by such persons), this Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
Section 8.9 Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any person, shall mean
any other person directly or indirectly controlling, controlled by, or under
common control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise; and
(b) "Business" shall mean the businesses of the Company and its
Subsidiaries as currently conducted.
(c) "Intellectual Property" means (i) all patents, patent
applications and patent disclosures; all inventions (whether or not patentable
and whether or not reduced to practice); (ii) all trademarks, service marks,
trade names, logos, slogans, corporate names and Internet domain names, and all
the goodwill associated with each of the foregoing; (iii) all mask works and
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<PAGE>
registrations and applications for registry thereof; (iv) all registered and
unregistered statutory and common law copyrights; (v) all registrations,
applications and renewals for any of the foregoing; and (vi) all trade secrets,
confidential information, ideas, formulae, compositions, know-how, manufacturing
and production processes and techniques, research information, drawings,
specifications, designs, plans, improvements, proposals, technical and computer
data, documentation and software, financial business and marketing plans,
customer and supplier lists and related information and marketing materials and
all other proprietary rights.
(d) the term "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act).
(e) "Knowledge of the Company" or words of similar import means
the actual knowledge of the following members of the Company's senior management
(including members of management holding Rollover Shares): Hock E. Tan and
Rudolph Gassner.
Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its respective officer thereunto duly authorized,
all as of the day and year first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Rudolf Gassner
----------------------------
Name: Rudolf Gassner
Title: Chairman of the Board
ICS MERGER CORP.
By: /s/ Michael A. Krupka
----------------------------
Name: Michael A. Krupka
Title: Managing Director
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AMENDMENT No.1 TO AGREEMENT AND PLAN OF MERGER
----------------------------------------------
AMENDMENT No. 1 (this "Amendment"), dated February 16, 1999, by and
among Integrated Circuit Systems, Inc. , a Pennsylvania corporation (the
"Company"), and ICS Merger Corp., a Pennsylvania corporation ("ICS"). All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Merger Agreement (as defined
below).
W I T N E S S E T H :
-------------------
WHEREAS, the Company and ICS are parties to a certain Agreement and
Plan of Merger dated January 20, 1999 (the "Merger Agreement"); and
WHEREAS, the parties hereto wish to amend the Merger Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. Section 1.1 of the Merger Agreement is hereby amended to insert
in the first sentence the words "(including Section 1906 thereof, which shall
be applicable to the transactions contemplated hereby,)" after the words "this
Agreement and the BCL" and before the words "at the Effective Time".
2. Section 2.1(b)(ii) of the Merger Agreement is hereby amended to
delete the date "February 10, 1999" from the end of that Section and to insert
the date "March 3, 1999" in lieu thereof.
3. Section 2.2 of the Merger Agreement is hereby deleted in its
entirety and the following new Section 2.2 shall be inserted in lieu thereof.
"Section 2.2 Options; Stock Plans. Immediately prior to the
Effective Time, each holder of a then-outstanding employee stock
option, whether or not fully exercisable, to purchase Common
Shares (an "Option") granted under the Company's 1992 Stock
Option Plan and 1997 Equity Compensation Plan (the "Stock Plans")
and all other outstanding options, in each case as reflected in
Section 3.2 of the Disclosure Schedule, will be entitled to
receive in settlement of such Option (a) a cash payment from the
Company equal to the product of (i) the total number of Common
Shares previously subject to such Option and (ii) the excess of
the Merger Consideration over the exercise price per Common Share
subject to such
<PAGE>
Option, subject to any required withholding of taxes (the
"Option Spread"), (b) new stock options ("New Options") in the
Company pursuant to new stock option agreements between the
Company, ICS and certain members of Management or (c) some
combination of (a) and (b) above. The Company will, upon the
request of ICS, use reasonable efforts to obtain the written
acknowledgment of each employee holding an Option that the
payment of the amount of cash or New Options referred to above
will satisfy in full the Company's obligation to such employee
pursuant to such Option and take such other action as is
necessary to effect the provisions of this Section 2.2. The
amounts payable pursuant to this Section 2.2 shall be paid as
soon as reasonably practicable following the Closing Date and
shall be subject to and made net of all applicable withholding
taxes. The Company will solicit from each Retained Employee, as
such term is defined in that certain asset purchase agreement
among 3COM Corporation, the Company and ICS Technologies, Inc.,
an agreement by each such employee who owns an Option (as
defined in such agreement) to accept, in lieu of stock upon the
exercise of the Option, the amount of cash such employee would
have received if they received the cash payments described in
this Section 2.2 (the "Option Payment") which shall be a
condition to any agreement by the Company to pay such Option
Payment in respect of such Options."
4. Section 3.2 of the Merger Agreement is hereby amended to delete
the second full sentence and the following new sentence shall be inserted in
lieu thereof.
"As of the close of business on January 19, 1999, 12,106,225
Common Shares were issued and outstanding, all of which are
entitled to vote on this Agreement."
5. Section 3.2 of the Merger Agreement is hereby amended to delete
the fourth full sentence and the following new sentence shall be inserted in
lieu thereof.
"As of January 19, 1999, except for (i) 2,356,709 Common Shares
reserved for issuance pursuant to outstanding Options, there are
no existing options, warrants, calls, subscriptions, or other
rights, or other agreements or commitments, obligating the
Company to issue, transfer or sell any shares of capital stock of
the Company or any of its Subsidiaries."
6. Section 3.25 of the Merger Agreement is hereby amended to delete
the first clause that reads "Except as set forth in Section 3.13 of the
Disclosure Schedule," and the following new clause shall be inserted in lieu
thereof.
"Except with respect to any matter set forth in Section 3.7, 3.13
or 3.22(a) of the Disclosure Schedule,"
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<PAGE>
7. Section 5.2 of the Merger Agreement is hereby deleted in its
entirety and the following new Section 5.2 shall be inserted in lieu thereof.
"From the date of this Agreement until the Effective Time, the
Company will, and will cause its Subsidiaries, and each of their
respective officers, directors, employees, agents or other
representatives (including, without limitation, any investment
banker, attorney or accountant retained by the Company or its
Subsidiaries) (the "Company Representatives"), to give ICS and
their respective officers, employees, agents or other
representatives (including, without limitation, any investment
banker, attorney or accountant retained by ICS) (the "ICS
Representatives") and representatives of financing sources
identified by ICS who do not compete with the Company in the
integrated circuit industry ("Financing Sources"), so long as
such ICS Representatives and representatives of Financing Sources
agree in writing (with the Company as a party or expressly set
forth as a third party beneficiary to such agreement) to maintain
the confidentiality of any non-public confidential information
about the Company and its Subsidiaries in a manner consistent
with market practice for acquisition financing transactions,
reasonable access, upon reasonable notice and during normal
business hours, to the offices and other facilities and to the
books and records of the Company and its Subsidiaries and will
cause the Company Representatives and the Company's Subsidiaries
to furnish ICS and the ICS Representatives and Financing Sources
identified by ICS with such financial and operating data and such
other information with respect to the business and operations of
the Company and its Subsidiaries as ICS and representatives of
Financing Sources may from time to time reasonably request.
In addition, the Company agrees that so long as the Financing
Sources and the representatives agree in writing (with the
Company as a party or expressly set forth as a third party
beneficiary to such agreement) to maintain the confidentiality of
any non-public confidential information about the Company and its
Subsidiaries in a manner consistent with market practice for
acquisition financing transactions, ICS and the ICS
Representatives may directly furnish financial and operating data
and such other information about the Company and its Subsidiaries
as they reasonably deem necessary, to representatives of
Financing Sources or any ICS Representative. ICS agrees that it
will receive and hold any information furnished pursuant to this
Section 5.2 subject to the provisions of the letter agreement
dated May 13, 1998, between Bear Stearns Merchant Fund Corp. and
the Company and the letter agreement dated May 15, 1998, between
Bain Capital Inc. and the Company (the "Confidentiality
Agreements")."
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<PAGE>
8. Section 5.10 of the Merger Agreement is hereby amended to delete
the words "Investment Banks" from the proviso after the words "in the opinion
of" and before the words "more favorable to the Company" and to insert the words
"Investment Banker" in its place .
9. Section 5.10 of the Merger Agreement is hereby amended to delete
the word "then" from the proviso after the words "from a financial point of
view" and before the words "than the transactions contemplated by this
Agreement."
10. Section 6.2(d) of the Merger Agreement is hereby amended to add
the following new clause to the beginning of the first sentence of Section
6.2(d).
"Except as set forth in Section 3.7 or 3.22(a) of the Disclosure
Schedule,"
11. Sections 7.1(b) of the Merger Agreement is hereby deleted in its
entirety and the following new Section 7.1(b) shall be inserted in lieu thereof.
"(b) by ICS or the Company if the Merger shall not have been
consummated on or before June 30, 1999; provided, however, that
neither ICS nor the Company may terminate this Agreement pursuant
to this Section 7.1(b) if such party shall have materially
breached this Agreement."
12. Section 7.1(d) of the Merger Agreement is hereby amended to
delete the word "Transaction" from the second line and to insert the word
"Proposal" in its place.
13. Section 7.1(d) of the Merger Agreement is hereby amended to
delete subsection (ii) up to the proviso and the following new clause
7.1(d)(ii) shall be inserted before the proviso in lieu thereof.
"(ii) after consultation with counsel, that failure to approve
such proposal and terminate this Agreement could reasonably be
expected to result in a breach of the Company's Board's fiduciary
duties to shareholders (assuming for such purpose that fiduciary
duties are owed only to shareholders), as they would exist in the
absence of any limitations in this Agreement;"
14. Section 7.1(e)(iii) of the Merger Agreement is hereby amended to
delete the word "Transaction" and to insert the word "Proposal" in its place.
15. Section 3.2 of the Disclosure Schedule of the Merger Agreement is
hereby amended to delete the following clause from the end of the sentence
referring to the Incentive Stock Option to purchase 112,000 shares granted to
R. Gassner:
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<PAGE>
", and providing for accelerated vesting in the event the fair
market value of the common stock exceeds $20 for ten consecutive
trading days, subject to certain limitations"
16. The Company's grant of an option on February 2, 1999 to each of
Henry Boreen, Edward Esber and John Pickitt, the Company's three non-employee
directors, to purchase 8,000 shares of the Company's Common Stock at a per
share price of $18.375 pursuant to the non-discretionary annual grant provision
of the Company's 1997 Equity Compensation Plan shall be deemed to be included on
the appropriate Optionee Statements attached to Section 3.2 of the Disclosure
Schedule of the Merger Agreement effective as of the date of the Merger
Agreement.
17. Section 3.13 of the Disclosure Schedule of the Merger Agreement
is hereby amended to include the following effective as of the date of the
Merger Agreement:
"Any resignation by any person who was an Executive Officer of
the Company as of January 19, 1999, and is no longer an Executive
Officer of the Company as of February 16, 1999."
18. Section 5.1 of the Disclosure Schedule of the Merger Agreement is
hereby amended to include the following effective as of the date of the Merger
Agreement:
"4. The Company's 1997 Equity Compensation Plan provides for the
non-discretionary annual grant of an option on February 2, 1999
to each of the Company's three Independent Directors to purchase
8,000 shares of the Company's Common Stock at the Fair Market
Value on the date of the grant."
19. ICS agrees that it will cause item (ix) of Exhibit C to the
Senior Secured Credit Facilities and Mezzanine Facility Loan Commitment Letter
dated January 18, 1999 from Credit Suisse First Boston ("Loan Commitment
Letter") to be amended to read in its entirety as follows:
"(ix) the Closing Date shall occur on or before June 30, 1999."
20. ICS further agrees that it will cause item (ii) of Exhibit C to
the Loan Commitment Letter to be amended by inserting at the end of that section
the following:
"; provided, however, that the failure of the Merger and related
transactions to be eligible for recapitalization accounting shall
not be considered a failure to satisfy any of the conditions to
the commitments of CSFB stated herein;"
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<PAGE>
21. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Merger
Agreement.
22. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
23. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
24. From and after the date hereof, except as the context otherwise
requires, all references in the Merger Agreement to the Merger Agreement shall
be deemed to be references to the Merger Agreement as modified hereby.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 1 to be duly executed and delivered as of the date first above
written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
----------------------------------
Name: Hock E. Tan
Title: Senior Vice President,
Chief Operating Officer
and
Chief Financial Officer
ICS MERGER CORP.
By: /s/ Michael A. Krupka
----------------------------------
Name: Michael A. Krupka
Title: Managing Director
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<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INTEGRATED CIRCUIT SYSTEMS, INC.
ARTICLE ONE
-----------
The name of the corporation is Integrated Circuit Systems, Inc.
ARTICLE TWO
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The address of the corporation's registered office in the State of
Pennsylvania is 2435 Boulevard of the Generals, City of Valley Forge, County of
Montgomery, State of Pennsylvania; and its registered agent at such address is
Hock E. Tan.
ARTICLE THREE
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The corporation is incorporated under the Business Corporation Law approved
the 5th day of May, 1933, P.L. 364. The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or activity for which
corporations may be organized under the Pennsylvania Business Corporation Law of
1988, as amended.
ARTICLE FOUR
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A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 36,500,000 shares, consisting of:
(i) 27,000,000 shares of Class A Common Stock, par value $0.01 per share
("Class A Common");
--------------
(i) 7,000,000 shares of Class B Common Stock, par value 0.01 per share
(Class B Common"); and
--------------
(ii) 3,000,000 shares of Class L Common Stock, par value $0.01 per share
("Class L Common").
--------------
<PAGE>
The Class A Common, Class B Common and Class L Common, and any other common
stock issued hereafter, are referred to collectively as the "Common Shares."
-------------
The Common Shares shall have the rights, preferences and limitations set forth
below. Capitalized terms used but not otherwise defined in Part A or Part B of
this Article IV are defined in Part C.
B. COMMON SHARES
-------------
Except as otherwise provided in this Part B or as otherwise required by
applicable law, all Common Shares shall be identical in all respects and shall
entitle the holders thereof to the same rights and privileges, subject to the
same qualifications, limitations and restrictions.
Section 1. Voting Rights. Except as otherwise required by applicable
-------------
law, all holders of Class A Common shall be entitled to one vote per share on
all matters to be voted on by the Corporation's stockholders; provided that,
-------- ----
except as otherwise required by applicable law, the holders of Class A Common
shall not in any respect have cumulative voting rights. Except as otherwise
required by applicable law, all holders of Class B Common and Class L Common
shall have no right to vote on any matters to be voted on by the Corporation's
stockholders.
Section 2. Distributions. At the time of each Distribution, such
-------------
Distribution shall be made to the holders of Common Shares in the following
priority:
2A. The holders of Class L Common, as a separate class, shall be entitled
to receive all or a portion of such Distribution (ratably among such holders
based upon the aggregate Unpaid Yield on Class L Common held by each such holder
as of the time of such Distribution) equal to the aggregate Unpaid Yield on the
outstanding shares of Class L Common as of the time of such Distribution, and no
Distribution or any portion thereof shall be made under paragraph 2B or 2C below
until the entire amount of the Unpaid Yield on the outstanding shares of Class L
Common as of the time of such Distribution has been paid in full. The
Distributions made pursuant to this paragraph 2A to holders of Class L Common
shall constitute a payment of Yield on Class L Common.
2B. After the required amount of a Distribution has been made in full
pursuant to paragraph 2A above, the holders of Class L Common, as a separate
class, shall be entitled to receive all or a portion of such Distribution
(ratably among such holders based upon the aggregate Unreturned Cost of shares
of Class L Common held by each such holder as of the time of such Distribution)
equal to the aggregate Unreturned Cost of the outstanding shares of Class L
Common as of the time of such Distribution, and no Distribution or any portion
thereof shall be made under paragraph 2C below until the entire amount of the
Unreturned Cost of the outstanding shares of Class L Common as of the time of
such Distribution has been paid in full. The Distributions made pursuant to this
paragraph 2B to holders of Class L Common shall constitute a payment of Cost of
Class L Common.
2
<PAGE>
2C. After the required amount of a Distribution has been made pursuant to
paragraphs 2A and 2B above, holders of Common Shares, as a group, shall be
entitled to receive the remaining portion of such Distribution (ratably among
such holders based upon the number of Common Shares held by each such holder as
of the time of such Distribution).
Section 3. Stock Splits and Stock Dividends. The Corporation shall not
--------------------------------
in any manner subdivide (by stock split, stock dividend or otherwise) or combine
(by stock split, stock dividend or otherwise) the outstanding Common Shares of
one class unless the outstanding Common Shares of all the other classes shall be
proportionately subdivided or combined, respectively. All such subdivisions and
combinations shall be payable only in Class L Common to the holders of Class L
Common, in Class B Common to the holders of Class B Common and in Class A Common
to the holders of Class A Common. In no event shall a stock split or stock
dividend constitute a payment of Yield or a return of Cost.
Section 4. Conversion of Class A Common and Class B Common.
-----------------------------------------------
4A. Each holder of an outstanding share of Class A Common may convert such
share of Class A Common into a share of Class B Common at any time. Each holder
of an outstanding share of Class B Common may convert such share of Class B
Common into a share of Class A Common at any time so long as after giving effect
to the conversion such holder and such holder's Affiliates, collectively, do not
directly or indirectly own more than 49.9% of the outstanding shares of Class A
Common.
4B. If a conversion of Class A Common or Class B Common is to be made in
connection with an Initial Public Offering or other transaction, the conversion
may, at the election of the holder thereof, be conditioned upon the consummation
of such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
4C. As soon as possible after a conversion has been effected, the
Corporation shall deliver to the converting holder a certificate or certificates
representing the number of shares of Class A Common issuable by reason of such
conversion in such name or names and such denomination or denominations as the
converting holder has specified.
4D. The issuance of certificates for shares of Class A Common or Class B
Common upon conversion of Class A Common or Class B Common, as the case may be,
shall be made without charge to the holders of such Common Stock for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of shares of Common
Stock. Upon conversion of each share of Common Stock, the Corporation shall
take all such actions as are necessary in order to insure that the Class A
Common or Class B Common issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable, free and clear of all taxes,
liens, charges and encumbrances with respect to the issuance thereof.
3
<PAGE>
4E. The Corporation shall not close its books against the transfer of
Class A Common or of Class B Common issued or issuable upon conversion in any
manner which interferes with the timely conversion of such Common Stock. The
Corporation shall assist and cooperate with any holder of shares required to
make any governmental filings or obtain any governmental approval prior to or in
connection with any conversion of shares hereunder (including, without
limitation, making any filings required to be made by the Corporation).
4F. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common and Class B Common, solely
for the purpose of issuance upon the conversion of the Class A Common or Class B
Common, such number of shares of Class A Common or Class B Common, issuable upon
the conversion of all outstanding Class A Common or Class B Common, as the case
may be. All shares of Class A Common and Class B Common which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Class A Common and
Class B Common may be so issued without violations of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Class A Common or Class B Common may be listed (except for
official notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance). The Corporation shall not take any action
which would cause the number of authorized but unissued shares of Class A Common
or Class B Common to be less than the number of such shares required to be
reserved hereunder for issuance upon conversion of the Class A Common or Class B
Common, as the case may be.
Section 5. Conversion of Class L Common upon Initial Public Offering.
---------------------------------------------------------
5A. Upon the consummation of the Corporation's Initial Public Offering,
each outstanding share of Class L Common shall, without any action by the holder
thereof, automatically convert into a number of shares of Class A Common equal
to the sum of (x) one and (y) the result of (A) the Unreturned Cost plus Unpaid
Yield of such share of Class L Common divided by (B) the price per share of the
Class A Common in the Initial Public Offering (in each case before giving effect
to any stock split declared in connection with such Initial Public Offering).
5B. As soon as possible after a conversion has been effected, the
Corporation shall deliver to the converting holder a certificate or certificates
representing the number of shares of Class A Common issuable by reason of such
conversion in such name or names and such denomination or denominations as the
converting holder has specified.
5C. The issuance of certificates for shares of Class A Common upon
conversion of Class L Common shall be made without charge to the holders of such
Class L Common for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
shares of Class A Common. Upon conversion of each
4
<PAGE>
share of Class L Common, the Corporation shall take all such actions as are
necessary in order to insure that the Class A Common issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
5D. The Corporation shall not close its books against the transfer of
Class L Common or of Class A Common issued or issuable upon conversion of Class
L Common in any manner which interferes with the timely conversion of Class L
Common. The Corporation shall assist and cooperate with any holder of shares
required to make any governmental filings or obtain any governmental approval
prior to or in connection with any conversion of shares hereunder (including,
without limitation, making any filings required to be made by the Corporation).
5E. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common, solely for the purpose of
issuance upon the conversion of the Class L Common, such number of shares of
Class A Common issuable upon the conversion of all outstanding Class L Common.
All shares of Class A Common which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Class A Common may be so issued without
violations of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Class A Common may be
listed (except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance). The Corporation shall
not take any action which would cause the number of authorized but unissued
shares of Class A Common to be less than the number of such shares required to
be reserved hereunder for issuance upon conversion of the Class L Common.
Section 6. Registration or Transfer. The Corporation shall keep at its
------------------------
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of Common Shares. Upon the surrender of any
certificate representing shares of any class of Common Shares at such place, the
Corporation shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall cancel such
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of such class as is requested by
the holder of the surrendered certificate and shall be substantially identical
in form to the surrendered certificate. The issuance of new certificates shall
be made without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.
Section 7. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more shares of any class of Common Shares, and
in the case of any such loss, theft or destruction, upon receipt of
5
<PAGE>
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor, its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
Section 8. Notices. All notices referred to herein shall be in
-------
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
Section 9. Fractional Shares. In no event will holders of fractional
-----------------
shares be required to accept any consideration in exchange for such shares other
than consideration which all holders of Common Stock are required to accept.
Section 10. Amendment and Waiver. No amendment or waiver of any
--------------------
provision of this Article IV shall be effective without the prior written
consent of the holders of a majority of the then outstanding Common Shares
voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class of Common Shares that adversely
affects the powers, preferences or special rights of such class of Common Shares
shall be effective without the prior consent of the holders of a majority of the
then outstanding shares of such affected class of Common Shares, voting as a
single class.
C. DEFINITIONS
-----------
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). With respect to any Person who is an individual, "Affiliates" shall
also include, without limitation, any member of such individual's Family Group.
"Business Corporation Law of 1988" means the Business Corporation Law of
--------------------------------
1988 of the State of Pennsylvania, as amended from time to time.
"Common Stock" means, collectively, the Corporation's Class A Common Stock,
------------
Class B Common Stock and Class L Common Stock and any other class of capital
stock of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or
6
<PAGE>
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Cost" of each share of Class L Common shall be equal to $18.00 per share
----
(as proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting the Class L Common).
"Distribution" means each distribution made by the Corporation to holders
------------
of Common Shares, whether in cash, property, or securities of the Corporation
and whether by dividend, liquidating distributions or otherwise; provided that
neither of the following shall be a Distribution: (a) any redemption or
repurchase by the Corporation of any Common Shares for any reason or (b) any
recapitalization or exchange of any Common Shares, or any subdivision (by stock
split, stock dividend or otherwise) or any combination (by stock split, stock
dividend or otherwise) of any outstanding Common Shares.
"Family Group" means a Person's spouse and descendants (whether natural or
------------
adopted) and any trust solely for the benefit of such Person and/or such
Person's spouse and/or descendants (natural or adopted) of a Person and any
corporation, limited liability company, partnership or other entity, the entity
holders of which solely include such Person, his or her spouse or descendants
(natural or adopted) or any trust for the benefit of such Person, his or her
spouse or descendants (natural or adopted).
"Initial Public Offering" means the initial offering by the Corporation of
-----------------------
its capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect, or
any comparable statement under any similar federal statute then in force;
provided that an Initial Public Offering shall not include an offering made in
- -------- ----
connection with a business acquisition or a combination of an employee benefit
plan.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Unpaid Yield" of any share of Class L Common means an amount equal to the
------------
excess, if any, of (a) the aggregate Yield accrued on such share, over (b) the
aggregate amount of Distributions made by the Corporation that constitute
payment of Yield on such share.
"Unreturned Cost" of any share of Class L Common means an amount equal to
---------------
the excess, if any, of (a) the Cost of such share, over (b) the aggregate amount
of Distributions made by the Corporation that constitute a return of the Cost of
such share.
"Yield" means, with respect to each outstanding share of Class L Common for
-----
each calendar quarter, the amount accruing on such share each day during such
quarter at the rate of
7
<PAGE>
9% per annum of the sum of (a) such share's Unreturned Cost, plus (b) Unpaid
Yield thereon for all prior quarters. In calculating the amount of any
Distribution to be made to the Class L Common during a calendar quarter, the
portion of a Class L Common share's Yield for such portion of such quarter
elapsing before such Distribution is made shall be taken into account.
ARTICLE FIVE
------------
The corporation is to have perpetual existence.
ARTICLE SIX
-----------
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the corporation is expressly authorized to make, alter
or repeal the by-laws of the corporation.
ARTICLE SEVEN
-------------
Meetings of stockholders may be held within or without the State of
Pennsylvania, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Pennsylvania at such place or
places as may be designated from time to time by the board of directors or in
the by-laws of the corporation. Election of directors need not be by written
ballot unless the by-laws of the corporation so provide.
ARTICLE EIGHT
-------------
To the fullest extent permitted by the Business Corporation Law of the State
of Pennsylvania as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHT shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
8
<PAGE>
ARTICLE NINE
------------
The corporation expressly elects not to be governed by Section 2538 (Adoption
of Transactions with Interested Shareholders) and the provisions contained in
Subchapters E (Control Transactions), G (Control-Share Acquisitions), H
(Disgorgement by Certain Controlling Shareholders for Employees Terminated
Following Attempts to Acquire Control), I (Severance Compensation for Employees
Terminated Following Certain Control-Share Acquisitions) and J (Business
Combination Transactions - Labor Contracts) of Chapter 25 of the Business
Corporation Law of the State of Pennsylvania.
ARTICLE TEN
-----------
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Pennsylvania, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
9
<PAGE>
Exhibit 10.8
AMENDMENT No.1 TO AGREEMENT AND PLAN OF MERGER
----------------------------------------------
AMENDMENT No. 1 (this "Amendment"), dated February 16, 1999, by and
among Integrated Circuit Systems, Inc., a Pennsylvania corporation (the
"Company"), and ICS Merger Corp., a Pennsylvania corporation ("ICS"). All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Merger Agreement (as defined
below).
W I T N E S S E T H :
-------------------
WHEREAS, the Company and ICS are parties to a certain Agreement and
Plan of Merger dated January 20, 1999 (the "Merger Agreement"); and
WHEREAS, the parties hereto wish to amend the Merger Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. Section 1.1 of the Merger Agreement is hereby amended to insert
in the first sentence the words "(including Section 1906 thereof, which shall be
applicable to the transactions contemplated hereby,)" after the words "this
Agreement and the BCL" and before the words "at the Effective Time".
2. Section 2.1(b)(ii) of the Merger Agreement is hereby amended to
delete the date "February 10, 1999" from the end of that Section and to insert
the date "March 3, 1999" in lieu thereof.
3. Section 2.2 of the Merger Agreement is hereby deleted in its
entirety and the following new Section 2.2 shall be inserted in lieu thereof.
"Section 2.2 Options; Stock Plans. Immediately prior to the
Effective Time, each holder of a then-outstanding employee stock
option, whether or not fully exercisable, to purchase Common
Shares (an "Option") granted under the Company's 1992 Stock
Option Plan and 1997 Equity Compensation Plan (the "Stock Plans")
and all other outstanding options, in each case as reflected in
Section 3.2 of the Disclosure Schedule, will be entitled to
receive in settlement of such Option (a) a cash payment from the
Company equal to the product of (i) the total number of Common
Shares
<PAGE>
previously subject to such Option and (ii) the excess of the
Merger Consideration over the exercise price per Common Share
subject to such Option, subject to any required withholding of
taxes (the "Option Spread"), (b) new stock options ("New
Options") in the Company pursuant to new stock option agreements
between the Company, ICS and certain members of Management or (c)
some combination of (a) and (b) above. The Company will, upon the
request of ICS, use reasonable efforts to obtain the written
acknowledgment of each employee holding an Option that the
payment of the amount of cash or New Options referred to above
will satisfy in full the Company's obligation to such employee
pursuant to such Option and take such other action as is
necessary to effect the provisions of this Section 2.2. The
amounts payable pursuant to this Section 2.2 shall be paid as
soon as reasonably practicable following the Closing Date and
shall be subject to and made net of all applicable withholding
taxes. The Company will solicit from each Retained Employee, as
such term is defined in that certain asset purchase agreement
among 3COM Corporation, the Company and ICS Technologies, Inc.,
an agreement by each such employee who owns an Option (as defined
in such agreement) to accept, in lieu of stock upon the exercise
of the Option, the amount of cash such employee would have
received if they received the cash payments described in this
Section 2.2 (the "Option Payment") which shall be a condition to
any agreement by the Company to pay such Option Payment in
respect of such Options."
4. Section 3.2 of the Merger Agreement is hereby amended to delete
the second full sentence and the following new sentence shall be inserted in
lieu thereof.
"As of the close of business on January 19, 1999, 12,106,225
Common Shares were issued and outstanding, all of which are
entitled to vote on this Agreement."
5. Section 3.2 of the Merger Agreement is hereby amended to delete
the fourth full sentence and the following new sentence shall be inserted in
lieu thereof.
"As of January 19, 1999, except for (i) 2,356,709 Common Shares
reserved for issuance pursuant to outstanding Options, there are
no existing options, warrants, calls, subscriptions, or other
rights, or other agreements or commitments, obligating the
Company to issue, transfer or sell any shares of capital stock of
the Company or any of its Subsidiaries."
6. Section 3.25 of the Merger Agreement is hereby amended to delete
the first clause that reads "Except as set forth in Section 3.13 of the
Disclosure Schedule," and the following new clause shall be inserted in lieu
thereof.
-2-
<PAGE>
"Except with respect to any matter set forth in Section 3.7, 3.13 or
3.22(a) of the Disclosure Schedule,"
7. Section 5.2 of the Merger Agreement is hereby deleted in its
entirety and the following new Section 5.2 shall be inserted in lieu thereof.
"From the date of this Agreement until the Effective Time, the
Company will, and will cause its Subsidiaries, and each of their
respective officers, directors, employees, agents or other
representatives (including, without limitation, any investment
banker, attorney or accountant retained by the Company or its
Subsidiaries) (the "Company Representatives"), to give ICS and
their respective officers, employees, agents or other
representatives (including, without limitation, any investment
banker, attorney or accountant retained by ICS) (the "ICS
Representatives") and representatives of financing sources
identified by ICS who do not compete with the Company in the
integrated circuit industry ("Financing Sources"), so long as
such ICS Representatives and representatives of Financing Sources
agree in writing (with the Company as a party or expressly set
forth as a third party beneficiary to such agreement) to maintain
the confidentiality of any non-public confidential information
about the Company and its Subsidiaries in a manner consistent
with market practice for acquisition financing transactions,
reasonable access, upon reasonable notice and during normal
business hours, to the offices and other facilities and to the
books and records of the Company and its Subsidiaries and will
cause the Company Representatives and the Company's Subsidiaries
to furnish ICS and the ICS Representatives and Financing Sources
identified by ICS with such financial and operating data and such
other information with respect to the business and operations of
the Company and its Subsidiaries as ICS and representatives of
Financing Sources may from time to time reasonably request.
In addition, the Company agrees that so long as the Financing
Sources and the representatives agree in writing (with the
Company as a party or expressly set forth as a third party
beneficiary to such agreement) to maintain the confidentiality of
any non-public confidential information about the Company and its
Subsidiaries in a manner consistent with market practice for
acquisition financing transactions, ICS and the ICS
Representatives may directly furnish financial and operating data
and such other information about the Company and its Subsidiaries
as they reasonably deem necessary, to representatives of
Financing Sources or any ICS Representative. ICS agrees that it
will receive and hold any information furnished pursuant to this
Section 5.2 subject to the provisions of the letter agreement
dated May 13, 1998, between Bear Stearns Merchant
-3-
<PAGE>
Fund Corp. and the Company and the letter agreement dated May 15,
1998, between Bain Capital Inc. and the Company (the
"Confidentiality Agreements")."
8. Section 5.10 of the Merger Agreement is hereby amended to delete
the words "Investment Banks" from the proviso after the words "in the opinion
of" and before the words "more favorable to the Company" and to insert the words
"Investment Banker" in its place .
9. Section 5.10 of the Merger Agreement is hereby amended to delete
the word "then" from the proviso after the words "from a financial point of
view" and before the words "than the transactions contemplated by this
Agreement."
10. Section 6.2(d) of the Merger Agreement is hereby amended to add
the following new clause to the beginning of the first sentence of Section
6.2(d).
"Except as set forth in Section 3.7 or 3.22(a) of the Disclosure
Schedule,"
11. Sections 7.1(b) of the Merger Agreement is hereby deleted in its
entirety and the following new Section 7.1(b) shall be inserted in lieu thereof.
"(b) by ICS or the Company if the Merger shall not have been
consummated on or before June 30, 1999; provided, however, that
neither ICS nor the Company may terminate this Agreement pursuant
to this Section 7.1(b) if such party shall have materially
breached this Agreement."
12. Section 7.1(d) of the Merger Agreement is hereby amended to
delete the word "Transaction" from the second line and to insert the word
"Proposal" in its place.
13. Section 7.1(d) of the Merger Agreement is hereby amended to
delete subsection (ii) up to the proviso and the following new clause
7.1(d)(ii) shall be inserted before the proviso in lieu thereof.
"(ii) after consultation with counsel, that failure to approve
such proposal and terminate this Agreement could reasonably be
expected to result in a breach of the Company's Board's fiduciary
duties to shareholders (assuming for such purpose that fiduciary
duties are owed only to shareholders), as they would exist in the
absence of any limitations in this Agreement;"
-4-
<PAGE>
14. Section 7.1(e)(iii) of the Merger Agreement is hereby amended to
delete the word "Transaction" and to insert the word "Proposal" in its place.
15. Section 3.2 of the Disclosure Schedule of the Merger Agreement
is hereby amended to delete the following clause from the end of the sentence
referring to the Incentive Stock Option to purchase 112,000 shares granted to R.
Gassner:
", and providing for accelerated vesting in the event the fair
market value of the common stock exceeds $20 for ten consecutive
trading days, subject to certain limitations"
16. The Company's grant of an option on February 2, 1999 to each of
Henry Boreen, Edward Esber and John Pickitt, the Company's three non-employee
directors, to purchase 8,000 shares of the Company's Common Stock at a per
share price of $18.375 pursuant to the non-discretionary annual grant provision
of the Company's 1997 Equity Compensation Plan shall be deemed to be included on
the appropriate Optionee Statements attached to Section 3.2 of the Disclosure
Schedule of the Merger Agreement effective as of the date of the Merger
Agreement.
17. Section 3.13 of the Disclosure Schedule of the Merger Agreement
is hereby amended to include the following effective as of the date of the
Merger Agreement:
"Any resignation by any person who was an Executive Officer of
the Company as of January 19, 1999, and is no longer an Executive
Officer of the Company as of February 16, 1999."
18. Section 5.1 of the Disclosure Schedule of the Merger Agreement is
hereby amended to include the following effective as of the date of the Merger
Agreement:
"4. The Company's 1997 Equity Compensation Plan provides for the
non-discretionary annual grant of an option on February 2, 1999
to each of the Company's three Independent Directors to purchase
8,000 shares of the Company's Common Stock at the Fair Market
Value on the date of the grant."
19. ICS agrees that it will cause item (ix) of Exhibit C to the
Senior Secured Credit Facilities and Mezzanine Facility Loan Commitment Letter
dated January 18, 1999 from Credit Suisse First Boston ("Loan Commitment
Letter") to be amended to read in its entirety as follows:
"(ix) the Closing Date shall occur on or before June 30, 1999."
-5-
<PAGE>
20. ICS further agrees that it will cause item (ii) of Exhibit C to
the Loan Commitment Letter to be amended by inserting at the end of that section
the following:
"; provided, however, that the failure of the Merger and related
transactions to be eligible for recapitalization accounting shall
not be considered a failure to satisfy any of the conditions to
the commitments of CSFB stated herein;"
21. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Merger
Agreement.
22. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
23. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
24. From and after the date hereof, except as the context otherwise
requires, all references in the Merger Agreement to the Merger Agreement shall
be deemed to be references to the Merger Agreement as modified hereby.
-6-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 1 to be duly executed and delivered as of the date first above
written.
INTEGRATED CIRCUIT SYSTEMS,
INC.
By: /s/ Hock E. Tan
--------------------------------------
Name: Hock E. Tan
Title: Senior Vice President,
Chief Operating Officer and
Chief Financial Officer
ICS MERGER CORP.
By: /s/ Michael A. Krupka
-------------------------------------
Name: Michael A. Krupka
Title: Managing Director
-7-
<PAGE>
Exhibit 10.9
INTEGRATED CIRCUIT SYSTEMS, INC.
EXECUTIVE STOCK AND OPTION AGREEMENT
------------------------------------
THIS EXECUTIVE STOCK AND OPTION AGREEMENT (this "Agreement") is made and
---------
entered into as of May 11, 1999 by and between Integrated Circuit Systems, Inc.,
a Pennsylvania corporation (the "Company"), and Hock E. Tan ("Executive").
------- ---------
Reference is hereby made to the Agreement and Plan of Merger, as amended,
dated January 20, 1999, between the Company and ICS Merger Corp., a Pennsylvania
corporation ("ICS"), pursuant to which, as of the date hereof, and simultaneous
---
with the execution of this Agreement, ICS has merged with and into the Company
(such merger, the "Merger") with the Company as the surviving corporation.
------
The Company and Executive desire to enter into this Agreement (i) to
provide Executive options (collectively, the "Options") to acquire a certain
-------
number of shares of Class A Common and a certain number of shares of Class L
Common pursuant to the terms and subject to the conditions provided herein, and
(ii) to restrict the sale, assignment, transfer, encumbrance or other
disposition of certain shares of Common Stock held by Executive, and to provide
for certain rights and obligations in respect thereto as hereinafter provided.
The Options granted hereunder are being granted under this Agreement and are not
subject to the Company's 1999 Stock Option Plan or any other stock plan which
has been previously adopted or which is adopted in the future by the Company.
Capitalized terms used herein and not otherwise defined are defined in Section
18 hereof.
The parties hereto agree as follows:
1. Options and Option Shares.
-------------------------
(a) Options Grant. The Company hereby grants to Executive options to
-------------
purchase (x) 229,922 shares of Class A Common ("Class A Option Shares") at an
---------------------
exercise price of $0.044 per share (the "Class A Exercise Price") and (y) 25,547
----------------------
shares of Class L Common ("Class L Option Shares" and together with the Class A
---------------------
Option Shares, the "Option Shares") at an exercise price of $3.60 per share (the
-------------
"Class L Exercise Price"). The Class A Exercise Price and the Class L Exercise
----------------------
Price are collectively referred to herein as "Option Prices" and individually
--------------
as "Option Price". The option to purchase Class A Option Shares may be
------------
exercised independently of the option to purchase Class L Option Shares, and
likewise the option to purchase Class L Option Shares may be exercised
independently of the option to exercise Class A Option Shares. The Options will
be immediately exercisable and, subject to earlier expiration as provided in
subsection 1(b) below, will expire on the Expiration Date. The Options are not
intended to be "incentive stock options" within the meaning of Section 422A of
the Code.
(b) Expiration. Any Options which have not been exercised prior to the
----------
Termination Date will expire, and may not be exercised thereafter under any
circumstances, on the earlier of (i) 65 days after the resignation of Executive
other than for Good Reason (as defined in Executive's Employment Agreement) (180
days if the Termination Date occurs as a result of the death or
<PAGE>
disability (as determined in the good faith discretion of the Board) of
Executive), (ii) the Expiration Date or (iii) a Bain Exit. In addition, in the
event of a proposed Sale of the Company, the Board may provide, in its
discretion, by at least 20 days written notice to Executive, that any or all
Options shall terminate if not exercised as of the date of such Sale of the
Company or any other designated date following such Sale of the Company or that
any such Options shall after such Sale of the Company represent only the right
to receive such consideration as the Board shall deem equitable in the
circumstances. Executive shall be entitled to 25 days advance written notice of
a Bain Exit.
(c) Procedure for Exercise. At any time after the date hereof and prior to
----------------------
the Expiration Date, Executive may exercise all or a portion of the Options
which have not expired pursuant to subsection 1(b) above by delivering written
notice of exercise to the Company, together with (i) a written acknowledgment
that Executive has read and has been afforded an opportunity to ask questions of
members of the Company's management regarding all financial and other
information provided to Executive regarding the Company and (ii) a certified
check or wire transfer of funds in an amount equal to the aggregate Option
Prices of the Option Shares being purchased or, at the option of Executive,
payment may also be made by (A) surrendering shares of Class A Common that have
been owned by the holder for at least six months and that have an aggregate fair
market value (as determined by the Board in its sole discretion) equal to the
exercise price, (B) by delivery of an irrevocable undertaking by a broker to
deliver promptly to the company sufficient funds to pay the exercise price, or
(C) any combination of the foregoing. As a condition to any exercise of the
Options, Executive will permit the Company to deliver to him all financial and
other information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(d) Withholding Tax Requirements. It shall be a condition of the exercise
----------------------------
of any Option that the Executive make appropriate payment or other provision
acceptable to the Company with respect to any withholding tax requirement
arising from such exercise. The amount of withholding tax required, if any,
with respect to any Option exercise (the "Withholding Amount") shall be
------------------
determined by the Treasurer or other appropriate officer of the Company, and the
Executive shall furnish such information and make such representations as such
officer requires to make such determination.
(e) Withholding Tax Procedure. If the Company determines that withholding
-------------------------
tax is required with respect to any Option exercise, the Company shall notify
the Executive of the Withholding Amount, and the Executive shall pay to the
Company in cash (including check, bankdraft, money order or wire transfer of
immediately available funds) an amount not less than the Withholding Amount or,
at the option of the Executive, such payment may also be made (i) by
surrendering shares of Class A Common that have been owned by the holder for at
least six months and that have an aggregate fair market value (as determined by
the Board in its sole discretion) equal to the amount of withholding taxes, (ii)
by delivery of an irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the withholding taxes, (iii) by requesting in
the notice of exercise that the Company not issue a number of shares of Class A
Common issuable upon exercise whose aggregate fair market value (as determined
by the Board in its sole discretion) equal the minimum amount of withholding
tax, or (iv) any combination of the foregoing. All amounts paid to the Company
pursuant to this Section 1(e) shall be deposited in accordance with
2
<PAGE>
applicable law by the Company as withholding tax for the Executive's account. If
the Treasurer or other appropriate officer of the Company determines that no
withholding tax is required with respect to the exercise of any Option (because
such option is an incentive stock option or otherwise), but subsequently it is
determined that the exercise resulted in taxable income as to which withholding
is required (as a result of a disposition of shares or otherwise), the Executive
shall promptly, upon being notified of the withholding requirement, pay to the
Company, by means acceptable to the Company, the amount required to be withheld;
and at its election the Company may condition the transfer of any shares issued
upon exercise of an incentive stock option upon receipt of such payment.
(f) Non-Transferability of Options. The Options are personal to Executive
------------------------------
and are not transferable (whether by sale or pledge) by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Options.
2. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with the
-------------------------------------------
purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a current view to, or intention of, distribution thereof in
violation of the Securities Act or any applicable state securities laws,
and the shares of Executive Stock will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.
(ii) Executive is an executive or director of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his investment in
Executive Stock for an indefinite period of time because Executive Stock
has not been registered under the Securities Act and, therefore, cannot be
sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the
Company and its Subsidiaries as he or she has requested. Executive has
reviewed, or has had an opportunity to review, a copy of the Merger
Agreement, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review
the Offering Memorandum related to certain of the debt financing of the
Merger, the Company's Certificate of Incorporation and the Company's Bylaws
and any credit agreements, notes and related documents to which the Company
is a party.
3
<PAGE>
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(vi) Executive has not granted and is not a party to any proxy,
voting trust or other agreement which is inconsistent with, conflicts with
or violates any provision of this Agreement. Executive shall not grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this
Agreement.
(vii) Executive is a resident of the State of Pennsylvania.
(b) Acknowledgment by Executive. As an inducement to the Company to issue
---------------------------
the Options to Executive, and as a condition thereto, Executive acknowledges and
agrees that subject to any employment agreement between Executive and the
Company or applicable law, neither the issuance of Options or any Executive
Stock to Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the right
of the Company to terminate Executive's employment at any time for any reason.
(c) Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Executive as follows:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
(ii) The Company has all requisite corporate power and corporate
authority to executive, deliver and perform this Agreement and to
consummate the transactions provided for herein.
(iii) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby, including, but not limited to, the issuance and sale
of the Post-Recapitalization Stock to be issued by it hereunder, have been
duly authorized, and this Agreement constitutes the valid and binding
obligation of the Company, enforceable against it in accordance with the
terms hereof.
(iv) The Executive Stock issued to the Executive hereunder, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable.
(v) As of the Closing, the authorized capital stock of the Company
will consist of (A) 27,000,000 shares of Class A Common, of which
15,612,588 shares will be issued and outstanding immediately after the
Closing, (B) 7,000,000 shares of Class B Common Stock, of which 5,653,079
shares will be issued and outstanding immediately after the Closing, and
4
<PAGE>
(C) 3,000,000 shares of Class L Common Stock, of which 2,362,852 shares
will be issued and outstanding immediately after the Closing. As of the
Closing, other than options to purchase up to 5,734,333 shares of the
Company's Class A Common, options to purchase up to 137,148 shares of the
Company's Class L Common and preemptive rights to purchase shares of the
Company's capital stock granted to certain of the Company's stockholders,
there will be no rights, subscriptions, warrants, options, conversion
rights, or agreements of any kind outstanding to purchase from the Company,
or otherwise require the Company to issue, any shares of capital stock of
the Company or securities or obligations of any kind convertible or
exchangeable for any shares of capital stock of the Company; provided,
--------
however, that shares of Class A Common may be converted into shares of
-------
Class B Common and shares of Class B Common may be converted into shares of
Class A Common, all subject to the terms of the Company's Articles of
Incorporation.
3. Right to Purchase Executive Stock or Option Shares Upon Termination of
----------------------------------------------------------------------
Employment.
----------
(a) Repurchase Right. If the Termination Date occurs, the Executive Stock
----------------
(including any Executive Stock acquired subsequent to the Termination Date),
whether held by Executive or one or more transferees and the Option Shares, will
be subject to repurchase by the Bain Stockholders, the Bear Stearns
Stockholders, and the Company pursuant to the terms and conditions set forth in
this Section 3 (the "Repurchase Option").
-----------------
(b) Repurchase Price. Executive Stock purchased pursuant to the Repurchase
----------------
Option will be purchased at a price per share equal to the Fair Market Value of
such Executive Stock as of the Valuation Date. Option Shares purchased pursuant
to the Repurchase Option will be purchased at a price per share equal to the
difference between the Fair Market Value and the Exercise Price of such Option
Share as of the Valuation Date.
(c) Repurchase Procedures. The Company may elect or decline to exercise
---------------------
the Repurchase Option by delivering written notice (the "Company Repurchase
------------------
Notice") to the holder or holders of each class of the applicable Executive
- ------
Stock or Option Shares, the Bain Stockholders and the Bear Stearns Stockholders
within the later of the one-year anniversary of this Agreement or 240 days after
the applicable Termination Date. To the extent that after giving effect to the
Company's option pursuant to the immediately preceding sentence any portion of
the Executive Stock or Option Shares is not being repurchased by the Company,
the Bain Stockholders and the Bear Stearns Stockholders may elect or decline to
exercise the Repurchase Option to purchase up to their pro rata share
(determined based upon the number of shares of Class A Common and Class B Common
held by each) by delivering written notice (the "Initial Repurchase Notice") to
-------------------------
the Company, the holder or holders of Executive Stock or Option Shares and the
other within the later of (i) 10 business days after receipt of the Company
Repurchase Notice or (ii) the expiration of the later of one-year anniversary of
this Agreement or the expiration of the 240 day period during which the Company
was entitled to deliver the Company Repurchase Notice. To the extent that the
Bain Stockholders or the Bear Stearns Stockholders do not elect to repurchase
their full allotment of the remaining Executive Stock or Option Shares, the
other party shall be entitled to purchase all or any portion of the remaining
Executive Stock or Option Shares by providing written notice (the
5
<PAGE>
"Supplemental Repurchase Notice" and together with the Initial Repurchase Notice
------------------------------
and Company Repurchase Notice, a "Repurchase Notice") to each of the parties
-----------------
receiving the Initial Repurchase Notice within ten business days of the
expiration of the period during which the Bain Stockholders and the Bear Stearns
Stockholders were entitled to deliver the Initial Repurchase Notice. Each
Repurchase Notice will set forth the number of shares of each class of Executive
Stock and Option Shares to be acquired from such holder(s), an estimate of the
aggregate consideration to be paid for such holder's shares of each such class
of Executive Stock or Option Shares and the time and place for the closing of
the transaction. If any shares of any class of Executive Stock or Option Shares
are held by any transferees of Executive, the Bain Stockholders, the Bear
Stearns Stockholders and the Company, as the case may be, will purchase such
shares of such class elected to be purchased from such holder(s) of Executive
Stock or Option Shares, pro rata according to the number of shares of such class
of Executive Stock or Option Shares held by such holder(s) at the time of
delivery of such Repurchase Notice (determined as nearly as practicable to the
nearest share).
(d) Closing. Each closing of a repurchase transaction will take place on
-------
the date designated by the Bain Stockholders, the Bear Stearns Stockholders or
the Company, as the case may be, in the latest Repurchase Notice, which date
will not be more than 60 days after the delivery of such notice, and no earlier
than any date set forth in an earlier Repurchase Notice or the final
determination of Fair Market Value per share of Executive Stock or Option Shares
as of the Valuation Date and the expiration of any time periods for which a
repurchase election may be revoked pursuant to Section 3(e) (the "Scheduled
Closing Date"). The Company will pay for any shares of Executive Stock or
Option Shares to be purchased pursuant to a Repurchase Option by delivery of
cash or cashier's check payable to the holder(s) of such shares of Executive
Stock or Option Shares in an aggregate amount equal to their share of the
aggregate repurchase price (the "Repurchase Price"); provided that any purchase
---------------- -------- ----
of the Executive Stock or Option Shares that occurs after the Scheduled Closing
Date by the Company as a result of the Financing Circumstances (as defined
below) shall include simple interest calculated from the Scheduled Closing Date
to the date of such payment at the rate of 6% per annum on the Repurchase Price
attributable to such shares of Executive Stock or Option Shares. The Bain
Stockholders and the Bear Stearns Stockholders will pay for any shares of
Executive Stock or Option Shares to be purchased pursuant to a Repurchase Option
by delivery of cash or cashier's check payable to the holder(s) of such shares
of Executive Stock or Option Shares in an aggregate amount equal to their share
of the aggregate unpaid Repurchase Price for such shares of Executive Stock or
Option Shares. Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of shares of Executive Stock or Option Shares
pursuant to this Section 3(d) will be subject to applicable restrictions and
covenants contained in the Pennsylvania Business Corporation Law of 1988 and in
the Company's and its Subsidiaries' debt financing agreements. If (i) any such
restrictions or covenants prohibit the repurchase of Executive Stock or Option
Shares hereunder which the Company is otherwise entitled to make, (ii) the
Company does not have cash availability, including availability under its
revolver, of at least $15 million on a projected basis for the next six month
period (collectively, the "Financing Circumstances"), then the Company will not
-----------------------
be required to make such repurchase (and may defer making such repurchase) until
it is permitted to do so under such restrictions and covenants and until its
projected cash availability is greater than $15 million (with it being
understood that the Company will make the maximum amount of repurchases
permitted and may defer making the remainder of such repurchases until permitted
to do so and it being further understood that any closing of any such
6
<PAGE>
repurchase shall not occur on a date which is later than the second anniversary
of the Scheduled Closing Date). The Bain Stockholders, the Bear Stearns
Stockholders and the Company will receive customary representations and
warranties from each seller regarding the sale of shares of Executive Stock or
Option Shares solely with respect to such seller's ownership and title to
Executive Stock or Option Shares and capacity to transfer Executive Stock or
Option Shares.
(e) Revocation of Repurchase Election. Notwithstanding anything contained
---------------------------------
in this Agreement to the contrary, if Executive objects to Board's determination
of Fair Market Value as described in the definition of Fair Market Value, or if
the Fair Market Value of a share of Executive Stock or Option Shares is
otherwise determined to be an amount more than 10% greater than the per share
repurchase price for such share of Executive Stock or Option Shares in the
Initial Repurchase Notice or Supplemental Repurchase Notice, each of the
Company, the Bain Stockholders and the Bear Stearns Stockholders shall have the
right to revoke its exercise of the Repurchase Option for all or any portion of
the Executive Stock or Option Shares elected to be repurchased by it by
delivering notice of such revocation in writing to the holders of the Executive
Stock and Option Shares, the Company, the Bain Stockholders and the Bear Stearns
Stockholders during (i) the 30 day period beginning on the date that the
Company, the Bain Stockholders and the Bear Stearns Stockholders received
Executive's written notice of objection, and (ii) the 30 day period beginning on
the date that the Company, the Bain Stockholders and/or the Bear Stearns
Stockholders are given written notice that the Fair Market Value of a share of
Executive Stock or Option Shares was finally determined to be an amount more
than 10% greater than the per share repurchase price for Executive Stock or
Option Shares set forth in the Initial Repurchase Notice or in the Supplemental
Repurchase Notice.
In the event that the Bain Stockholders deliver a notice of revocation, the
Bear Stearns Stockholders shall be entitled to purchase all or any portion of
the Executive Stock or Option Shares that would otherwise have been purchased by
the Bain Stockholders by providing an additional Supplemental Repurchase Notice
to the holders of the Executive Stock and Option Shares and the Company within
10 business days after receipt of the Bain Stockholders' notice of revocation.
The Company may exercise the Repurchase Option for the remaining Executive Stock
and Option Shares by delivering an additional Company Repurchase Notice to the
holder or holders of the applicable Executive Stock and Option Shares within 10
business days of the expiration of the 10 business day period described in the
preceding sentence.
In the event that the Bear Stearns Stockholders deliver a notice of
revocation, the Bain Stockholders shall be entitled to purchase all or any
portion of the Executive Stock or Option Shares that would otherwise have been
purchased by the Bear Stearns Stockholders by providing an additional
Supplemental Repurchase Notice to the holders of the Executive Stock and Option
Shares and the Company within 10 business days after receipt of the Bear Stearns
Stockholders' notice of revocation. The Company may exercise the Repurchase
Option for the remaining Executive Stock and Option Shares by delivering an
additional Company Repurchase Notice to the holder or holders of the applicable
Executive Stock and Option Shares within 10 business days of the expiration of
the 10 business day period described in the preceding sentence.
7
<PAGE>
In the event that the Company delivers a notice of revocation, the Bain
Stockholders and the Bear Stearns Stockholders shall be entitled to purchase
their pro rata share (determined based on the number of shares of Class A Common
and Class B Common held by each) of all or any portion of the Executive Stock or
Option Shares that would otherwise have been purchased by the Company by
providing an additional Supplemental Repurchase Notice to the holders of the
Executive Stock and Option Shares and the other party within 10 business days
after receipt of the Company's notice of revocation. To the extent that the
Bain Stockholders or the Bear Stearns Stockholders do not elect to repurchase
their full allotment of Executive Stock or Option Shares, the other party shall
be entitled to purchase the remaining Executive Stock or Option Shares by
delivering an additional Supplemental Repurchase Notice to the holder or holders
of the applicable Executive Stock or Option Shares within 10 business days of
the expiration of the 10 business day period described in the preceding
sentence.
(f) Termination of Repurchase Right. The Repurchase Option granted to the
-------------------------------
Bain Stockholders, Bear Stearns Stockholders and the Company shall terminate (to
the extent not previously exercised) with respect to Executive Stock and Option
Shares at the earliest of (i) a Bain Exit, (ii) a Qualified Initial Public
Offering, or (iii) the tenth anniversary of the Closing Date.
4. Right to Put Executive Stock.
----------------------------
(a) Put Right. If Executive ceases to be employed by the Company or any
----------
of its Subsidiaries due to a termination by the Company of Executive's
employment with the Company or any Subsidiary other than for Cause, then
holder(s) of Executive Stock have the right (the "Put Right") to require the
---------
Company, or should they so elect subject to the terms and conditions set forth
herein, the Bain Stockholders and the Bear Stearns Stockholders, to purchase all
or any portion of the Executive Stock then held by all (and not less than all)
of such holder(s) (other than any Executive Stock for which the Company has
exercised its Repurchase Option) pursuant to the terms and conditions set forth
in this Section 4. If any shares of any class of Executive Stock are held by
any transferees of Executive, the Bain Stockholders, the Bear Stearns
Stockholders and the Company, as the case may be, will purchase such shares of
such class to be purchased from such holder(s) of Executive Stock, pro rata
according to the number of shares of such class of Executive Stock held by such
holder(s) at the time of delivery of such Put Notice (determined as nearly as
practicable to the nearest share).
(b) Put Price. Executive Stock purchased pursuant to the Put Right will be
---------
purchased at a price per share equal to the Fair Market Value of such Executive
Stock as of the Valuation Date.
(c) Put Procedures.
--------------
(i) The Put Right is exercisable by the holder(s) of the Executive
Stock delivering written notice (the "Put Notice") to the Company, the Bain
----------
Stockholders and the Bear Stearns Stockholders during the period beginning
on the date that Executive is terminated by the Company (the "Termination Date")
----------------
and ending on the date 65 days after the Termination Date. The Put Notice will
set forth the number of shares of each class of Executive Stock held by all of
the holder(s) of Executive Stock.
8
<PAGE>
(ii) The Bain Stockholders and the Bear Stearns Stockholders may
each elect to purchase their pro rata share (determined based upon the number of
shares of Class A Common and Class B Common held by each) of any or all of the
shares of Executive Stock which the Company is otherwise required to purchase
pursuant to the Put Option by delivering written notice (the "Initial Put
-----------
Purchase Notice") to the holder or holders of each class of Executive Stock, the
- ---------------
Company and the other party, within 30 days after receiving the Put Notice. To
the extent that the Bain Stockholders or the Bear Stearns Stockholders do not
elect to purchase their full allotment of Executive Stock, the other party shall
be entitled to purchase all or any portion of the remaining Executive Stock by
providing notice (the "Supplemental Put Purchase Notice") to each of the parties
--------------------------------
receiving the Initial Put Purchase Notice within the later of (i) 10 business
days after receipt of the Initial Put Purchase Notice or (ii) the expiration of
the 30 day period during which the Bain Stockholders and the Bear Stearns
Stockholders were entitled to deliver Initial Put Purchase Notices. To the
extent that, after giving effect to the reoffer pursuant to the immediately
preceding sentence, any portion of the Executive Stock is not being purchased by
the Bain Stockholders or the Bear Stearns Stockholders, the Company must
repurchase the remaining Executive Stock as set forth in Section 4(d) below.
Each Initial Put Purchase Notice and Supplemental Purchase Notice shall set
forth the number of shares of each class of Executive Stock to be acquired from
such holder(s) and an estimate of the aggregate consideration to be paid for
such holder's shares of each such class of Executive Stock.
(d) Closing. The closing of the transactions contemplated by this Section
-------
4 will take place at a time and place mutually agreed upon by the parties
acquiring Executive Stock which date will not be more than 120 days after the
delivery of the Put Notice, and no earlier than the final determination of Fair
Market Value per share of Executive Stock as of the Valuation Date and the
expiration of any time periods for which a purchase election may be revoked
pursuant to Section 4(e) (the "Anticipated Closing Date"). The Bain
------------------------
Stockholders, the Bear Stearns Stockholders and the Company, as the case may be,
shall pay for any shares of Executive Stock to be purchased pursuant to the Put
Option by delivery of cash or a cashier's check payable to the holder(s) of such
shares of Executive Stock in an aggregate amount equal to their pro rata share
of the aggregate repurchase price ("Put Price") for such shares of Executive
---------
Stock; provided that any purchase of Executive Stock that occurs after the
-------- ----
Anticipated Closing Date by the Company as a result of the Financing
Circumstances shall include simple interest calculated from the Anticipated
Closing Date until the date of such purchase at the rate of 6% per annum on the
Put Price attributable to such shares of Executive Stock. Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of shares
of Executive Stock by the Company will be subject to applicable restrictions and
covenants contained in the Pennsylvania Business Corporation Law of 1988 and in
the Company's and its Subsidiaries' debt and equity financing agreements. If
either of the Financing Circumstances exist, the Company will not be required to
make such repurchases until it is permitted to do so under such restrictions and
until its projected cash availability is greater than $15 million (with it being
understood that the Company will make the maximum amount of repurchases
permitted under such financing agreements and may defer making the remainder of
such repurchases until permitted to do so and it being further understood that
any closing of any such repurchase shall not occur on a date which is later than
the second anniversary of the Anticipated Closing Date). The Bain Stockholders,
the Bear Stearns Stockholders and the Company will receive customary
9
<PAGE>
representations and warranties from each seller regarding the sale of shares of
Executive Stock, solely with respect to such seller's ownership and title to
Executive Stock and capacity to transfer Executive Stock.
(e) Revocation of Purchase Election. Notwithstanding anything contained in
-------------------------------
this Agreement to the contrary, if Executive objects to the Board's
determination of Fair Market Value as described in the definition of Fair Market
Value, or if the Fair Market Value of a share of Executive Stock is otherwise
determined to be an amount more than 10% greater than the per share repurchase
price for such share of Executive Stock in the Initial Put Purchase Notice or
Supplemental Put Purchase Notice, each of the Bain Stockholders and the Bear
Stearns Stockholders shall have the right to revoke its exercise of the option
to purchase shares of Executive Stock pursuant to Section 4(d) by delivering
notice of such revocation in writing to the holders of the Executive Stock, the
Company, and the other party during (i) the 30 day period beginning on the date
that the Company, the Bain Stockholders and the Bear Stearns Stockholders
received Executive's written notice of objection, and (ii) the 30 day period
beginning on the date that the Company, the Bain Stockholders and/or the Bear
Stearns Stockholders are given written notice that the Fair Market Value of a
share of Executive Stock was finally determined to be an amount more than 10%
greater than the per share repurchase price for Executive Stock set forth in the
Initial Put Purchase Notice or in the Supplemental Put Purchase Notice.
Furthermore, if Executive objects to the Board's determination of Fair
Market Value as described in the definition of Fair Market Value, or if the Fair
Market Value of a share of Executive Stock is otherwise determined to be more
than 10% less than the per share repurchase price for such share of Executive
Stock in the Initial Put Purchase Notice or Supplemental Put Purchase Notice,
Executive shall have the right to revoke his exercise of the Put Right pursuant
to Section 4 by delivering notice of such revocation in writing to the Company,
the Bain Stockholders and the Bear Stearns Stockholders during (i) the 30 day
period beginning on the date that the Company, the Bain Stockholders and the
Bear Stearns Stockholders received Executive's written notice of objection, or
(ii) the 30 day period beginning on the date that Executive, the Company, the
Bain Stockholders and/or the Bear Stearns Stockholders are given written notice
that the Fair Market Value of a share of Executive Stock was finally determined
to be more than 10% less than the per share repurchase price for Executive Stock
set forth in the Initial Put Purchase Notice or in the Supplemental Put Purchase
Notice.
In the event that the Bain Stockholders deliver a notice of revocation, the
Bear Stearns Stockholders shall be entitled to purchase all or any portion of
the Executive Stock that would otherwise have been purchased by the Bain
Stockholders by providing an additional Supplemental Put Purchase Notice to the
holders of the Executive Stock and the Company within 10 business days after
receipt of the Bain Stockholders' notice of revocation. The Company must
purchase the remaining shares of Executive Stock by delivering an additional
Company Put Purchase Notice to the holder or holders of the applicable Executive
Stock within 10 business days of the expiration of the 10 business day period
described in the preceding sentence.
In the event that the Bear Stearns Stockholders deliver a notice of
revocation, the Bain Stockholders shall be entitled to purchase all or any
portion of the Executive Stock that would
10
<PAGE>
otherwise have been purchased by the Bear Stearns Stockholders by providing an
additional Supplemental Put Purchase Notice to the holders of the Executive
Stock and the Company within 10 business days after receipt of the Bear Stearns
Stockholders' notice of revocation. The Company must purchase the remaining
shares of Executive Stock by delivering an additional Company Put Purchase
Notice to the holder or holders of the applicable Executive Stock within 10
business days of the expiration of the 10 business day period described in the
preceding sentence.
(f) Termination of Put Right. The Put Right granted to the holder(s) of
------------------------
Executive Stock shall terminate (to the extent not previously exercised) with
respect to Executive Stock as of the first anniversary of the date of this
Agreement.
5. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge, transfer
---------------------------
or otherwise dispose of (a "Transfer") any interest in any shares of Executive
--------
Stock, except (i) pursuant to the provisions of Sections 3, 4, 5(b), 8, 9, 11
(in connection with a Transfer by the Bain Stockholders only) or 13 hereof, (ii)
pursuant to the terms of the Registration Agreement, dated as of the date
hereof, by and between the Company and certain of its stockholders, (iii)
pursuant to applicable laws of descent and distribution, or (iv) among
Executive's Family Group; provided, that the restrictions contained in this
--------
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to clauses (iii) or (iv) above and, as a
condition to any such Transfer, the transferees of such shares of Executive
Stock must agree in writing to be bound by the provisions of this Agreement.
In the case of a transfer by Executive to a member of his Family Group, after
such transfer Executive must continue to own at least 50% of his shares of
Executive Stock originally owned by him on a fully diluted basis. Any
transferee of Executive Stock pursuant to a Transfer in accordance with clause
(iii) or (iv) above is herein referred to as a "Permitted Transferee." Upon the
--------------------
proposed Transfer of Executive Stock pursuant to clause (iii) or (iv) above,
Executive or a Permitted Transferee Transferring such Executive Stock will
deliver a written notice (a "Transfer Notice") to the Company, which discloses
---------------
in reasonable detail the identity of the Permitted Transferee(s).
Notwithstanding the foregoing, no party hereto shall avoid the provisions of
this Agreement by making one or more transfers to one or more Permitted
Transferees and then disposing of all or any portion of such party's interest in
such Permitted Transferee.
(b) Termination of Transfer Restrictions. The restrictions set forth in
------------------------------------
Section 6(a) will terminate upon a Qualified Initial Public Offering.
6. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing shares of Executive Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
11
<PAGE>
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK AND OPTION
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE
OF THE COMPANY DATED AS OF MAY 11, 1999, A COPY OF WHICH MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
The legend set forth above regarding the Plan shall be removed from the
certificates evidencing any securities which cease to be Executive Stock.
(b) No holder of Executive Stock may Transfer any Executive Stock (except
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the Securities Act
is not required in connection with such Transfer. If such opinion of counsel
reasonably acceptable in form and substance to the Company further states that
no subsequent Transfer of such Executive Stock will require registration under
the Securities Act, the Company will promptly upon such Transfer deliver new
certificates which do not bear the Securities Act legend set forth in Section
6(a).
7. Definition of Executive Stock. For all purposes of this Agreement,
-----------------------------
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company, purchasers pursuant to an offering
registered under the Securities Act or purchasers pursuant to a Rule 144
transaction (other than a Rule 144(k) transaction occurring prior to the time
the Company is a Public Company) and subsequent transferees), and each such
other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder. Executive
Stock will also include shares of the Company's capital stock issued with
respect to shares of Executive Stock by way of a stock split, stock dividend or
other recapitalization.
8. Unaffiliated Sale of the Company
--------------------------------
(a) If the Board approves an Unaffiliated Sale of the Company (an "Approved
--------
Sale"), then each holder of each class of Executive Stock will vote for, consent
- ----
to and raise no objections against such Approved Sale. Each holder of each
class of Executive Stock will, to the maximum extent permitted by applicable
law, waive any dissenters' rights, appraisal rights or similar rights in
connection with such Approved Sale, and if such Approved Sale is a sale of
stock, each holder of such class of Executive Stock will agree to sell
(including, without limitation, by executing and delivering definitive
agreements with respect thereto) up to all of his or her shares of Executive
Stock on the terms and conditions approved by the Board; provided that the terms
--------
and conditions of such transaction applicable to each holder of a class of
Executive Stock are the same as those applicable to the Bain Stockholders
holding such class of capital stock (including, subject to Section
12
<PAGE>
10 below, the price per share and the type of consideration, but excluding
reasonable investment banking and advisory fees customarily charged by the Bain
Stockholders and the Bear Stearns Stockholders for transactions of such type).
Each holder of Executive Stock will take all necessary or desirable actions in
connection with the consummation of the Approved Sale as requested by the Board
or the Company.
(b) If the Company or the holders of the Company's securities enter into
any negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities and Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Executive Stock appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Executive Stock declines to appoint the purchaser representative
designated by the Company, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(c) Each of the holders of Executive Stock (if any) will bear their pro-
rata share (based upon the number of shares of Class A Common sold) of the costs
of any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all or substantially all holders of Common
Stock and are not otherwise paid by the Company or the acquiring party. Costs
incurred by each holder of Executive Stock on its own behalf will not be
considered costs of the transaction hereunder.
(d) The provisions of this Section 8 shall terminate upon a Qualified
Initial Public Offering.
9. Bain Sale of the Company
------------------------
(a) If a majority of the members of the Board (which, for purposes of this
Section 9, shall include any director appointed by the Bear Stearns Stockholders
pursuant to the Voting Agreement, dated as of the date hereof, by and among the
Company and certain stockholders of the Company party thereto from time to time
(the "Voting Agreement")) who are not Affiliates or designees of the Bain
Stockholders (the "Non-Bain Directors") approve a Bain Sale of the Company (an
------------------
"Approved Bain Sale"), then each holder of Executive Stock who is not an
------------------
Affiliate of the Bain Stockholders will vote for, consent to and raise no
objections against such Approved Bain Sale. Each such holder of Executive Stock
will, to the maximum extent permitted by applicable law, waive any dissenters'
rights, appraisal rights or similar rights in connection with such Approved Bain
Sale, and in the event that such Approved Bain Sale is a sale of stock, each
such holder of Executive Stock will agree to sell (including, without
limitation, by executing and delivering definitive agreements with respect
thereto) up to all of his or her Executive Stock on the terms and conditions
approved by the Non-Bain Directors; provided that the terms and conditions of
--------
such transaction applicable to each holder of a class of Executive Stock that is
not a Bain Stockholder or an Affiliate thereof are the same as those applicable
to the stockholder holding the largest number of shares of such class of capital
stock that is not a Bain Stockholder or an Affiliate thereof (including, subject
to Section 9 below, the price
13
<PAGE>
per share and the type of consideration, but excluding reasonable investment
banking and advisory fees customarily charged by the Bear Stearns Stockholders
for transactions of such type). Each holder of Executive Stock will take all
necessary or desirable actions in connection with the consummation of the
Approved Bain Sale as requested by the Non-Bain Directors, the Bain Stockholders
or the Company.
(b) If, in relation to an Approved Bain Sale, the Company or the holders of
the Company's securities enter into any negotiation or transaction for which
Rule 506 (or any similar rule then in effect) promulgated by the Securities and
Exchange Commission may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), the
holders of Executive Stock will, at the request of the Company or the Bain
Stockholders appoint a purchaser representative (as such term is defined in Rule
501) reasonably acceptable to the Company and the Bain Stockholders. If any
holder of Executive Stock appoints a purchaser representative designated by the
Company or the Bain Stockholders, the Company will pay the fees of such
purchaser representative, but if any holder of Executive Stock declines to
appoint the purchaser representative designated by the Company or the Bain
Stockholders, such holder will appoint another purchaser representative, and
such holder will be responsible for the fees of the purchaser representative so
appointed.
(c) Each of the holders of Executive Stock (if any) will bear their pro-
rata share (based upon the number of shares of Class A Common sold by
stockholders) of the costs of any sale of Executive Stock pursuant to an
Approved Bain Sale, to the extent such costs are incurred for the benefit of all
or substantially all holders of Common Stock not affiliated with the Bain
Stockholders and are not otherwise paid by the Company or the acquiring party.
Costs incurred by each holder of Executive Stock on its or her own behalf will
not be considered costs of the transaction hereunder.
(d) The provisions of this Section 9 shall terminate upon a Qualified
Initial Public Offering.
10. Distributions upon Sale of the Company, etc.. In the event of a sale
--------------------------------------------
or exchange by the holders of Executive Stock (whether by sale, merger,
recapitalization, reorganization, consolidation, combination or otherwise) in
connection with an Approved Sale or Approved Bain Sale each holder of Executive
Stock shall receive in exchange for the Executive Stock held by such holder
participating in such sale, the same portion of the aggregate consideration from
such sale or exchange that such holder would have received if such aggregate
consideration had been distributed by the Company to the holders of capital
stock of the Company participating in such sale, in complete liquidation
pursuant to the rights and preferences set forth in the Company's Amended and
Restated Articles of Incorporation as in effect immediately prior to such sale
or exchange (and assuming that the only shares of capital stock of the Company
outstanding were the shares of capital stock of the Company participating in
such sale). Each holder of Executive Stock shall take all necessary or
desirable actions in connection with the distribution of the aggregate
consideration from such sale or exchange as requested by the Company.
14
<PAGE>
11. Participation Rights.
--------------------
(a) If the Bain Stockholders or the Bear Stearns Stockholders propose to
enter into any sale to an unaffiliated third party (including Bear Stearns or
its Affiliates in the case of Bain, or Bain or its Affiliates, in the case of
Bear Stearns) pursuant to which such party or parties acquire more than 5% of
any class of capital stock held by the Bain Stockholders or Bear Stearns
Stockholder in any transaction or series of transactions (excluding Public Sales
and transfers and/or distributions to partners of the Bain Stockholders or the
Bear Stearns Stockholders), then the Executive will be afforded an opportunity
to participate in such transaction on, subject to Section 10 above, the same
terms and conditions as applicable to the other holders of such class of capital
stock participating in such transaction. If any stockholder other than the Bain
Stockholders or the Bear Stearns Stockholders, as the case may be (each a
"Transferring Stockholder") has elected to participate in such sale, the
------------------------
Transferring Stockholder shall be entitled to sell in the contemplated sale a
number of shares of any class of capital stock equal to the product of (i) the
quotient determined by dividing the percentage of such class of capital stock
owned by the Transferring Stockholder by the aggregate percentage of Common
Stock owned by the stockholders participating in such sale (which in the case of
a sale by Bain Stockholders may include the Bear Stearns Stockholders and which
in the case of a sale by Bear Stearns Stockholders may include the Bain
Stockholders) and (ii) the number of shares of such class of capital stock to
be sold in the contemplated sale. Each holder of Executive Stock participating
in any such transaction will take all necessary or desirable actions in
connection with the consummation of any such transaction as requested by the
Bain Stockholders including without limitation executing the applicable purchase
agreement.
(b) Notwithstanding the foregoing, in the event that the Bain Stockholders
intend to transfer shares of more than one class of capital stock, each
Transferring Stockholder will not be entitled to participation rights pursuant
to this Section 11 unless such Transferring Stockholder sells in the
contemplated sale a pro rata portion of shares of all such classes of capital
stock, which portion shall be determined in the manner set forth in Section
11(a).
(c) The Bain Stockholders will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of any
Transferring Stockholders in any contemplated sale, and the Bain Stockholders
will not transfer any class of capital stock to the prospective transferee(s)
unless (i) the prospective transferee(s) agree to allow the participation of the
Transferring Stockholders or (ii) the Bain Stockholders agree to purchase on the
same terms and conditions the number of such class of capital stock from any
Transferring Stockholders which such Transferring Stockholders would have been
entitled to sell pursuant to this Section 11.
12. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will not
issue, sell or otherwise transfer to the Bain Stockholders or the Bear Stearns
Stockholders (an "Issuance") at any time prior to a Public Offering, any capital
--------
stock or debt securities (or securities convertible into or exercisable or
exchangeable for capital stock or debt securities) unless, at least 15 days
prior to such Issuance, the Company notifies each holder of Executive Stock in
writing of the Issuance (including the price, the purchasers thereof and the
other terms thereof) and grants to each holder of Executive
15
<PAGE>
Stock, the right (the "Right") to subscribe for and purchase a portion of such
-----
additional shares or other securities so issued at the same price and on the
same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Class A Common and Class B
Common held by such holder by (2) the total number of shares of Class A Common
and Class B Common outstanding on a fully diluted basis. Notwithstanding the
foregoing, if all Persons entitled to purchase or receive such stock or
securities are required to also purchase other securities of the Company, the
holders of capital stock exercising their Right pursuant to this Section shall
also be required to purchase the same strip of securities (on the same terms and
conditions) that such other Persons are required to purchase. The Right may be
exercised by such holder at any time by written notice to the Company received
by the Company within 10 days after receipt by such holder of the notice from
the Company referred to above. The closing of the purchase and sale pursuant to
the exercise of the Right shall occur not less than 10 days after the Company
receives notice of the exercise of the Right and concurrently with the closing
of the Issuance.
(b) Notwithstanding the foregoing, the Right shall not apply to (i)
issuances of capital stock or debt securities (or securities convertible into or
exchangeable for, or options to purchase, capital stock or debt securities), pro
rata to all holders of any class of Stock, as a dividend on, subdivision of or
other distribution in respect of, such class of capital stock, (ii) conversions
or exchanges of one class or form of capital stock into another class or form of
capital stock, (iii) issuances of capital stock upon exercise of any debt
security issued by the Company, or (iv) the issuance of capital stock (or
securities convertible into or exchangeable for, or options to purchase, capital
stock) on customary, arm's length terms in connection with the provision by the
Bain Stockholders or the Bear Stearns Stockholders of debt financing to the
Company or its Subsidiaries.
(c) The provisions of this Section 12 will terminate upon the consummation
of a Public Offering or upon a Bain Exit.
13. Initial Public Offering. In the event that the Board approves an
-----------------------
initial public offering and sale of Common Stock (a "Public Offering") pursuant
---------------
to an effective registration statement under the Securities Act of 1933, as
amended, the holders of Common Stock shall take all necessary or desirable
actions in connection with the consummation of the Public Offering. In the
event that such Public Offering is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the Common
Stock structure would adversely affect the marketability of the offering, each
holder of Common Stock shall consent to and vote for a recapitalization,
reorganization and/or exchange of the Common Stock into securities that the
managing underwriters and the Board find acceptable and equitable in the
circumstances and shall take all necessary or desirable actions in connection
with the consummation of the recapitalization, reorganization and/or exchange;
provided that the resulting securities take into account rights and preferences
- --------
set forth in the Company's Amended and Restated Articles of Incorporation as in
effect immediately prior to such Public Offering.
14. Organic Change. Any recapitalization, reorganization,
--------------
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for
16
<PAGE>
Common Stock is referred to herein as an "Organic Change." Except as provided in
--------------
a Sale of the Company or otherwise provided herein, after the consummation of
any Organic Change, each Option shall thereafter be exercisable for, rather than
the applicable Option Shares immediately theretofore acquirable and receivable
upon exercise of such Option, such shares of stock, securities or assets
(including cash) as may be issued or payable with respect to or in exchange for
the number and class of Option Shares immediately theretofore acquirable and
receivable upon exercise of such Option had such Organic Change not taken place.
15. Adjustment for Change in Common Stock. In the event of a
-------------------------------------
recapitalization, reorganization, stock split, stock dividend, combination of
shares, consolidation, merger or other change in any class of Common Stock, the
Board may, in order to prevent the dilution or enlargement of rights under any
Option, make appropriate changes in the number and type of shares or other
consideration covered by any unexercised Option which has not expired and its
applicable Option Price as is appropriate and equitable under the circumstances.
16. Holdback Agreement. Before and after the effective date of any
------------------
underwritten Public Offering, no holder of Executive Stock will effect any sale
or distribution of Common Stock during the period designated by the underwriters
managing such underwritten Public Offering with respect to such holder of
Executive Stock, but in no event shall any such period following the effective
date of any such underwritten Public Offering exceed 180 days.
17. Voting Agreement. Except as otherwise provided herein, from and after
----------------
the date hereof until the provisions of this Section 17 cease to be effective,
Executive and Executive's transferees shall vote all of their Option Shares and
take all other necessary or desirable actions within their control (including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings) as
requested from time to time by the holders of a majority of the shares of voting
Common Stock. The provisions of this Section 17 shall cease to be effective upon
the earlier of the consummation of (i) a Qualified Initial Public Offering, or
(ii) a Bain Exit.
18. Definitions. The following terms are defined as follows:
-----------
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). It is understood and agreed that any portfolio company in which a
Bain Stockholder or any other Affiliates thereof which is a private equity fund
holds in excess of 30% of the outstanding capital stock is an "Affiliate" of
such Bain Stockholder for purposes of this Agreement and that any portfolio
company in which a Bear Stearns Stockholder or any Affiliate thereof that
invests primarily in equity securities holds in excess of 30% of the outstanding
capital stock is an "Affiliate" of such Bear Stearns Stockholder for purposes of
this Agreement.
17
<PAGE>
"Bain Exit" means (i) a sale of all or substantially all of the
---------
consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates or (ii) the transfer or other disposition of at
least 95% of the outstanding shares of capital stock of the Company for cash or
marketable securities (in each case whether by merger, consolidation, sale of
the Company's capital stock or otherwise).
"Bain Sale of the Company" means (i) a sale of all or substantially all of
------------------------
the consolidated assets of the Company to one or more of the Bain Stockholders
or their Affiliates, or (ii) the transfer or other disposition to the Bain
Stockholders or their Affiliates of outstanding shares of capital stock of the
Company (in each case, whether by merger, consolidation, sale of the Company's
capital stock or otherwise) such that after giving effect to such transfer the
Bain Stockholders and their Affiliates own all or substantially all of the
outstanding shares of the Company's capital stock (in each case, whether by
merger, consolidation, sale of the Company's capital stock or otherwise).
"Bain Stockholders" means the Persons listed on the signature pages hereto
-----------------
as Bain Stockholders.
"Bear Stearns Stockholders" means ICST Acquisition Corporation, a Delaware
-------------------------
corporation.
"Board" means the Company's Board of Directors.
-----
"Cause" means (i) the commission of a felony, (ii) the commission of fraud
-----
having an adverse effect on the Company or any of its Subsidiaries or any of
their directors or shareholders, (iii) any material act or omission involving
dishonesty having an adverse effect on the Company or any of its Subsidiaries or
any of their directors or shareholders, (iv) gross negligence or willful
misconduct with respect to the Company or any of its Subsidiaries or substantial
failure to otherwise perform duties as reasonably directed in any such case
described in this clause (iv), for thirty days after written notice from the
Board and an opportunity to cure.
"Class A Common" means the Company's Class A Common, par value $.01 per
--------------
share.
"Class B Common" means the Company's Class B Common Stock, par value $.01
--------------
per share.
"Class L Common" means the Company's Class L Common Stock, par value $.01
--------------
per share.
"Common Stock" means, collectively, Class A Common, Class B Common, Class L
------------
Common and any other common stock authorized by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time.
"Executive Stock" means (i) all shares of Issued Stock and (ii) all shares
---------------
of Common Stock issued with respect to the shares referred to in clause (i)
above by way of stock dividend or stock split in connection with any conversion,
merger, consolidation or recapitalization or other reorganization affecting the
Common Stock.
18
<PAGE>
"Expiration Date" means, with respect to any Option, the date which is ten
---------------
(10) years after the date of this Agreement.
"Fair Market Value"of each share of Common Stock means the average of the
-----------------
closing prices of the sales of the appropriate class of Common Stock on all
securities exchanges on which such class of Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day such Common Stock is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 4:00 P.M., New York time, or, if on any day such Common Stock is not
quoted in the NASDAQ System, of the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Fair Market Value is being determined and the 20 consecutive business
days prior to such day. If at any time such class of Common Stock is not listed
on any securities exchange or quoted in the NASDAQ System or the over-the-
counter market, the Fair Market Value will be the fair value of such class of
Common Stock determined in good faith by the Board based on such factors as the
members thereof, in the exercise of their business judgment, consider relevant
without taking into account a discount for a minority position or illiquidity
but taking into account whether the Company is a privately held company or a
public company (with it being understood that as of the day immediately
following the date hereof, the Fair Market Value for each share of Class A
Common shall be $0.22 and for each share of Class L Common shall be $18 per
share notwithstanding that the Company is a private company). If the Executive
in good faith disagrees with such determination, the Board and the Executive
will negotiate in good faith to agree on such Fair Market Value. If such
agreement is not reached within 30 days after the delivery of the Company
Repurchase Notice, the Initial Repurchase Notice or the Supplemental Repurchase
Notice, Fair Market Value shall be determined by an independent and unaffiliated
appraiser (which shall be one of Valuation Research, BT Alex Brown, Broadview
Associates or Morgan Stanley) selected by the Board, which appraiser shall be
instructed to submit to the Board and the Executive a report within 30 days of
its engagement setting forth such determination. The first $7,000 of the
expenses of such appraiser shall be borne by the Executive (and the remainder
shall be borne by the Company) unless the appraiser's valuation is at least 25%
greater than the amount determined by the Board, in which case, the costs of the
appraiser shall be borne by the Company. In the absence of manifest error, the
determination of such appraiser shall be final and binding upon all parties.
Notwithstanding the foregoing, to the extent that the Company has determined
Fair Market Value through an independent and unaffiliated appraiser at any time
within the six month period prior to Executive's Termination Date, the Fair
Market Value set forth in such appraisal shall conclusively be deemed to be
"Fair Market Value" hereunder and shall be binding upon all parties hereto,
unless the Board, in its good faith discretion determines that acquisitions,
divestitures or other material events consummated during such six-month period
affect the valuation set forth in such appraisal.
"Family Group" means a Participant's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of such Participant
and/or such Participant's spouse and/or descendants (natural or adopted) of
Participant and any corporation, limited liability company, partnership or other
entity the equity holders of which solely include such Participant, his or her
19
<PAGE>
spouse or descendants (natural or adopted) or any trust for the benefit of such
Participant, his or her spouse or descendants (natural or adopted).
"Independent Third Party" means any Person who, immediately prior to the
-----------------------
contemplated transaction, does not own in excess of 5% of the Common Stock on a
fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock.
"Issued Stock" means all shares of Common Stock issued upon the proper
------------
exercise of an Option.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Public Company" means a company any of whose securities are registered
--------------
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means a public offering and sale of the Common Stock
---------------
pursuant to an effective registration statement under the Securities Act;
provided that a Public Offering shall not include an offering made in connection
with a business acquisition or combination or an employee benefit plan.
"Public Sale" means any sale of Common Stock to the public pursuant to an
-----------
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 (other than Rule
144(k) prior to the time the Company is a Public Company) adopted under the
Securities Act.
"Qualified Initial Public Offering" means the initial sale by the Company
---------------------------------
of any class or classes of the Common Stock in an offering registered under the
Securities Act of 1933, as amended from time to time, other than an offering
made solely in connection with a business acquisition or combination or an
employee benefit plan, but only if the aggregate gross proceeds received by the
Company and its stockholders in such initial sale or series of such sales in the
aggregate are in excess of $50 million.
"Sale of the Company" means (i) a Bain Sale of the Company, or (ii) an
-------------------
Unaffiliated Sale of the Company.
20
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability company,
association or other business entity gains or losses or shall be or control the
managing director, managing member, manager or a general partner of such
partnership, limited liability company, association or other business entity.
"Termination Date" means the date that Executive ceases to be employed by
----------------
the Company or any of its Subsidiaries for any reason.
"Unaffiliated Sale of the Company" means (i) a sale of all or substantially
--------------------------------
all of the consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates, or (ii) the transfer or other disposition to
any Person other than the Bain Stockholders or their Affiliates of more than 50%
of the outstanding shares of capital stock of the Company (in each case, whether
by merger, consolidation, sale of the Company's capital stock or otherwise).
"Valuation Date" shall mean (i) with respect to any Repurchase Option, the
--------------
date, if any, that the Company delivers a Repurchase Notice to a holder of
Executive Stock or (ii) with respect to any Put Right, the date, if any, that
the holder(s) of Executive Stock deliver a Put Notice to the Company.
19. Notices. Any notice provided for in this Agreement must be in writing
-------
and must be personally delivered, received by certified mail, return receipt
requested, or sent by guaranteed overnight delivery service, to the Investors at
the addresses indicated in the Company's records and to the other recipients at
the address indicated below:
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: President
21
<PAGE>
With copies to:
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
ICST Acquisition Corp.
c/o Bear, Stearns & Co. Inc.
New York, NY 10167
Attn: John D. Howard
Bodil M. Arlander
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey Hammes, P.C.
Jeffrey Seifman
and
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
To Executive:
at Executive's last address
on the records of the Company
22
<PAGE>
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
20. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
21. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
Without limiting the foregoing, all Executive Stock and stock option agreements
between the Company and Executive which existed immediately prior to the Merger
are hereby canceled and terminated.
22. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
23. Successors and Assigns; Transfer. This Agreement is intended to bind
--------------------------------
and inure to the benefit of and be enforceable by Executive and the Company and
their respective successors, heirs and assigns, provided that Executive may not
assign any of his rights or obligations, except as expressly provided by the
terms of this Agreement. Prior to Transferring any shares of Executive Stock
(other than in a Public Sale or any Approved Sale) to any person or entity,
Executive will cause the prospective transferee to execute and deliver to the
Company an agreement containing the rights and restrictions set forth herein
with respect to such shares of Executive Stock.
24. Governing Law. The corporate law of the Commonwealth of Pennsylvania
-------------
will govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the law of any jurisdiction other than the Commonwealth of
Pennsylvania.
25. Remedies. The parties hereto acknowledge and agree that money damages
--------
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party hereto will have the right to injunctive relief, in addition
to all of its other rights and remedies at law or in equity, to enforce the
provisions of this Agreement.
23
<PAGE>
26. Effect of Transfers in Violation of Agreement. The Company will not
---------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
27. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company (with
approval of the Board) and Executive; provided that Sections 3, 4, 8, 11, 29 and
-------- ----
30 are for the express benefit of the Bain Stockholders and/or the Bear Stearns
Stockholders and there shall be no amendment to (or other amendment to this
Agreement which has the effect of amending) any of Sections 3, 4, 8, 11, 29 or
30 or this Section 26 in a manner adverse to the Bain Stockholders without first
obtaining the written consent of the Bain Stockholders or in a manner adverse to
the Bear Stearns Stockholders without first obtaining the written consent of the
Bear Stearns Stockholders, as applicable
28. Rights of Executive. Nothing in this Agreement shall interfere with
-------------------
or limit in any way the right of the Company or any Subsidiary to terminate
Executive's employment at any time (with or without cause), or confer upon
Executive any right to continue in the employ of the Company or any Subsidiary
for any period of time or to continue to receive Executive's current (or other)
rate of compensation.
29. Certain Transactions with Bain. Following the date of the
------------------------------
consummation of the Merger, (i) the Company will not effect a Sale of the
Company to a portfolio company of the Bain Stockholders, and (ii) the Company
will not agree to consummate (or consummate) any non-material transaction other
than on an arms-length basis or otherwise enter into or consummate any material
transaction whether or not on an arms-length basis with the Bain Stockholders or
their Affiliates, other than pursuant to agreements entered on or prior to the
date hereof or agreed upon by the Non-Bain Directors, in each case unless such
transaction has been approved by the Non-Bain Directors (which for purposes of
this Section 29 shall include the approval of any director appointed by the Bear
Stearns Stockholders pursuant to the Voting Agreement).
30. Rights Granted to the Bain Stockholders, the Bear Stearns Stockholders
----------------------------------------------------------------------
and their Affiliates. Any rights granted to the Bain Stockholders, the Bear
- --------------------
Stearns Stockholders and their Affiliates hereunder may also be exercised (in
whole or in part) by their designees (which may be Affiliates).
31. Offset. Whenever the Company or any of its Subsidiaries is to pay any
------
sum to Executive or any Affiliate or related person thereof, any amounts that
such Executive or such Affiliate or related person owes to the Company or any of
its Subsidiaries may be deducted from that sum before payment.
32. Further Assurances. Executive shall execute and deliver all
------------------
documents, provide all information, and take or refrain from taking such actions
as may be necessary or appropriate to achieve the proposes of this Agreement.
In addition, in connection with any Sale of the Company
24
<PAGE>
structured to achieve pooling of interest accounting treatment, Executive will
take such actions as requested by the Board as are necessary to achieve and
maintain pooling of interest treatment.
33. Deemed Transfer of Executive Stock. If the Bain Stockholders, the
----------------------------------
Bear Stearns Stockholders and/or the Company shall make available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Option Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such shares shall be
deemed purchased in accordance with the applicable provisions hereof and the
Bain Stockholders, the Bear Stearns Stockholders and the Company, as the case
may be, shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
34. Construction. References herein to this Agreement and any other
------------
agreement shall mean references to such agreement, as amended, modified,
supplemented or waived from time to time.
* * * * *
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Executive Stock and
Option Agreement on the day and year first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
--------------------------------
By: Hock E. Tan
Its: President
/s/ Hock E. Tan
--------------------------------
Hock E. Tan
<PAGE>
with respect to paragraphs 3, 4, 8, 11, 26, 29 and
--------------------------------------------------
30 only:
-------
BAIN STOCKHOLDERS:
-----------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
-------------------------------------
Name: Michael Krupka
Its: Managing Director
BCIP TRUST ASSOCIATES II
By: /s/ Michael Krupka
-------------------------------------
BCIP TRUST ASSOCIATES II-B
By: /s/ Michael Krupka
-------------------------------------
BCIP ASSOCIATES II
By: /s/ Michael Krupka
-------------------------------------
BCIP ASSOCIATES II-B
By: /s/ Michael Krupka
-------------------------------------
<PAGE>
with respect to paragraphs 3, 4, 8, 11, 26, 29 and
--------------------------------------------------
30 only:
-------
BAIN STOCKHOLDERS:
-----------------
BCIP ASSOCIATES II-C
By: /s/ Michael Krupka
-------------------------------------
PEP INVESTMENTS PTY LTD.
By: /s/ Michael Krupka
-------------------------------------
<PAGE>
with respect to paragraphs 3, 4, 8, 11, 26, 29 and
--------------------------------------------------
30 only:
-------
BAIN STOCKHOLDERS:
-----------------
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Seifman
------------------------------
Its: ______________________________
RANDOLPH STREET PARTNERS 1998
DIF, L.L.C.
By: /s/ Jeffrey Seifman
------------------------------
Its: ______________________________
<PAGE>
with respect to paragraphs 3, 4, 8, 11, 26, 29 and
--------------------------------------------------
30 only:
-------
BEAR STEARNS STOCKHOLDERS:
-------------------------
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
-----------------------------
Its:____________________________
<PAGE>
EXHIBIT 10.10
INTEGRATED CIRCUIT SYSTEMS, INC.
DEFERRED COMPENSATION AGREEMENT
-------------------------------
THIS DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made and
---------
entered into as of the 11th day of May, 1999 by and between Hock E. Tan (the
"Executive") and Integrated Circuit Systems, Inc., a Pennsylvania corporation
---------
(the "Company"). This Agreement is intended to provide deferred compensation to
-------
the Executive. In consideration for the continued employment of the Executive by
the Company on and after the date hereof, the Company and the Executive hereto
agree as follows:
1. Deferred Compensation Benefit. Subject to the provisions in
-----------------------------
paragraphs 2, 3 and 4 hereof, as of the date ten years after the date hereof
(the "Deferred Date"), the Company will pay the Executive (or his beneficiary in
-------------
the event of his death) a lump sum of $102,086 (the "Benefit Amount"),
--------------
regardless of whether the Executive is employed by the Company as of such date.
2. Sale of the Company. If there is a consummation of a Sale of
-------------------
the Company prior to the Deferred Date and if neither a consummation of a
Qualified Initial Public Offering (as defined herein) nor a Termination Event
(as defined herein) has occurred, then the Benefit Amount otherwise payable
under paragraph 1 above shall become immediately payable as of the date of the
consummation of a Sale of the Company.
3. Qualified Initial Public Offering. If there is a consummation of
---------------------------------
a Qualified Initial Public Offering (as defined herein) prior to the Deferred
Date and if neither a consummation of a Sale of the Company nor a Termination
Event has occurred, then the Benefit Amount otherwise payable under paragraph 1
above shall become payable in the form of installments as follows:
(a) 50% of the Benefit Amount shall be immediately payable on the
date of the consummation of a Qualified Initial Public Offering
(the "QIPO Date"); and
---------
(b) 50% of the Benefit Amount shall be payable on the earlier of (i)
the date one year after the QIPO Date and (ii) the Deferred Date.
4. Termination Event. If, prior to the Deferral Date, Executive
-----------------
ceases to be employed by the Company or any of its Subsidiaries, and if neither
a consummation of a Sale of the Company nor a consummation of a Qualified
Initial Public Offering has occurred (if all such conditions are met, a
"Termination Event"), then the Benefit Amount otherwise payable under paragraph
-----------------
1 above shall become due and payable on the 60th day after the Termination Date.
5. Earnings and Interest. No earnings or interest with respect to
---------------------
the Benefit Amount shall be payable, regardless of the form or timing of the
payment of such Benefit Amount.
6. Death of the Executive. The death of the Executive shall not
----------------------
affect the timing of the payment of the Benefit Amount under this Agreement.
<PAGE>
7. Designation of Beneficiaries. The Executive may name any Person
----------------------------
(who may be named concurrently, contingently or successively) to whom the
Benefit Amount under this Agreement is to be paid if the Executive dies before
the Benefit Amount is fully distributed. Each such beneficiary designation will
revoke all prior designations by the Executive, shall not require the consent of
any previously named beneficiary, shall be in a form prescribed by the Company
and will be effective only when filed with the Company during the Executive's
lifetime. If the Executive fails to designate a beneficiary before his death, as
provided in this paragraph, or if the beneficiary designated by the Executive
dies before the date of the Executive's death or before complete payment of the
Benefit Amount, the Company, in its discretion, may pay the Benefit Amount to
either (i) one or more of the Executive's relatives by blood, adoption or
marriage and in such proportions as the Company determines, or (ii) the legal
representative or representatives of the estate of the last to die of the
Executive and his designated beneficiary. Notwithstanding the foregoing, if the
Executive is married, the Executive's spouse must consent in writing to the
designation of any Person as beneficiary other than the spouse.
8. Definitions.
-----------
(a) "Affiliate" means, when used with reference to a specified
---------
Person, any Person that directly or indirectly controls or is controlled by
or is under common control with the specified Person. As used in this
definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise). With
respect to any Person who is an individual, "Affiliates" shall also
include, without limitation, any member of such individual's Family Group.
It is understood and agreed that any portfolio company in which a Bain
Stockholder or any other Affiliate thereof which is a private equity fund
holds in excess of 30% of the outstanding capital stock is an "Affiliate"
of such Bain Stockholder for purposes of this Plan and that any portfolio
company in which a Bear Stearns Stockholder or any other Affiliate thereof
that invests primarily in equity securities holds in excess of 30% of the
outstanding capital stock is an "Affiliate" of such Bear Stearns
Stockholder for purposes of this Plan.
(b) "Bain Sale of the Company" means (i) a sale of all or
------------------------
substantially all of the consolidated assets of the Company to one or more
of the Bain Stockholders or their Affiliates, or (ii) the transfer or other
disposition to the Bain Stockholders or their Affiliates of outstanding
shares of capital stock of the Company (in each case, whether by merger,
consolidation, sale of the Company's capital stock or otherwise) such that
after giving effect to such transfer the Bain Stockholders and their
Affiliates own all or substantially all of the outstanding shares of the
Company's capital stock (in each case, whether by merger, consolidation,
sale of the Company's capital stock or otherwise).
(c) "Bain Stockholders" means each of the Persons listed on
-----------------
Schedule I hereto.
(d) "Board" means the Board of Directors of the Company.
-----
-2-
<PAGE>
(e) "Class A Common" means the Company's Class A Common Stock,
--------------
par value $.01 per share.
(f) "Class L Common" means the Company's Class L Common Stock,
--------------
par value $.01 per share.
(g) "Common Stock" means, collectively, Class A Common, Class L
------------
Common and any other common stock authorized by the Company.
(h) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended, and the rules and regulations promulgated thereunder.
(i) "Person" means an individual, a partnership, a corporation,
------
a limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, a governmental
entity or any department, agency or political subdivision thereof or any
other entity or organization.
(j) "Qualified Initial Public Offering" means the initial sale
---------------------------------
by the Company of any class or classes of the Common Stock in an offering
registered under the Securities Act, other than an offering made solely in
connection with a business acquisition or combination or an employee
benefit plan, but only if the aggregate gross proceeds received by the
Company and/or its stockholders in such initial sale or series of such
sales in the aggregate are in excess of $50 million.
(k) "Sale of the Company" means (i) a Bain Sale of the Company,
-------------------
or (ii) an Unaffiliated Sale of the Company.
(l) "Subsidiary" means, with respect to any Person, any
----------
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence
of any contingency) to vote in the election of directors thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person or a combination thereof, or
(ii) if a partnership, limited liability company, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability
company, association or other business entity gains or losses or shall be
or control the managing director, managing member, manager or a general
partner of such partnership, limited liability company, association or
other business entity.
(m) "Termination Date" means the date that Executive ceases to
----------------
be employed by the Company or any of its Subsidiaries for any reason.
-3-
<PAGE>
(n) "Unaffiliated Sale of the Company" means (i) a sale of all
--------------------------------
or substantially all of the consolidated assets of the Company to any
Person other than the Bain Stockholders or their Affiliates, or (ii) the
transfer or other disposition to any Person other than the Bain
Stockholders or their Affiliates of more than 50% of the outstanding shares
of capital stock of the Company (in each case, whether by merger,
consolidation, sale of the Company's capital stock or otherwise).
9. Administration of this Deferred Compensation Arrangement. The
--------------------------------------------------------
deferred compensation arrangement set forth under this Agreement shall be
administered by the Company. The Company's duties and authority under this
arrangement shall include (i) the interpretation of the provisions of this
Agreement, (ii) the adoption of any rules and regulations which may become
necessary or advisable in the operation of this arrangement, (iii) the making of
such determinations as may be permitted or required pursuant to this
arrangement, and (iv) the taking of such other actions as may be required for
the proper administration of this arrangement in accordance with its terms. Any
decision of the Company with respect to any matter within the authority of the
Company that is in accordance with this Agreement shall be final, binding and
conclusive upon the Executive, beneficiary, and each Person claiming under or
through the Executive, and no additional authorization or ratification by the
stockholders or the Executive shall be required. Any action by the Company with
respect to any one or more other executives under similar agreements shall not
be binding on the Company as to any action to be taken with respect to the
Executive. Each determination required or permitted under this Agreement by the
Company shall be made by the Company in the sole and absolute discretion of the
Company.
10. Action by Company. Any action required or permitted by the
-----------------
Company under this Agreement shall be by resolution of the Board or by a duly
authorized committee of the Board, or by a person or persons authorized by
resolution of the Board or such committee.
11. Amendment. This Agreement may not be canceled, changed,
---------
modified, or amended orally, and no cancellation, change, modification or
amendment hereof shall be effective or binding unless in a written instrument
signed by the Company (with the approval of its Board of Directors) and the
Executive. A provision of this Agreement may be waived only by a written
instrument signed by the party against whom or which enforcement of such waiver
is sought.
12. No Waiver. The failure at any time either of the Company or the
---------
Executive to require the performance by the other of any provision of this
Agreement shall in no way affect the full right of such party to require such
performance at any time thereafter, nor shall the waiver by either the Company
or the Executive of any breach of any provision of this Agreement be taken or
held to constitute a waiver of any succeeding breach of such or any other
provision of this Agreement.
13. Withholding for Taxes. Notwithstanding anything contained in this
---------------------
Agreement to the contrary, the Company shall withhold from any distribution made
pursuant to this Agreement such amount or amounts as may be required for
purposes of the Company complying with the tax withholding provisions of the
Internal Revenue Code of 1986, as amended, or any state tax act for purposes of
paying any income, estate, inheritance or other tax attributable to any amounts
distributable under this Agreement.
-4-
<PAGE>
14. Assignment. This Agreement is binding on and for the benefit of
----------
the Company and the Executive and their respective successors, heirs, executors,
administrators, and other legal representatives. Except as provided in Section 7
hereof, neither this Agreement nor any right or obligation hereunder may be
sold, transferred, assigned, or pledged by the Company or by the Executive
without the prior written consent of the other.
15. Interpretation and Severability. In the event any provision of
-------------------------------
this Agreement, or any portion thereof, is determined by any or court of
competent jurisdiction to be unenforceable or void, the remaining provisions of
this Agreement shall nevertheless be binding upon the Company and the Executive
with the same effect as though the void provision or portion thereof had never
been set forth therein.
16. No Conflict. Each of the Company and the Executive represents
-----------
and warrants that such person or entity is not subject to any agreement, order,
judgment or decree of any kind which would prevent such person or entity from
entering into this Agreement.
17. Employment Relationship. This Agreement shall not in any way
-----------------------
affect the right and power of the Company to dismiss or otherwise terminate the
employment or change the terms of the employment or amount of compensation of
the Executive at any time for any reason with or without cause or in accordance
with any applicable employment contract.
18. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the substantive laws of the Commonwealth of Pennsylvania,
without application of its conflict or choice of law provisions. The Company and
the Executive agree that this is not an ERISA plan or part of an ERISA plan.
19. Execution. This Agreement may be executed in counterparts, each
---------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
20. Gender and Number. Wherever any words are used herein in the
-----------------
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
21. Headings. The headings contained in this Agreement are for
--------
reference purposes only, and shall not affect the meaning or interpretation of
this Agreement.
22. Construction. References herein to this Agreement or any other
------------
agreement shall be references to such agreement as amended, modified,
supplemented or waived from time to time.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Deferred Compensation Agreement as of the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock Tan /s/ Hock E. Tan
------------------- -------------------
Name: Hock Tan Hock E. Tan
Its: President
[Signature Page to Deferred Compensation Agreement]
<PAGE>
SCHEDULE I
BAIN STOCKHOLDERS
Bain Capital Fund VI, L.P.
BCIP Trust Associates II
BCIP Trust Associates II-B
BCIP Associates II
BCIP Associates II-B
BCIP Associates II-C
PEP Investments PTY Ltd.
Randolph Street Partners II
Randolph Street Partners 1999 DIF, L.L.C.
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EXHIBIT 10.11
STOCKHOLDERS AGREEMENT
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THIS STOCKHOLDERS AGREEMENT is made as of May 11, 1999, by and among
Integrated Circuit Systems, Inc., a Pennsylvania corporation (the "Company"),
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each of the Persons listed on Schedule I attached hereto (the "Bain
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Stockholders"), each of the Persons listed on Schedule II attached hereto (the
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"Bear Stearns Stockholders") and the Person listed on Schedule III hereto (the
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"First Boston Stockholder"). The Bain Stockholders, the Bear Stearns
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Stockholders and the First Boston Stockholder are collectively referred to as
the "Stockholders" and individually as a "Stockholder". Capitalized terms used
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herein are defined in Section 11 hereof.
As of the date hereof, the Bain Stockholders', the Bear Stearns
Stockholders' and the First Boston Stockholder's shares of common stock of ICS
Merger Corp., a Pennsylvania corporation ("ICS"), will be converted into shares
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of the Company's Class A Common Stock, par value $.01 per share, Class B Common
Stock, par value $.01 per shares, and Class L Common Stock, par value $.01 per
share (collectively, the "Common Stock") pursuant to a Merger Agreement, dated
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as of January 20, 1999, between the ICS and the Company (as amended, the "Merger
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Agreement").
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The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) assuring continuity in the management and
ownership of the Company and (ii) limiting the manner and terms by which the
Stockholders' Common Stock may be transferred.
1. Representations and Warranties. Each Stockholder represents and
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warrants that (i) such Stockholder is the record owner of the number of
Stockholder Shares set forth opposite his or its name on Schedule I, II or III
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attached hereto, (ii) this Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes the valid and binding obligation
of such Stockholder, enforceable in accordance with its terms, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Stockholder Shares shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
2. Preemptive Rights.
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(a) Except as set forth in subsection (b) below, the Company will not
issue, sell or otherwise transfer for consideration to the Bain Stockholders,
the Bear Stearns Stockholders or the First Boston Stockholder (an "Issuance") at
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any time prior to a Public Offering, any Stockholder Shares or debt securities
(or securities convertible into or exercisable or exchangeable for Stockholder
Shares or debt securities) unless, at least 15 days prior to such Issuance, the
Company notifies each holder of Stockholder Shares in writing of the Issuance
(including the price, the purchasers thereof and the other terms thereof) and
grants to each other holder of Stockholder Shares, the right (the "Right") to
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subscribe for and purchase a portion of such additional shares or
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other securities so issued at the same price and on the same terms as issued in
the Issuance equal to the quotient determined by dividing (1) the number of
fully diluted shares of Common Stock held by such holder by (2) the total number
of shares of Common Stock outstanding on a fully diluted basis. Notwithstanding
the foregoing, if all Persons entitled to purchase or receive such stock or
securities are required to also purchase other securities of the Company, the
holders of Stockholder Shares exercising their Right pursuant to this Section
shall also be required to purchase the same strip of securities (on the same
terms and conditions) that such other Persons are required to purchase. The
Right may be exercised by such holder at any time by written notice to the
Company received by the Company within 10 days after receipt by such holder of
the notice from the Company referred to above. The closing of the purchase and
sale pursuant to the exercise of the Right shall occur not less than 10 days
after the Company receives notice of the exercise of the Right and concurrently
with the closing of the Issuance.
(b) Notwithstanding the foregoing, the Right shall not apply to (i)
issuances of Stockholder Shares or debt securities (or securities convertible
into or exchangeable for, or options to purchase, Stockholder Shares or debt
securities), pro rata to all holders of any class of Stockholder Shares, as a
dividend on, subdivision of or other distribution in respect of, such class of
Stockholder Shares, (ii) conversions or exchanges of one form or class of
Stockholder Shares to another form or class of Stockholder Shares, (iii)
issuances of Stockholder Shares upon exercise of any debt security issued by the
Company, or (iv) the issuance of Stockholder Shares (or securities convertible
into or exchangeable for, or options to purchase, Stockholder Shares) on
customary, arm's length terms in connection with the provision by the Bain
Stockholders, the Bear Stearns Stockholders, the First Boston Stockholder or
Affiliates thereof of debt financing to the Company or its Subsidiaries.
(c) The provisions of this Section 2 will terminate upon the
consummation of a Public Offering or upon a Bain Exit.
3. Restrictions on Transfer of Stockholder Shares.
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(a) Transfer of Stockholder Shares. Neither the Bear Stearns
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Stockholders nor the First Boston Stockholder shall sell, transfer, assign,
pledge or otherwise dispose of (whether voluntarily or involuntarily, whether
with or without consideration or by operation of law) (a "Transfer") (as defined
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in Section 3(b)) any interest in their Stockholder Shares except pursuant to and
in accordance with Sections 3(b) (in connection with a Transfer by a Bain
Stockholder only), 3(c), 4, 5 or 7 below.
(b) Participation Rights.
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(i) If the Bain Stockholders propose to enter into any sale to an
Independent Third Party or to an affiliated group of Independent Third
Parties pursuant to which such party or parties acquire more than 5% of the
Stockholder Shares held by the Bain Stockholders in any transaction or
series of transactions (excluding Public Sales and transfers and/or
distributions to partners of the Bain Stockholders), then the Bear Stearns
Stockholders and the First Boston Stockholder will be afforded an
opportunity to participate in such
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transaction on, subject to Section 6, the same terms and conditions as
applicable to the other holders of Stockholder Shares participating in such
transaction. If any stockholder other than the Bain Stockholders (each a
"Transferring Stockholder") has elected to participate in such sale, the
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Bain Stockholders and such Transferring Stockholder shall be entitled to
sell in the contemplated sale a number of shares of such class of
Stockholder Shares equal to the product of (A) the quotient determined by
dividing the percentage of such class of Stockholder Shares owned by the
Transferring Stockholder by the aggregate percentage of such class of
Stockholder Shares owned by the stockholders participating in such sale
(which in the case of a sale by Bain Stockholders may include the Bear
Stearns Stockholders and which in the case of a sale by Bear Stearns
Stockholders may include the Bain Stockholders) and (B) the number of
Stockholder Shares to be sold in the contemplated sale. Subject to the
first sentence of this Section 3(b)(i), the Bear Stearns Stockholders and
the First Boston Stockholder will take all necessary or desirable actions
in connection with the consummation of any such transaction as requested by
the Bain Stockholders including, without limitation, executing the
applicable purchase agreement.
(ii) Notwithstanding the foregoing, in the event that the Bain
Stockholders intend to transfer shares of more than one class of
Stockholder Shares (for purposes of this clause (ii) treating the Company's
Class A Common Stock and Class B Common Stock the same), each Transferring
Stockholder will not be entitled to participation rights pursuant to this
Section 3(b) unless such Transferring Stockholder sells in the contemplated
sale a pro rata portion of shares of all such classes of Stockholder
Shares, which portion shall be determined in the manner set forth in
Section 3(b)(i).
(iii) The Bain Stockholders will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of any
Transferring Stockholders in any contemplated sale, and the Bain
Stockholders will not transfer any of their Stockholder Shares to the
prospective transferee(s) unless (i) the prospective transferee(s) agree to
allow the participation of the Transferring Stockholders or (ii) the Bain
Stockholders agree to purchase on the same terms and conditions the number
of such class of Stockholder Shares from any Transferring Stockholders
which such Transferring Stockholders would have been entitled to sell
pursuant to this Section 3 on the same terms and conditions as the Bain
Stockholders.
(c) Permitted Transfers. The restrictions set forth in this Section
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3 shall not apply with respect to any Transfer of Stockholder Shares (i)
pursuant to the terms of the Registration Agreement, dated as of the date
hereof, by and between the Company and certain of its stockholders, or (ii) by
any Stockholder among its Affiliates (including for purposes of this Section
3(c) with respect to the Bear Stearns Stockholders, any Affiliate of The Bear
Stearns Companies Inc. or with respect to the First Boston Stockholder, any
Affiliate of Credit Suisse First Boston); provided that the restrictions
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contained in this Section 3 shall continue to be applicable to the Stockholder
Shares after any Transfer of the type referred to in clause (ii) above; and
provided further that the transferees of such Stockholder Shares shall have
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agreed in writing to be bound by the provisions of this Agreement and the Voting
Agreement affecting the Stockholder Shares so transferred. Any
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transferee of Stockholder Shares pursuant to a Transfer in accordance with the
provisions of this Section 3(c) is herein referred to as a "Permitted
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Transferee". Notwithstanding the foregoing, no party hereto shall avoid the
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provisions of this Agreement by making one or more transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party's
interest in any such Permitted Transferee. In addition, the Bear Stearns
Stockholder shall not permit its equity interests to be held by any Person that
is not an Affiliate of The Bear Stearns Companies Inc. and the First Boston
Stockholder shall not permit its equity interests to be held by any Person that
is not an Affiliate of Credit Suisse First Boston.
(d) Termination of Restrictions. The restrictions set forth in
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Section 3 shall continue with respect to each Stockholder Share until the
earlier of (i) the consummation of a Qualified Initial Public Offering or (ii)
the seventh anniversary of the date hereof; provided, however, that after the
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fifth anniversary hereof, (I) if a Pooling Dissolution Event (as hereinafter
defined) has not previously occurred, the Bear Stearns Stockholders may Transfer
their Stockholder Shares if and only if the proposed transferee agrees in
writing to appoint an Affiliate of the Bear Stearns Stockholders to the Board
pursuant to the Voting Agreement or otherwise through the seventh anniversary of
the date hereof or (II) if a Pooling Dissolution Event has previously occurred,
prior to giving effect to any such transfer, the Bear Stearns Stockholders shall
have taken all actions reasonably requested by the Bain Stockholders to assure
that the Bain Stockholders can convert all or any portion of its Class B Common
Stock into Class A Common Stock before giving effect to such Transfer and agree
to vote with the Bain Stockholders to increase the size of the Board and appoint
a designee of the Bain Stockholders so that the Bain Stockholders have control
of the Board after giving effect to such Transfer.
4. Unaffiliated Sale of the Company.
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(a) If the Board approves an Unaffiliated Sale of the Company (an
"Approved Sale"), then each holder of each class of Stockholder Shares will vote
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for, consent to and raise no objections against such Approved Sale. Each holder
of each class of Stockholder Shares will, to the maximum extent permitted by
applicable law, waive any dissenters' rights, appraisal rights or similar rights
in connection with such Approved Sale, and if such Approved Sale is a sale of
stock, each holder of such class of Stockholder Shares will agree to sell
(including, without limitation, by executing definitive agreements with respect
thereto) up to all of his or her shares of Stockholder Shares on the terms and
conditions approved by the Board; provided that the terms and conditions of such
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transaction applicable to each Stockholder with respect to such class of
Stockholder Shares are the same as those applicable to the stockholder holding
the largest number of shares of such class of Stockholder Shares (including,
subject to Section 6 below, the price per share and the type of consideration,
but excluding reasonable investment banking and advisory fees customarily
charged by the Bain Stockholders, the Bear Stearns Stockholders, the First
Boston Stockholder and their Affiliates for transactions of such type). Subject
to the immediately preceding proviso, each holder of Stockholder Shares will
take all necessary or desirable actions in connection with the consummation of
the Approved Sale as requested by the Board or the Company.
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(b) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities and Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stockholder Shares will,
at the request of the Company, appoint a purchaser representative (as such term
is defined in Rule 501) reasonably acceptable to the Company. If any holder of
Stockholder Shares appoints a purchaser representative designated by the
Company, the Company will pay the fees of such purchaser representative, but if
any holder of Stockholder Shares declines to appoint the purchaser
representative designated by the Company, such holder will appoint another
purchaser representative, and such holder will be responsible for the fees of
the purchaser representative so appointed.
(c) Each of the holders of Stockholder Shares (if any) will bear
their pro-rata share (based upon the number of shares of Class A Common and
Class B Common sold) of the costs of any sale of Stockholder Shares pursuant to
an Approved Sale to the extent such costs are incurred for the benefit of all or
substantially all holders of Common Stock and are not otherwise paid by the
Company or the acquiring party. Costs incurred by each holder of Stockholder
Shares on its own behalf will not be considered costs of the transaction
hereunder.
(d) The provisions of this Section 4 shall terminate at the time of a
Qualified Initial Public Offering.
5. Bain Sale of the Company.
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(a) If a majority of the members of the Board (including the vote of
any director appointed by the Bear Stearns Stockholders pursuant to the terms of
the Voting Agreement, dated as of the date hereof, by and among the Company and
its stockholders) which are not affiliated with or designated by the Bain
Stockholders (the "Non-Bain Directors") approve a Bain Sale of the Company (an
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"Approved Bain Sale"), then each holder of Stockholders Shares that is not
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affiliated with the Bain Stockholders will vote for, consent to and raise no
objections against such Approved Bain Sale. Each such holder of each class of
Stockholders Shares will, to the maximum extent permitted by applicable law,
waive any dissenters' rights, appraisal rights or similar rights in connection
with such Approved Bain Sale, and in the event that such Approved Bain Sale is a
sale of stock, each such holder of Stockholders Shares will agree to sell up to
all of his or her Stockholders Shares (including, without limitation, by
executing definitive agreements with respect to the sale thereof) on the terms
and conditions approved by the Non-Bain Directors; provided that the terms and
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conditions of such transaction applicable to each Stockholder that is not a Bain
Stockholder or an Affiliate thereof with respect to such class of Stockholder
Shares are the same as those applicable to the stockholder holding the largest
number of shares of such class of Stockholder Shares that is not a Bain
Stockholder or an Affiliate thereof (including, subject to Section 6 below, the
price per share and the type of consideration, but excluding reasonable
investment banking and advisory fees customarily charged by the Bear Stearns
Stockholders, the First Boston Stockholder and their Affiliates for transactions
of such type). Each such holder of Stockholder Shares will take
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all necessary or desirable actions in connection with the consummation of the
Approved Bain Sale as requested by the Non-Bain Directors, the Bain Stockholders
or the Company.
(b) If, in relation to an Approved Bain Sale, the Company or the
holders of the Company's securities enter into any negotiation or transaction
for which Rule 506 (or any similar rule then in effect) promulgated by the
Securities and Exchange Commission may be available with respect to such
negotiation or transaction (including a merger, consolidation or other
reorganization), the holders of Stockholders Shares will, at the request of the
Company or the Bain Stockholders appoint a purchaser representative (as such
term is defined in Rule 501) reasonably acceptable to the Company and the Bain
Stockholders. If any holder of Stockholders Shares appoints a purchaser
representative designated by the Company or the Bain Stockholders, the Company
will pay the fees of such purchaser representative, but if any holder of
Stockholders Shares declines to appoint the purchaser representative designated
by the Company or the Bain Stockholders, such holder will appoint another
purchaser representative, and such holder will be responsible for the fees of
the purchaser representative so appointed.
(c) Each of the holders of Stockholder Shares (if any) will bear
their pro-rata share (based upon the number of shares of Class A Common and
Class B Common sold by stockholders) of the costs of any sale of Stockholder
Shares pursuant to an Approved Bain Sale to the extent such costs are incurred
for the benefit of all or substantially all holders of Common Stock that are not
affiliated with the Bain Stockholders and are not otherwise paid by the Company
or the acquiring party. Costs incurred by each holder of Stockholder Shares on
its own behalf will not be considered costs of the transaction hereunder.
(d) The provisions of this Section 5 shall terminate at the time of a
Qualified Initial Public Offering.
6. Distributions upon Sale of the Company, etc. In the event of a
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sale or exchange by the Stockholders of Stockholder Shares held by the
Stockholders (whether by sale, merger, recapitalization, reorganization,
consolidation, combination or otherwise) in connection with an Approved Sale or
an Approved Bain Sale each Stockholder shall receive in exchange for the
Stockholder Shares held by such Stockholder participating in such sale, the same
portion of the aggregate consideration from such sale or exchange that such
Stockholder would have received if such aggregate consideration had been
distributed by the Company to the holders of capital stock of the Company
participating in such sale, in complete liquidation pursuant to the rights and
preferences set forth in the Company's Amended and Restated Articles of
Incorporation as in effect immediately prior to such sale or exchange (and
assuming that the only shares of capital stock of the Company outstanding were
the shares of capital stock of the Company participating in such sale). Each
holder of Stockholder Shares shall take all necessary or desirable actions in
connection with the distribution of the aggregate consideration from such sale
or exchange as requested by the Company.
7. Initial Public Offering. In the event that the Board approves an
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initial public offering and sale of Common Stock (a "Public Offering") pursuant
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to an effective registration
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statement under the Securities Act of 1933, as amended, the holders of Common
Stock shall take all necessary or desirable actions in connection with the
consummation of the Public Offering. In the event that such Public Offering is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the Common Stock structure would adversely affect
the marketability of the offering, each holder of Common Stock shall consent to
and vote for a recapitalization, reorganization and/or exchange of the Common
Stock into securities that the managing underwriters and the Board find
acceptable and shall take all necessary or desirable actions in connection with
the consummation of the recapitalization, reorganization and/or exchange;
provided that the resulting securities take into account the rights and
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preferences set forth in the Company's Amended and Restated Articles of
Incorporation as in effect immediately prior to such Public Offering.
8. Restrictive Legend; Additional Restriction on Transfer. Each
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certificate evidencing Stockholder Shares and each certificate issued in
exchange for or upon the transfer of any Stockholder Shares (if such shares
remain Stockholder Shares after such transfer) shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS PURSUANT TO A STOCKHOLDERS AGREEMENT, DATED AS OF MAY,
1999 AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN
OF THE COMPANY'S STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO
TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with the definition of Stockholder Shares set
forth in Section 10 hereof.
9. Covenants. Until such time as the Company has consummated a
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Qualified Initial Public Offering or until such time as the Bain Stockholders
and their Affiliates no longer hold at least 50% of the Common Stock (as
adjusted to reflect stock splits, stock dividends, stock combinations or
recapitalizations) they own as of the date hereof on a fully-diluted basis,
without the prior written consent of the holders of at least a majority of the
shares of Common Stock then held by all of the Bain Stockholders, the Company
shall not (and no Stockholder shall vote its shares, either at a stockholder
meeting or by written consent, so as to cause or permit the Company to):
(a) directly or indirectly declare or pay any dividends or make any
distributions upon any of its capital stock or other equity securities pursuant
to the terms of the Company's Articles of Incorporation as in effect from time
to time (the "Articles of Incorporation");
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(b) directly or indirectly redeem, purchase or otherwise acquire, or
permit any of its Subsidiaries to redeem, purchase or otherwise acquire, any of
the Company's or any subsidiary's capital stock or other equity securities
(including, without limitation, warrants, options and other rights to acquire
such capital stock or other equity securities) other than pursuant to the
mandatory redemption or repurchase terms of the Executive Stock Agreements and
the Executive Stock and Option Agreements executed by the Company as of the date
hereof, or directly or indirectly enter into, issue, redeem, purchase or make
any payments with respect to any stock appreciation rights, phantom stock plans
or similar rights or plans;
(c) authorize, issue, sell or enter into any agreement providing for
the issuance (contingent or otherwise) of, (A) any notes or debt securities
containing equity features (including, without limitation, any notes or debt
securities convertible into or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or other
equity securities or containing profit participation features) or (B) any
capital stock or other equity securities (or any securities convertible into or
exchangeable for any capital stock or other equity securities) of the Company or
any of its Subsidiaries other than pursuant to the Executive Stock and Option
Agreements executed as of the date hereof;
(d) make, or permit any of its Subsidiaries to make, any loans or
advances to, guarantees for the benefit of, or investments in, any Person (other
than a wholly-owned subsidiary), except for (A) reasonable advances to employees
in the ordinary course of business and (B) investments having a stated maturity
no greater than one year from the date the Company makes such Investment in (1)
obligations of the United States government or any agency thereof or obligations
guaranteed by the United States government, (2) certificates of deposit of
commercial banks having combined capital and surplus of at least $50 million,
(3) commercial paper with a rating of at least "Prime-1" by Moody's Investors
Service, Inc. or (4) loans to the Company's management pursuant to the terms of
Promissory Notes executed as of the date hereof;
(e) merge or consolidate with any Person or permit any of its
Subsidiaries to merge or consolidate with any Person (other than a wholly-owned
Subsidiary);
(f) sell, lease or otherwise dispose of, or permit any of its
Subsidiaries to sell, lease, license or otherwise dispose of, any of the assets
of the Company and its Subsidiaries in any transaction or series of related
transactions (other than sales of inventory, furniture, fixtures and equipment
in the ordinary course of business) or sell or dispose of any of its or any of
its Subsidiaries' intellectual property rights;
(g) liquidate, dissolve or effect a recapitalization or
reorganization, or permit any of its Subsidiaries to liquidate, dissolve or
effect a recapitalization or reorganization, in any form of transaction
(including, without limitation, any reorganization into a limited liability
company, a partnership or any other non-corporate entity which is treated as a
partnership for federal income tax purposes);
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(h) acquire, or permit any of its Subsidiaries to acquire, any
interest in any company or business (whether by a purchase of assets, purchase
of stock, merger or otherwise), or enter into any partnership or joint venture;
(i) enter into, or permit any of its Subsidiaries to enter into, the
ownership, active management or operation of any business other than the line of
business of the Company existing on the date of this Agreement;
(j) become subject to, or permit any of its Subsidiaries to become
subject to, (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's right to perform the provisions of this
Agreement, the Registration Agreement dated as of the date hereof by and between
the Company and certain of its stockholders (the "Registration Agreement"), the
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Voting Agreement dated as of the date hereof by and between the Company and
certain of its stockholders (as amended, modified, waived or supplemented from
time to time, the "Voting Agreement"), the Articles of Incorporation or the
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Company's bylaws, in case as in effect from time to time;
(k) make any amendment to the Articles of Incorporation, the
Company's bylaws, the Registration Agreement or the Voting Agreement;
(l) enter into (except for Executive Stock Agreements and Executive
Stock and Option Agreements and any other ancillary agreements executed as of
the date hereof), or amend, modify or supplement (or waive any rights under), or
permit any of its subsidiaries to enter into, amend, modify or supplement (or
waive any rights under), any agreement, transaction, commitment or arrangement
with any of its or any of its Subsidiaries' officers, directors, employees,
stockholders or Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such Person or
individual owns a beneficial interest, except for customary employment
arrangements and benefit programs on reasonable terms approved by the Board;
(m) pay or increase any compensation (including salary, bonuses and
other forms of current and deferred compensation) to any officer or director of
the Company or any of its Subsidiaries, or elect, appoint or remove any
executive officer of the Company or its Subsidiaries;
(n) establish or acquire (A) any Subsidiaries other than wholly-owned
Subsidiaries or (B) any Subsidiaries (other than wholly-owned Subsidiaries)
organized outside of the United States and its territorial possessions;
(o) create, incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any indebtedness (or
any guaranty of indebtedness or obligations of any other Person), other than
indebtedness under its senior credit facility(as in existence on the date
hereof) or trade payables and other current liabilities incurred in the ordinary
course of business;
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(p) create, incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any liens or other
encumbrances on its assets, other than statutory liens incurred in the ordinary
course of business, liens for taxes not yet due and payable or liens otherwise
permitted under its senior credit facility (as in existence on the date hereof);
(q) make any capital expenditures (including, without limitation,
payments with respect to capitalized leases, as determined in accordance with
generally accepted accounting principles consistently applied) exceeding
$5,000,000 in the aggregate on a consolidated basis during any twelve-month
period;
(r) enter into any leases or other rental agreements (excluding
capitalized leases, as determined in accordance with generally accepted
accounting principles consistently applied) under which the amount of the
aggregate lease payments for all such agreements exceeds $2,000,000 on a
consolidated basis for any twelve-month period;
(s) change its fiscal year;
(t) increase the authorized size of its board of directors above six
members or decrease the authorized size of its board of directors below six
members;
(u) amend or modify any stock option plan or employee stock ownership
plan as in existence as of the Closing, adopt any new stock option plan or
employee stock ownership plan or issue any shares of Common Stock to its or its
Subsidiaries' employees other than pursuant to the Company's existing stock
option and employee stock ownership plans;
(v) initiate or settle any lawsuit, arbitration or similar
proceeding, or permit any of its Subsidiaries to initiate or settle any lawsuit,
arbitration or similar proceeding other than any settlement, lawsuit or
arbitration which does not individually exceed $100,000 or together with all
other settlements, lawsuits and arbitrations exceed $500,000 any one fiscal
year;
(w) authorize, approve, adopt or amend the Company's annual budget or
capital expenditure budget, or its strategic plans, or permit any of its
Subsidiaries to authorize, approve, adopt or amend such Subsidiary's annual
budget or capital expenditure budget, or its strategic plans;
(x) select, retain or remove the independent certified public
accountants or counsel for the Company or any of its subsidiaries, or adopt (or
modify in any material respect) any accounting policy or tax policy; or
(y) make an assignment for the benefit of creditors, decide to
subject the Company or any of its Subsidiaries to any proceedings under any
bankruptcy or insolvency law, decide to avail the Company or any of its
Subsidiaries of the benefit of legislation for the benefit of debtors, or take
steps to wind up or terminate the Company's or any of its Subsidiaries'
existence.
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The Company shall not give effect to any action by any Stockholder or any other
Person that is in contravention of this Section 9. The Bain Stockholders may
expressly condition any consent to an issuance or sale (or a redemption,
repurchase or other acquisition) of any shares of the Company's capital stock
upon being afforded two business days' notice prior to the consummation by the
Bain Stockholders of an exchange of any shares of Class A Common or Class B
Common for shares of Class B Common or Class A Common, respectively.
The provisions of this Section 9 shall not be given effect at such times, if
any, that a majority of the members of the board of directors of the Company are
comprised of Affiliates of Bain Stockholders.
10. Transfer. Prior to transferring any Stockholder Shares (other
--------
than a Public Sale, an Approved Sale or an Affiliated Approved Sale) to any
Person, the transferring Stockholder shall cause the prospective transferee to
be bound by this Agreement and to execute and deliver to the Company and the
other Stockholders a counterpart of this Agreement.
11. Definitions.
-----------
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). With respect to any Person who is an individual, "Affiliates" shall
also include, without limitation, any member of such individual's Family Group.
It is understood and agreed that any portfolio company in which a Bain
Stockholder or any other Affiliate thereof which is a private equity fund holds
in excess of 30% of the outstanding capital stock is an "Affiliate" of such Bain
Stockholder for purposes of this Agreement, that any portfolio company in which
a Bear Stearns Stockholder or any other Affiliate thereof that invests primarily
in equity securities holds in excess of 30% of the outstanding capital stock is
an "Affiliate" of such Bear Stearns Stockholder for purposes of this Agreement,
and that any portfolio company in which the First Boston Stockholder or any
other Affiliate thereof that invests primarily in equity securities holds in
excess of 30% of the outstanding capital stock is an "Affiliate" of such First
Boston Stockholder for purposes of this Agreement.
"Bain Exit" means (i) a sale of all or substantially all of the
---------
consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates or (ii) the transfer or other disposition of
capital stock to any Person after giving effect to which the Bain Stockholders
and their Affiliates own less than 5% of the outstanding shares of capital stock
of the Company and any capital stock received in connection with an Organic
Change (as hereinafter defined) (in each case, whether by merger, consolidation,
sale of the Company's capital stock or otherwise).
"Bain Sale of the Company" means (i) a sale of all or substantially
------------------------
all of the consolidated assets of the Company to one or more of the Bain
Stockholders or their Affiliates, or (ii) the transfer or other disposition to
the Bain Stockholders or their Affiliates of outstanding shares
-11-
<PAGE>
of capital stock of the Company (in each case, whether by merger, consolidation,
sale of the Company's capital stock or otherwise) such that after giving effect
to such transfer the Bain Stockholders and their Affiliates own all or
substantially all of the shares of the Company's capital stock (in each case,
whether by merger, consolidation, sale of the Company's capital stock or
otherwise).
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock.
"Organic Change" means any recapitalization, reorganization,
--------------
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Pooling Dissolution Event" means the promulgation, adoption or
-------------------------
modification of any rules, interpretations or regulations by FASB or any other
governmental agency, the result of which is to cause the Company to no longer be
able to be a part of a business combination on any date after May 12, 2001 that
would qualify for pooling of interests accounting treatment.
"Public Sale" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act (a "Registered
----------
Offering") or at any time after a Registered Offering to the public through a
- --------
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Qualified Initial Public Offering" means the initial sale by the
---------------------------------
Company of any class or classes of the Common Stock in an offering registered
under the Securities Act, other than an offering made solely in connection with
a business acquisition or combination or an employee benefit plan, but only if
the aggregate gross proceeds received by the Company and/or its stockholders in
such initial sale or series of such sales in the aggregate are in excess of $50
million.
"Sale of the Company" means (i) a Bain Sale of the Company, or (ii) an
-------------------
Unaffiliated Sale of the Company.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
-12-
<PAGE>
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
------------------
acquired by any Stockholder, (ii) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any other shares of any class or series of
capital stock of the Company held by a Stockholder. As to any particular shares
constituting Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been sold in a Public Sale.
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
the limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing member or general partner of
such limited liability company, partnership, association or other business
entity.
"Unaffiliated Sale of the Company" means (i) a sale of all or
--------------------------------
substantially all of the consolidated assets of the Company to any Person other
than the Bain Stockholders or their Affiliates, or (ii) the transfer or other
disposition to any Person other than the Bain Stockholders or their Affiliates
of more than 50% of the outstanding shares of capital stock of the Company (in
each case, whether by merger, consolidation, sale of the Company's capital stock
or otherwise).
12. Transfers in Violation of Agreement. Any Transfer or attempted
-----------------------------------
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
13. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of a
majority of each class of the Stockholder Shares; provided that in the event
--------
that such modification, amendment, action or waiver (or any action with the
effect of amending, modifying or waiving) would adversely affect the Bear
Stearns Stockholders or the First Boston Stockholder in a manner different than
the Bain Stockholders or otherwise reduce or diminish any rights that are
applicable to the Bear Stearns Stockholders or the First Boston Stockholders
unless the same rights applicable to the Bain Stockholders are reduced or
diminished in the same manner, then such modification, amendment or waiver will
require the consent of the
-13-
<PAGE>
Bear Stearns Stockholders or the First Boston Stockholder, as applicable. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
14. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
15. Entire Agreement. Except as otherwise expressly set forth
----------------
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
16. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
17. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
18. Remedies. The Company, the Bain Stockholders, the Bear Stearns
--------
Stockholders and the First Boston Stockholder shall be entitled to enforce their
rights under this Agreement specifically, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages would not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company, any of the Bain Stockholders, the Bear Stearns
Stockholders or the First Boston Stockholder may in its sole discretion apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
19. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or sent by certified mailed
(return receipt requested) or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
-14-
<PAGE>
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, received by certified mail and one day after deposit with
a reputable overnight courier service. The Company's address is:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chairman of the Board
With copies to: (which shall not constitute notice to the Company)
--------------
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
20. Governing Law. The corporate law of the Commonwealth of
-------------
Pennsylvania shall govern all issues and questions concerning the relative
rights of the Company and its stockholders. All other issues and questions
concerning the construction, validity, interpretation and enforceability of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the Commonwealth of
-15-
<PAGE>
Pennsylvania or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the Commonwealth of Pennsylvania.
21. Business Days. If any time period for giving notice or taking
-------------
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
22. Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
23. Expenses. The Company agrees to pay, and hold each of the Bain
--------
Stockholders, the Bear Stearns Stockholders and the First Boston Stockholder
harmless against liability for the payment of, (i) its fees and expenses
(including its fees and expenses of its counsel and other advisors) arising in
connection with the preparation, execution, interpretation, administration, and
monitoring of, and enforcement of its rights under this Agreement and the Merger
Agreement and the other agreements, documents and instruments contemplated
hereby and thereby, and the consummation of the transactions contemplated hereby
and thereby, (ii) the fees and expenses incurred with respect to any amendments
or waivers (whether or not the same become effective) under or in respect of
such agreements, documents and (iii) stamp and other taxes and filing fees which
may be payable in respect of the execution and delivery of such agreements,
documents and instruments or the acquisition or conversion of Stockholder Shares
from time to time.
24. Certain Transactions with Bain. Following the date of the
------------------------------
consummation of the Merger, (i) the Company will not effect a Sale of the
Company to any portfolio company of the Bain Stockholders, and (ii) the Company
will not, and the Company will not permit any of its Subsidiaries to, agree to
consummate (or consummate) any non-material transaction that is not on an arms-
length basis or otherwise enter into or consummate any material transaction
whether or not on an arms-length basis with the Bain Stockholders or their
Affiliates, other than pursuant to agreements entered into on or prior to the
date hereof or agreed upon by the Non-Bain Directors, in each case unless such
transaction has been approved by the Non-Bain Directors (which for purposes of
this Section 24 shall include the vote of any director appointed by the Bear
Stearns Stockholders pursuant to the Voting Agreement).
25. Rights Granted to the Bain Stockholders, the Bear Stearns
---------------------------------------------------------
Stockholders, the First Boston Stockholder and their Affiliates. Any rights
- ---------------------------------------------------------------
granted to the Bain Stockholders, the Bear Stearns Stockholders, the First
Boston Stockholder or their Affiliates hereunder may also be exercised (in whole
or in part) by its designees (which may be Affiliates).
26. Further Assurances. In connection with any Sale of the Company
------------------
structured to achieve pooling of interest accounting treatment, the Stockholders
will take such actions as reasonably requested by the Board in order to achieve
and maintain pooling of interests accounting treatment.
-16-
<PAGE>
27. Voting Agreement. Except as otherwise provided herein, from and
----------------
after the date hereof until the provisions of this Section 27 cease to be
effective, the First Boston Stockholder and its transferees shall vote all of
its Stockholder Shares and take all other necessary or desirable actions within
their control (including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings) as requested from time to time by the holders of a majority
of the voting shares of Common Stock. The provisions of this Section 27 shall
cease to be effective upon the earlier of the consummation of (i) a Qualified
Initial Public Offering, or (ii) a Bain Exit.
28. Construction. References herein to this Agreement and any other
------------
agreement shall be references to such agreement, as amended, modified,
supplemented or waived from time to time.
* * * * * *
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
COMPANY:
-------
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
----------------------------------
Name: Hock E. Tan
Its: Chief Executive Officer
[Signature Page to Stockholders Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
------------------------------
Name: Michael Krupka
Its: Managing Director
BCIP TRUST ASSOCIATES II
By: /s/ Michael Krupka
------------------------------
BCIP TRUST ASSOCIATES II-B
By: /s/ Michael Krupka
------------------------------
BCIP ASSOCIATES II
By: /s/ Michael Krupka
------------------------------
A Partner
[Signature Page to Stockholders Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BCIP ASSOCIATES II-B
By: /s/ Michael Krupka
------------------------------
A Partner
BCIP ASSOCIATES II-C
By: /s/ Michael Krupka
------------------------------
A Partner
PEP INVESTMENTS PTY LTD.
By: /s/ Michael Krupka
------------------------------
[Signature Page to Stockholders Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Seifman
------------------------------
Its: ______________________________
RANDOLPH STREET PARTNERS 1998
DIF, L.L.C.
By: /s/ Jeffrey Seifman
------------------------------
Its: ______________________________
[Signature Page to Stockholders Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BEAR STEARNS STOCKHOLDERS:
-------------------------
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
-------------------------------
Its: _______________________________
[Signature Page to Stockholders Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
FIRST BOSTON STOCKHOLDER:
------------------------
INTEGRATED CIRCUIT SYSTEMS EQUITY INVESTORS,
L.L.C.
By: /s/ ILLEGIBLE
-------------------------------
Its:
-------------------------------
[Signature Page to Stockholders Agreement]
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- ----------------------------
Class A Class B Class L
Voting Non-voting Voting
--------- ---------- ---------
<S> <C> <C> <C>
Bain Capital Fund VI, L.P. 5,606,914 4,143,220 1,083,349
BCIP Associates II 1,142,187 844,017 146,428
BCIP Trust Associates II 336,921 248,967 123,876
BCIP Associates II-B 150,760 111,404 33,324
BCIP Trust Associates II-B 97,858 72,312 30,197
BCIP Associates II-C 296,838 219,348 57,354
PEP Investments PTY Ltd. 18,690 13,811 3,611
Randolph Street Partners II 90,000 -- 10,000
Randolph Street Partners 1998 DIF, 45,000 -- 5,000
L.L.C.
</TABLE>
in each case:
c/o Bain Capital, Inc.
Two Copley Place, 7/th/ Floor
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey Hammes, P.C.
Jeffrey Seifman
<PAGE>
SCHEDULE II
-----------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- ------------------------------
Class A Class B Class L
Voting Non-voting Voting
--------- ---------- -------
<S> <C> <C> <C>
ICST Acquisition Corp. 4,434,416 -- 492,713
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 20/th/ Floor
New York, New York 10167
Attn: John Howard
Bo Arlander
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
</TABLE>
<PAGE>
SCHEDULE III
------------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- ----------------------------
Class A Class B Class L
Voting Non-voting Voting
------- ---------- -------
<S> <C> <C> <C>
Integrated Circuit Systems Equity Investors, 225,000 -- 25,000
L.L.C.
c/o Credit Suisse First Boston
11 Madison Avenue
New York, New York 10167
Attn: Richard Gallant
Jonathan Cary
</TABLE>
<PAGE>
SCHEDULE III
------------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- ----------------------------
<S> <C>
Integrated Circuit Systems Equity Investors, 250,000
L.L.C.
c/o Credit Suisse First Boston
11 Madison Avenue
New York, New York 10167
Attn: Richard Gallant
Jonathan Cary
</TABLE>
<PAGE>
Exhibit 10.12
EMPLOYEE AGREEMENT
This Agreement, made this 1st day of August, 1994, by and between INTEGRATED
CIRCUIT SYSTEMS, INC., a Pennsylvania Corporation (hereinafter referred to as
"COMPANY"), party of the first part and Hock Tan (hereinafter referred to as
"EMPLOYEE"), party of the second part.
WITNESSETH
In consideration of COMPANY'S employment of EMPLOYEE, the salary to be paid to
EMPLOYEE, and mutual covenants contained herein, the parties hereto, intending
to be legally bound, agree as follows:
1. (a) EMPLOYEE hereby fully and unconditionally assigns to COMPANY, or it's
nominee, any and all inventions, designs, improvements and/or
discoveries made individually or jointly with others during the term
of his employment with COMPANY and six (6) months thereafter which
pertain to the business of the COMPANY, whether or not such
inventions, designs, improvements and/or discoveries are made during
the hours of employment or on the property of COMPANY. Such assignment
is made in consideration of the employment by COMPANY of EMPLOYEE, and
COMPANY shall incur no further obligation to EMPLOYEE in connection
with the assignment hereinabove.
(b) To effect the foregoing, EMPLOYEE agrees that he shall promptly from
time to time fully inform and disclose to the President of COMPANY all
inventions, designs, improvements and discoveries, which he may now
have or hereafter have, and which he shall have conceived during the
term of his employment with COMPANY and for a period of six (6) months
thereafter, which pertain to the business of the COMPANY, whether or
not EMPLOYEE believes that the same are related to the business,
activities or interests of the COMPANY, whereupon COMPANY may release
the same to EMPLOYEE, or at it's option, and own expense shall prepare
and prosecute, in the name of COMPANY or it's nominee, applications
for letters patent of the United States and such foreign countries as
it may select. EMPLOYEE will execute the
<PAGE>
same, and he shall thereafter from time to time as requested, execute
all further documents pertaining to said application or patents
thereon or actions against any infringement thereof or to protect the
same and the rights and position of COMPANY with respect to said
patent applications or patents.
(c) In the event of any conflict as to whether an invention, design,
improvement or discovery was conceived or made before or after the
commencement of EMPLOYEE'S employment with the COMPANY, EMPLOYEE
agrees that such conflict shall be resolved in favor of the COMPANY,
unless such invention, design, improvement or discovery is now
described in a written record or filed in the U.S. Patent Office,
containing a filing date prior to EMPLOYEE'S employment, is in the
possession of a former employeer who owns the invention, design,
improvement or discovery, or is disclosed in writing to the COMPANY
within ten (10) days of the date hereof with notice and reasonable
proof that such invention, design, improvement or discovery was
conceived by EMPLOYEE prior to his said employment with the COMPANY.
(d) EMPLOYEE agrees that he shall render to COMPANY or it's nominee all
such assistance as it may reasonably require in the prosecution of all
such patent applications, including applications for the reissue of
such patents, and in the prosecution or defense of all interferences
which may be declared involving any of said patent applications or
patent, provided, however, that the expense incident thereto shall be
borne by COMPANY, except that if the COMPANY needs the EMPLOYEE'S
assistance after he is no longer employed by the COMPANY, the COMPANY
shall compensate the EMPLOYEE at the same hourly rate he was making
while employed here, and provided, that the COMPANY shall not be
obligated to pay expenses for such assistance wherein EMPLOYEE takes a
position adverse to that of the COMPANY.
2. Any of EMPLOYEE'S inventions, designs, improvements, and discoveries, other
than those described in the preceding paragraphs 1(a), (b), (c), and (d),
shall remain the property of EMPLOYEE, and upon request of EMPLOYEE, COMPANY
agrees that it will execute a desclaimer in writing dislaiming any right to
any such invention, design, improvements and discoveries of EMPLOYEE.
3. EMPLOYEE recognizes that his work for the COMPANY will bring him into close
contact with confidential matter of the COMPANY not publicly known such as
the following proprietary matter of "know-how", technical data, processes,
techniques,
<PAGE>
inventions, research projects, markets, sales, list of customers and other
information, knowledge or data which is of a confidential nature.
EMPLOYEE agrees to keep secret all such confidential matter of the COMPANY
and agrees not to, directly or indirectly, other than is necessary in the
business of the COMPANY and in the scope of his employment, use such
confidential matter or disclose such confidential matter to anyone outside
of the COMPANY, at any time (either during or after his employment with the
COMPANY), except upon the prior written consent of the COMPANY. EMPLOYEE
further agrees to deliver promptly to the COMPANY on termination of his
employment, or at any time it may request, all proprietary matter, reports,
manuals, drawings, blue prints, other papers of a confidential nature
including all copies and all models, or any other tangible embodiments of
such information, knowledge, or data which he may then possess or have under
his control.
4. EMPLOYEE recognizes that irreparable damage will result to COMPANY in the
event of the violation of any covenant contained herein made by EMPLOYEE,
and agrees that in the event of such violation COMPANY shall be entitled,
in addition to its other legal or equitable remedies and damages, to
temporary and permanent injunctive relief to restrain against such
violation(s) thereof by EMPLOYEE and by all other persons acting for or with
EMPLOYEE, including the cost of reasonable attorney's fees.
5. This agreement shall inure to the benefit of the heirs, executors,
administrators, successors and assigns of the respective parties hereto.
IN WITNESS WHEREOF, COMPANY has caused these presents to be executed and its
common or corporate seal hereto affixed, and EMPLOYEE has hereunto set his hand
and seal, the day and year first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By /s/ Edward H. Arnold
-------------------------------
Edward H. Arnold
Witness: EMPLOYEE:
/s/ Rosemary M. Baldino /s/ Hock E. Tan
- -------------------------------- -----------------------------------
Rosemary M. Baldino
<PAGE>
Exhibit 10.13
INTEGRATED CIRCUIT SYSTEMS, INC.
CONSULTANT STOCK AGREEMENT
--------------------------
THIS CONSULTANT STOCK AGREEMENT (this "Agreement") is made and entered into
---------
as of May 11, 1999 by and between Integrated Circuit Systems, Inc., a
Pennsylvania corporation (the "Company"), and Henry I. Boreen ("Consultant").
------- ----------
Reference is hereby made to the Agreement and Plan of Merger dated January
20, 1999, as amended, between the Company and ICS Merger Corp., a Pennsylvania
corporation ("ICS"), pursuant to which, as of the date hereof, and simultaneous
---
with the execution of this Agreement, ICS has merged with and into the Company
(such merger, the "Merger") with the Company as the surviving corporation.
------
The Company and Consultant desire to enter into this Agreement (i) to
provide for certain of the terms and conditions pursuant to which the Company
and Consultant have agreed that certain shares of the Company's common stock
owned by Consultant will be converted into shares of Class A Common and Class L
Common, and (ii) to provide for certain rights and obligations in respect of
shares of Common Stock held by Consultant as hereinafter provided. Capitalized
terms used herein and not otherwise defined are defined in Section 16 hereof.
The parties hereto agree as follows:
1. Rollover and Transfer of Common Stock.
-------------------------------------
(a) Upon execution of this Agreement, Consultant will exchange 350,540
shares of common stock of the Company (the "Pre-Recapitalization Stock") for
--------------------------
3,352,039 shares of Class A Common and 372,449 shares of Class L Common (the
"Rollover").
--------
(b) Immediately upon consummation of the Rollover, Consultant shall sell
to Bain Capital Fund VI, L.P., and Bain Capital Fund VI, L.P. shall purchase
from Consultant, 1,286,539 shares of Class A Common and 142,949 shares of Class
L Common (collectively, the "Acquired Stock"), for an aggregate purchase price
--------------
of $2,858,975, free and clear of all liens, encumbrances or other restrictions.
Upon payment of the purchase price by cash (which may include wire transfer of
immediately available funds) or cashiers check, Consultant shall deliver to Bain
Capital Fund VI, L.P. the stock certificates evidencing the shares of Acquired
Stock, duly endorsed in blank or accompanied by duly executed stock powers.
After transfer of the Acquired Stock, Consultant shall be the record and
beneficial owner of 2,065,500 shares of Class A Common and 229,500 shares of
Class L Common (collectively, the "Post-Recapitalization Stock").
---------------------------
<PAGE>
2. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Consultant. In connection with the
--------------------------------------------
purchase and sale of Post-Recapitalization Stock hereunder, Consultant
represents and warrants to the Company and to Bain Capital Fund VI, L.P. that:
(i) The shares of Post-Recapitalization Stock to be acquired by
Consultant pursuant to this Agreement will be acquired for Consultant's own
account and not with a current view to, or intention of, distribution
thereof in violation of the Securities Act or any applicable state
securities laws, and the shares of Post-Recapitalization Stock will not be
disposed of in contravention of the Securities Act or any applicable state
securities laws.
(ii) Consultant is a director of the Company or its Subsidiaries, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in Post-Recapitalization Stock.
(iii) Consultant is able to bear the economic risk of his investment
in Post-Recapitalization Stock for an indefinite period of time because
Post-Recapitalization Stock has not been registered under the Securities
Act and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
(iv) Consultant has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Post-
Recapitalization Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Consultant
has reviewed, or has had an opportunity to review, a copy of the Merger
Agreement, and Consultant is familiar with the transactions contemplated
thereby. Consultant also has reviewed, or has had an opportunity to review
the Offering Memorandum related to certain of the debt financing of the
Merger, the Company's Certificate of Incorporation and the Company's Bylaws
and any credit agreements, notes and related documents to which the Company
is a party.
(v) Consultant has not granted and is not a party to any proxy,
voting trust or other agreement which is inconsistent with, conflicts with
or violates any provision of this Agreement. Consultant shall not grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this
Agreement.
(vi) This Agreement constitutes the legal, valid and binding
obligation of Consultant, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Consultant does
not and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Consultant is a party or any judgment,
order or decree to which Consultant is subject.
2
<PAGE>
(vii) Consultant is a resident of the State of Pennsylvania.
(viii) Consultant is the record and beneficial owner of, and has good
and marketable title to, the Acquired Stock, free and clear of all liens,
encumbrances or other restrictions. Consultant shall transfer to Bain
Capital Fund VI, L.P. good and marketable title to the Acquired Stock, free
and clear of all liens, encumbrances or other restrictions.
(b) Acknowledgment by Consultant. As an inducement to the Company to issue
----------------------------
the Post-Recapitalization Stock to Consultant, and as a condition thereto,
Consultant acknowledges and agrees that subject to any consulting agreement
between Consultant and the Company or applicable law, neither the issuance of
Post-Recapitalization Stock to Consultant nor any provision contained herein
will entitle Consultant to remain as a consultant to the Company or its
Subsidiaries or affect the right of the Company to terminate Consultant's
consulting relationship at any time for any reason.
(c) Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Consultant as follows:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
(ii) The Company has all requisite corporate power and corporate
authority to execute, deliver and perform this Agreement and to consummate
the transactions provided for herein.
(iii) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby, including, but not limited to, the issuance and sale
of the Post-Recapitalization Stock to be issued by it hereunder, have been
duly authorized, and this Agreement constitutes the valid and binding
obligation of the Company, enforceable against it in accordance with the
terms hereof.
(iv) The Consultant Stock issued to the Consultant hereunder, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable.
(v) As of the Closing, the authorized capital stock of the Company
will consist of (A) 27,000,000 shares of Class A Common, of which
15,612,588 shares will be issued and outstanding immediately after the
Closing, (B) 7,000,000 shares of Class B Common Stock, of which 5,653,079
shares will be issued and outstanding immediately after the Closing, and
(C) 3,000,000 shares of Class L Common Stock, of which 2,362,852 shares
will be issued and outstanding immediately after the Closing. As of the
Closing, other than options to purchase up to 5,734,333 shares of the
Company's Class A Common, options to purchase up to 137,148 shares of the
Company's Class L Common and preemptive rights to purchase shares of the
Company's capital stock granted to certain of the Company's stockholders,
there will be no rights, subscriptions, warrants, options, conversion
rights, or agreements of any
3
<PAGE>
kind outstanding to purchase from the Company, or otherwise require the
Company to issue, any shares of capital stock of the Company or securities
or obligations of any kind convertible or exchangeable for any shares of
capital stock of the Company; provided, however, that shares of Class A
-------- -------
Common may be converted into shares of Class B Common and shares of Class B
Common may be converted into shares of Class A Common, all subject to the
terms of the Company's Articles of Incorporation.
3. Right to Purchase Consultant Stock Upon Termination of Employment.
-----------------------------------------------------------------
(a) Repurchase Right. If the Repurchase Date occurs, the Consultant Stock
----------------
(including any Consultant Stock acquired subsequent to the Repurchase Date),
whether held by Consultant or one or more transferees, will be subject to
repurchase by the Bain Stockholders, the Bear Stearns Stockholders and the
Company pursuant to the terms and conditions set forth in this Section 3 (the
"Repurchase Option").
-----------------
(b) Repurchase Price. Consultant Stock purchased pursuant to the
----------------
Repurchase Option will be purchased at a price per share equal to the Fair
Market Value of such Consultant Stock as of the Valuation Date.
(c) Repurchase Procedures. The Company may elect or decline to exercise
---------------------
the Repurchase Option by delivering written notice (the "Company Repurchase
------------------
Notice") to the holder or holders of each class of the applicable Consultant
- ------
Stock, the Bain Stockholders and the Bear Stearns Stockholders within the later
of the one-year anniversary of this Agreement or 240 days after the applicable
Repurchase Date. To the extent that after giving effect to the Company's option
pursuant to the immediately preceding sentence any portion of the Consultant
Stock is not being repurchased by the Company, the Bain Stockholders and the
Bear Stearns Stockholders may elect or decline to exercise the Repurchase Option
to purchase up to their pro rata share (determined based upon the number of
shares of Class A Common and Class B Common held by each) by delivering written
notice (the "Initial Repurchase Notice") to the Company, the holder or holders
-------------------------
of Consultant Stock and the other within the later of (i) 10 business days after
receipt of the Company Repurchase Notice or (ii) the expiration of the later of
one-year anniversary of this Agreement or the expiration of the 240 day period
during which the Company was entitled to deliver the Company Repurchase Notice.
To the extent that the Bain Stockholders or the Bear Stearns Stockholders do not
elect to repurchase their full allotment of the remaining Consultant Stock, the
other party shall be entitled to purchase all or any portion of the remaining
Consultant Stock by providing written notice (the "Supplemental Repurchase
-----------------------
Notice" and together with the Initial Repurchase Notice and Company Repurchase
- ------
Notice, a "Repurchase Notice") to each of the parties receiving the Initial
-----------------
Repurchase Notice within ten business days of the expiration of the period
during which the Bain Stockholders and the Bear Stearns Stockholders were
entitled to deliver the Initial Repurchase Notice. Each Repurchase Notice will
set forth the number of shares of each class of Consultant Stock to be acquired
from such holder(s), an estimate of the aggregate consideration to be paid for
such holder's shares of each such class of Consultant Stock and the time and
place for the closing of the transaction. If any shares of any class of
Consultant Stock are held by any transferees of Consultant, the Bain
Stockholders, the Bear Stearns Stockholders and the Company, as the case may be,
will
4
<PAGE>
purchase such shares of such class elected to be purchased from such holder(s)
of Consultant Stock, pro rata according to the number of shares of such class of
Consultant Stock held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
(d) Closing. Each closing of a repurchase transaction will take place on
-------
the date designated by the Bain Stockholders, the Bear Stearns Stockholders or
the Company, as the case may be, in the latest Repurchase Notice, which date
will not be more than 60 days after the delivery of such notice, and no earlier
than any date set forth in an earlier Repurchase Notice or the final
determination of Fair Market Value per share of Consultant Stock as of the
Valuation Date and the expiration of any time periods for which a repurchase
election may be revoked pursuant to Section 3(e) (the "Scheduled Closing Date").
The Company will pay for any shares of Consultant Stock to be purchased pursuant
to a Repurchase Option by delivery of cash or cashier's check payable to the
holder(s) of such shares of Consultant Stock in an aggregate amount equal to
their share of the aggregate repurchase price (the "Repurchase Price"); provided
---------------- --------
that any purchase of the Consultant Stock that occurs after the Scheduled
- ----
Closing Date by the Company as a result of the Financing Circumstances (as
defined below) shall include simple interest calculated from the Scheduled
Closing Date to the date of such payment at the rate of 6% per annum on the
Repurchase Price attributable to such shares of Consultant Stock. The Bain
Stockholders and the Bear Stearns Stockholders will pay for any shares of
Consultant Stock to be purchased pursuant to a Repurchase Option by delivery of
cash or cashier's check payable to the holder(s) of such shares of Consultant
Stock in an aggregate amount equal to their share of the aggregate unpaid
Repurchase Price for such shares of Consultant Stock. Notwithstanding anything
to the contrary contained in this Agreement, all repurchases of shares of
Consultant Stock pursuant to this Section 3(d) will be subject to applicable
restrictions and covenants contained in the Pennsylvania Business Corporation
Law of 1988 and in the Company's and its Subsidiaries' debt financing
agreements. If (i) any such restrictions or covenants prohibit the repurchase
of Consultant Stock hereunder which the Company is otherwise entitled to make,
(ii) the Company does not have cash availability, including availability under
its revolver, of at least $15 million on a projected basis for the next six
month period (collectively, the "Financing Circumstances"), or (iii) the
-----------------------
repurchase would not allow the transactions contemplated by the Merger to
qualify for recapitalization accounting, then the Company will not be required
to make such repurchase (and may defer making such repurchase) until it is
permitted to do so under such restrictions and covenants and until its projected
cash availability is greater than $15 million (with it being understood that the
Company will make the maximum amount of repurchases permitted and may defer
making the remainder of such repurchases until permitted to do so and it being
further understood that any closing of any such repurchase shall not occur on a
date which is later than the second anniversary of the Scheduled Closing Date).
The Bain Stockholders, the Bear Stearns Stockholders and the Company will
receive customary representations and warranties from each seller regarding the
sale of shares of Consultant Stock solely with respect to such seller's
ownership and title to Consultant Stock and capacity to transfer Consultant
Stock.
(e) Revocation of Repurchase Election. Notwithstanding anything contained
---------------------------------
in this Agreement to the contrary, if Consultant objects to Board's
determination of Fair Market Value as
5
<PAGE>
described in the definition of Fair Market Value, or if the Fair Market Value of
a share of Consultant Stock is otherwise determined to be an amount more than
10% greater than the per share repurchase price for such share of Consultant
Stock in the Initial Repurchase Notice or Supplemental Repurchase Notice, each
of the Company, the Bain Stockholders and the Bear Stearns Stockholders shall
have the right to revoke its exercise of the Repurchase Option for all or any
portion of the Consultant Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Consultant Stock, the
Company, the Bain Stockholders and the Bear Stearns Stockholders during (i) the
30 day period beginning on the date that the Company, the Bain Stockholders and
the Bear Stearns Stockholders received Consultant's written notice of objection,
and (ii) the 30 day period beginning on the date that the Company, the Bain
Stockholders and/or the Bear Stearns Stockholders are given written notice that
the Fair Market Value of a share of Consultant Stock was finally determined to
be an amount more than 10% greater than the per share repurchase price for
Consultant Stock set forth in the Initial Repurchase Notice or in the
Supplemental Repurchase Notice.
In the event that the Bain Stockholders deliver a notice of revocation, the
Bear Stearns Stockholders shall be entitled to purchase all or any portion of
the Consultant Stock that would otherwise have been purchased by the Bain
Stockholders by providing an additional Supplemental Repurchase Notice to the
holders of the Consultant Stock and the Company within 10 business days after
receipt of the Bain Stockholders' notice of revocation. The Company may exercise
the Repurchase Option for the remaining Consultant Stock by delivering an
additional Company Repurchase Notice to the holder or holders of the applicable
Consultant Stock within 10 business days of the expiration of the 10 business
day period described in the preceding sentence.
In the event that the Bear Stearns Stockholders deliver a notice of
revocation, the Bain Stockholders shall be entitled to purchase all or any
portion of the Consultant Stock that would otherwise have been purchased by the
Bear Stearns Stockholders by providing an additional Supplemental Repurchase
Notice to the holders of the Consultant Stock and the Company within 10 business
days after receipt of the Bear Stearns Stockholders' notice of revocation. The
Company may exercise the Repurchase Option for the remaining Consultant Stock by
delivering an additional Company Repurchase Notice to the holder or holders of
the applicable Consultant Stock within 10 business days of the expiration of the
10 business day period described in the preceding sentence.
In the event that the Company delivers a notice of revocation, the Bain
Stockholders and the Bear Stearns Stockholders shall be entitled to purchase
their pro rata share (determined based on the number of shares of Class A Common
and Class B Common held by each) of all or any portion of the Consultant Stock
that would otherwise have been purchased by the Company by providing an
additional Supplemental Repurchase Notice to the holders of the Consultant Stock
and the other party within 10 business days after receipt of the Company's
notice of revocation. To the extent that the Bain Stockholders or the Bear
Stearns Stockholders do not elect to repurchase their full allotment of
Consultant Stock, the other party shall be entitled to purchase the remaining
Consultant Stock by delivering an additional Supplemental Repurchase Notice to
the holder or holders of the applicable Consultant Stock within 10 business days
of the expiration of the 10 business day period described in the preceding
sentence.
6
<PAGE>
(f) Termination of Repurchase Right. The Repurchase Option granted to the
-------------------------------
Bain Stockholders, Bear Stearns Stockholders and the Company shall terminate (to
the extent not previously exercised) with respect to Consultant Stock at the
earliest of (i) a Bain Exit, (ii) a Qualified Initial Public Offering, or (iii)
the tenth anniversary of the Closing Date.
4. Right to Put Consultant Stock.
-----------------------------
(a) Put Right. If the Company terminates the consulting period under the
----------
Consulting Agreement executed by and between the Company and Consultant as of
the date hereof for any reason, then holder(s) of Consultant Stock have the
right (the "Put Right") to require the Company, or should the Bear Stearns
---------
Stockholders and Bain Stockholders so elect subject to the terms and conditions
set forth herein, the Bain Stockholders and the Bear Stearns Stockholders, to
purchase all or any portion of the Consultant Stock then held by all (and not
less than all) of such holder(s) (other than any Consultant Stock for which the
Company has exercised its Repurchase Option) pursuant to the terms and
conditions set forth in this Section 4; provided that, notwithstanding the
-------- ----
foregoing, Consultant shall not be entitled to exercise the Put Right if such
exercise (or the results thereof) would cause the transactions contemplated by
the Merger to fail to qualify for recapitalization accounting. If any shares of
any class of Consultant Stock are held by any transferees of Consultant, the
Bain Stockholders, the Bear Stearns Stockholders and the Company, as the case
may be, will purchase such shares of such class to be purchased from such
holder(s) of Consultant Stock, pro rata according to the number of shares of
such class of Consultant Stock held by such holder(s) at the time of delivery of
such Put Notice (determined as nearly as practicable to the nearest share).
(b) Put Price. Consultant Stock purchased pursuant to the Put Right will
---------
be purchased at a price per share equal to the Fair Market Value of such
Consultant Stock as of the Valuation Date.
(c) Put Procedures.
--------------
(i) The Put Right is exercisable by the holder(s) of the Consultant
Stock delivering written notice (the "Put Notice") to the Company, the Bain
----------
Stockholders and the Bear Stearns Stockholders during the period beginning on
the date that Consultant is terminated by the Company (the "Termination Date")
-----------------
and ending on the date 65 days after the Termination Date. The Put Notice will
set forth the number of shares of each class of Consultant Stock held by all of
the holder(s) of Consultant Stock.
(ii) The Bain Stockholders and the Bear Stearns Stockholders may
each elect to purchase their pro rata share (determined based upon the number of
shares of Class A Common and Class B Common held by each) of any or all of the
shares of Consultant Stock which the Company is otherwise required to purchase
pursuant to the Put Option by delivering written notice (the "Initial Put
-----------
Purchase Notice") to the holder or holders of each class of Consultant Stock,
- ---------------
the Company and the other party, within 30 days after receiving the Put Notice.
To the extent that the Bain Stockholders or the Bear Stearns Stockholders do not
elect to purchase their full allotment of Consultant Stock, the other party
shall be entitled to purchase all or any portion of the remaining
7
<PAGE>
Consultant Stock by providing notice (the "Supplemental Put Purchase Notice") to
--------------------------------
each of the parties receiving the Initial Put Purchase Notice within the later
of (i) 10 business days after receipt of the Initial Put Purchase Notice or (ii)
the expiration of the 30 day period during which the Bain Stockholders and the
Bear Stearns Stockholders were entitled to deliver Initial Put Purchase Notices.
To the extent that, after giving effect to the reoffer pursuant to the
immediately preceding sentence, any portion of the Consultant Stock is not being
purchased by the Bain Stockholders or the Bear Stearns Stockholders, the Company
must repurchase the remaining Consultant Stock as set forth in Section 4(d)
below. Each Initial Put Purchase Notice and Supplemental Purchase Notice shall
set forth the number of shares of each class of Consultant Stock to be acquired
from such holder(s) and an estimate of the aggregate consideration to be paid
for such holder's shares of each such class of Consultant Stock.
(d) Closing. The closing of the transactions contemplated by this Section
-------
4 will take place at a time and place mutually agreed upon by the parties
acquiring Consultant Stock which date will not be more than 120 days after the
delivery of the Put Notice, and no earlier than the final determination of Fair
Market Value per share of Consultant Stock as of the Valuation Date and the
expiration of any time periods for which a purchase election may be revoked
pursuant to Section 4(e) (the "Anticipated Closing Date"). The Bain
------------------------
Stockholders, the Bear Stearns Stockholders and the Company, as the case may be,
shall pay for any shares of Consultant Stock to be purchased pursuant to the Put
Option by delivery of cash or a cashier's check payable to the holder(s) of such
shares of Consultant Stock in an aggregate amount equal to their pro rata share
of the aggregate repurchase price ("Put Price") for such shares of Consultant
---------
Stock; provided that any purchase of Consultant Stock that occurs after the
-------- ----
Anticipated Closing Date by the Company as a result of the Financing
Circumstances shall include simple interest calculated from the Anticipated
Closing Date until the date of such purchase at the rate of 6% per annum on the
Put Price attributable to such shares of Consultant Stock. Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of shares
of Consultant Stock by the Company will be subject to applicable restrictions
and covenants contained in the Pennsylvania Business Corporation Law of 1988 and
in the Company's and its Subsidiaries' debt and equity financing agreements. If
either of the Financing Circumstances exist, the Company will not be required to
make such repurchases until it is permitted to do so under such restrictions and
until its projected cash availability is greater than $15 million (with it being
understood that the Company will make the maximum amount of repurchases
permitted and may defer making the remainder of such repurchases until permitted
to do so and it being further understood that the closing of such repurchase
shall not occur on a date which is later than the second anniversary of the
Anticipated Closing Date). The Bain Stockholders, the Bear Stearns Stockholders
and the Company will receive customary representations and warranties from each
seller regarding the sale of shares of Consultant Stock, solely with respect to
such seller's ownership and title to Consultant Stock and capacity to transfer
Consultant Stock.
(e) Revocation of Purchase Election. Notwithstanding anything contained
-------------------------------
in this Agreement to the contrary, if Consultant objects to the Board's
determination of Fair Market Value as described in the definition of Fair Market
Value or if the Fair Market Value of a share of Consultant Stock is otherwise
determined to be an amount more than 10% greater than the per share repurchase
price for such share of Consultant Stock in the Initial Put Purchase Notice or
8
<PAGE>
Supplemental Put Purchase Notice, each of the Bain Stockholders and the Bear
Stearns Stockholders shall have the right to revoke its exercise of the option
to purchase shares of Consultant Stock pursuant to Section 4(d) by delivering
notice of such revocation in writing to the holders of the Consultant Stock, the
Company, and the other party during (i) the 30 day period beginning on the date
that the Company, the Bain Stockholders and the Bear Stearns Stockholders
received Consultant's written notice of objection, and (ii) the 30 day period
beginning on the date that the Company, the Bain Stockholders and/or the Bear
Stearns Stockholders are given written notice that the Fair Market Value of a
share of Consultant Stock was finally determined to be an amount more than 10%
greater than the per share repurchase price for Consultant Stock set forth in
the Initial Put Purchase Notice or in the Supplemental Put Purchase Notice.
Furthermore, if Consultant objects to the Board's determination of Fair
Market Value as described in the definition of Fair Market Value, or if the Fair
Market Value of a share of Consultant Stock is otherwise determined to be more
than 10% less than the per share repurchase price for such share of Consultant
Stock in the Initial Put Purchase Notice or Supplemental Put Purchase Notice,
Consultant shall have the right to revoke his exercise of the Put Right pursuant
to Section 4 by delivering notice of such revocation in writing to the Company,
the Bain Stockholders and the Bear Stearns Stockholders during (i) the 30 day
period beginning on the date that the Company, the Bain Stockholders and the
Bear Stearns Stockholders received Consultant's written notice of objection, or
(ii) the 30 day period beginning on the date that Consultant, the Company, the
Bain Stockholders and/or the Bear Stearns Stockholders are given written notice
that the Fair Market Value of a share of Consultant Stock was finally determined
to be more than 10% less than the per share repurchase price for Consultant
Stock set forth in the Initial Put Purchase Notice or in the Supplemental Put
Purchase Notice.
In the event that the Bain Stockholders deliver a notice of revocation, the
Bear Stearns Stockholders shall be entitled to purchase all or any portion of
the Consultant Stock that would otherwise have been purchased by the Bain
Stockholders by providing an additional Supplemental Put Purchase Notice to the
holders of the Consultant Stock and the Company within 10 business days after
receipt of the Bain Stockholders' notice of revocation. The Company must
purchase the remaining shares of Consultant Stock by delivering an additional
Company Put Purchase Notice to the holder or holders of the applicable
Consultant Stock within 10 business days of the expiration of the 10 business
day period described in the preceding sentence.
In the event that the Bear Stearns Stockholders deliver a notice of
revocation, the Bain Stockholders shall be entitled to purchase all or any
portion of the Consultant Stock that would otherwise have been purchased by the
Bear Stearns Stockholders by providing an additional Supplemental Put Purchase
Notice to the holders of the Consultant Stock and the Company within 10 business
days after receipt of the Bear Stearns Stockholders' notice of revocation. The
Company must purchase the remaining shares of Consultant Stock by delivering an
additional Company Put Purchase Notice to the holder or holders of the
applicable Consultant Stock within 10 business days of the expiration of the 10
business day period described in the preceding sentence.
9
<PAGE>
(f) Termination of Put Right. The Put Right granted to the holder(s) of
------------------------
the Consultant Stock shall terminate (to the extent not previously exercised)
with respect to Consultant Stock on the first anniversary of the date of this
Agreement.
5. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will not
issue, sell or otherwise transfer to the Bain Stockholders or the Bear Stearns
Stockholders (an "Issuance") at any time prior to a Public Offering, any capital
--------
stock or debt securities (or securities convertible into or exercisable or
exchangeable for capital stock or debt securities) unless, at least 15 days
prior to such Issuance, the Company notifies each holder of Consultant Stock in
writing of the Issuance (including the price, the purchasers thereof and the
other terms thereof) and grants to each holder of Consultant Stock, the right
(the "Right") to subscribe for and purchase a portion of such additional shares
-----
or other securities so issued at the same price and on the same terms as issued
in the Issuance equal to the quotient determined by dividing (1) the number of
fully diluted shares of Class A Common and Class B Common held by such holder by
(2) the total number of shares of Class A Common and Class B Common outstanding
on a fully diluted basis. Notwithstanding the foregoing, if all Persons entitled
to purchase or receive such stock or securities are required to also purchase
other securities of the Company, the holders of capital stock exercising their
Right pursuant to this Section shall also be required to purchase the same strip
of securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by such holder at any time by
written notice to the Company received by the Company within 10 days after
receipt by such holder of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right shall
occur not less than 10 days after the Company receives notice of the exercise of
the Right and concurrently with the closing of the Issuance.
(b) Notwithstanding the foregoing, the Right shall not apply to (i)
issuances of capital stock or debt securities (or securities convertible into or
exchangeable for, or options to purchase, capital stock or debt securities), pro
rata to all holders of any class of Stock, as a dividend on, subdivision of or
other distribution in respect of, such class of capital stock, (ii) conversions
or exchanges of one class or form of capital stock into another class or form of
capital stock, (iii) issuances of capital stock upon exercise of any debt
security issued by the Company, or (iv) the issuance of capital stock (or
securities convertible into or exchangeable for, or options to purchase, capital
stock) on customary, arm's length terms in connection with the provision by the
Bain Stockholders or the Bear Stearns Stockholders of debt financing to the
Company or its Subsidiaries.
(c) The provisions of this Section 5 will terminate upon the consummation
of a Public Offering or upon a Bain Exit.
10
<PAGE>
6. Restrictions on Transfer of Consultant Stock.
--------------------------------------------
(a) Transfer of Consultant Stock. Consultant will not sell, pledge,
----------------------------
transfer or otherwise dispose of (a "Transfer") any interest in their Consultant
--------
Stock except (i) pursuant to and in accordance with Sections 3, 4, 6(b), 7, 8,
10 or 12 (in connection with a Transfer by the Bain Stockholders only below),
(ii) pursuant to the terms of the Registration Agreement, dated as of the date
hereof, by and between the Company and certain of its stockholders, (iii)
pursuant to applicable laws of descent and distribution, or (iv) among
Consultant's Family Group; provided, that the restrictions contained in this
--------
Section 6 will continue to be applicable to the shares of Consultant Stock after
any Transfer of the type referred to in clauses (iii) or (iv) above and, as a
condition to any such Transfer, the transferees of such shares of Consultant
Stock must agree in writing to be bound by the provisions of this Agreement.
In the case of a transfer by Consultant to a member of his Family Group, after
such transfer Consultant must continue to own at least 50% of his shares of
Consultant Stock originally owned by him on a fully diluted basis. Any
transferee of Consultant Stock pursuant to a Transfer in accordance with clause
(iii) or (iv) above is herein referred to as a "Permitted Transferee." Upon the
--------------------
proposed Transfer of Consultant Stock pursuant to clause (iii) or (iv) above,
Consultant or a Permitted Transferee Transferring such Consultant Stock will
deliver a written notice (a "Transfer Notice") to the Company, which discloses
---------------
in reasonable detail the identity of the Permitted Transferee(s).
Notwithstanding the foregoing, no party hereto shall avoid the provisions of
this Agreement by making one or more transfers to one or more Permitted
Transferees and then disposing of all or any portion of such party's interest in
any such Permitted Transferee.
(b) Termination of Restrictions. The restrictions set forth in Section
---------------------------
6(a) will terminate upon a Qualified Initial Public Offering.
7. Unaffiliated Sale of the Company.
--------------------------------
(a) If the Board approves an Unaffiliated Sale of the Company (an
"Approved Sale"), then each holder of each class of Consultant Stock will vote
-------------
for, consent to and raise no objections against such Approved Sale. Each holder
of each class of Consultant Stock will, to the maximum extent permitted by
applicable law, waive any dissenters' rights, appraisal rights or similar rights
in connection with such Approved Sale, and if such Approved Sale is a sale of
stock, each holder of such class Consultant Stock will agree to sell (including,
without limitation, by executing and delivering definitive agreements with
respect thereto) up to all of his or her shares of Consultant Stock on the terms
and conditions approved by the Board; provided that the terms and conditions of
--------
such transaction applicable to each holder of a class of Consultant Stock are
the same as those applicable to the Bain Stockholders holding such class of
capital stock (including, subject to Section 9 below, the price per share and
the type of consideration, but excluding reasonable investment banking and
advisory fees customarily charged by the Bain Stockholders and the Bear Stearns
Stockholders for transactions of such type). Each holder of Consultant Stock
will take all necessary or desirable actions in connection with the consummation
of the Approved Sale as requested by the Board or the Company.
11
<PAGE>
(b) If the Company or the holders of the Company's securities enter into
any negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities and Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Consultant Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Consultant Stock appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Consultant Stock declines to appoint the purchaser representative
designated by the Company, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(c) Each of the holders of Consultant Stock (if any) will bear their pro-
rata share (based upon the number of shares of Class A Common sold) of the costs
of any sale of Consultant Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all or substantially all holders of Common
Stock and are not otherwise paid by the Company or the acquiring party. Costs
incurred by each holder of Consultant Stock on its own behalf will not be
considered costs of the transaction hereunder.
(d) The provisions of this Section 7 shall terminate upon a Qualified
Initial Public Offering.
8. Bain Sale of the Company.
------------------------
(a) If a majority of the members of the Board (which, for purposes of this
Section 8, shall include any director appointed by the Bear Stearns Stockholders
pursuant to the Voting Agreement, dated as of the date hereof, by and among the
Company and certain stockholders of the Company party thereto from time to time
(the "Voting Agreement")) who are not Affiliates or designees of the Bain
----------------
Stockholders (the "Non-Bain Directors") approve a Bain Sale of the Company (an
------------------
"Approved Bain Sale"), then each holder of Consultant Stock that is not an
------------------
Affiliate of the Bain Stockholders will vote for, consent to and raise no
objections against such Approved Bain Sale. Each such holder of Consultant Stock
will, to the maximum extent permitted by applicable law, waive any dissenters'
rights, appraisal rights or similar rights in connection with such Approved Bain
Sale, and in the event that such Approved Bain Sale is a sale of stock, each
such holder of Consultant Stock will agree to sell (including, without
limitation, by executing and delivering definitive agreements with respect
thereto) up to all of his or her Consultant Stock on the terms and conditions
approved by the Non-Bain Directors; provided that the terms and conditions of
--------
such transaction applicable to each holder of a class of Consultant Stock that
is not a Bain Stockholder or an Affiliate thereof are the same as those
applicable to the stockholder holding the largest number of shares of such class
of capital stock that is not a Bain Stockholder or an Affiliate thereof
(including, subject to Section 9 below, the price per share and the type of
consideration, but excluding reasonable investment banking and advisory fees
customarily charged by the Bear Stearns Stockholders for transactions of such
type). Each holder of Consultant Stock will take all necessary or desirable
actions in connection with the consummation of the Approved Bain Sale as
requested by the Non-Bain Directors, the Bain Stockholders or the Company.
12
<PAGE>
(b) If, in relation to an Approved Bain Sale, the Company or the holders
of the Company's securities enter into any negotiation or transaction for which
Rule 506 (or any similar rule then in effect) promulgated by the Securities and
Exchange Commission may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), the
holders of Consultant Stock will, at the request of the Company or the Bain
Stockholders, appoint a purchaser representative (as such term is defined in
Rule 501) reasonably acceptable to the Company and the Bain Stockholders. If
any holder of Consultant Stock appoints a purchaser representative designated by
the Company or the Bain Stockholders, the Company will pay the fees of such
purchaser representative, but if any holder of Consultant Stock declines to
appoint the purchaser representative designated by the Company or the Bain
Stockholders, such holder will appoint another purchaser representative, and
such holder will be responsible for the fees of the purchaser representative so
appointed.
(c) Each of the holders of Consultant Stock (if any) will bear their pro-
rata share (based upon the number of shares of Class A Common sold by
stockholders) of the costs of any sale of Consultant Stock pursuant to an
Approved Bain Sale to the extent such costs are incurred for the benefit of all
or substantially all holders of Common Stock not affiliated with the Bain
Stockholders and are not otherwise paid by the Company or the acquiring party.
Costs incurred by each holder of Consultant Stock on its own behalf will not be
considered costs of the transaction hereunder.
(d) The provisions of this Section 8 shall terminate upon a Qualified
Initial Public Offering.
9. Distributions upon Sale of the Company, etc. In the event of a sale
--------------------------------------------
or exchange by the holders of Consultant Stock (whether by sale, merger,
recapitalization, reorganization, consolidation, combination or otherwise) in
connection with an Approved Sale or Approved Bain Sale each holder of Consultant
Stock shall receive in exchange for the Consultant Stock held by such holder
participating in such sale, the same portion of the aggregate consideration from
such sale or exchange that such holder would have received if such aggregate
consideration had been distributed by the Company to the holders of capital
stock of the Company participating in such sale, in complete liquidation
pursuant to the rights and preferences set forth in the Company's Amended and
Restated Articles of Incorporation as in effect immediately prior to such sale
or exchange (and assuming that the only shares of capital stock of the Company
outstanding were the shares of capital stock of the Company participating in
such sale). Each holder of Consultant Stock shall take all necessary or
desirable actions in connection with the distribution of the aggregate
consideration from such sale or exchange as requested by the Company.
10. Initial Public Offering. In the event that the Board approves an
-----------------------
initial public offering and sale of Common Stock (a "Public Offering") pursuant
---------------
to an effective registration statement under the Securities Act of 1933, as
amended, the holders of Common Stock shall take all necessary or desirable
actions in connection with the consummation of the Public Offering. In the event
that such Public Offering is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the Common
Stock structure would adversely affect the marketability of the offering, each
holder of Common Stock shall consent to and vote for a
13
<PAGE>
recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters and the Board find acceptable and
equitable in the circumstances and shall take all necessary or desirable actions
in connection with the consummation of the recapitalization, reorganization
and/or exchange; provided that the resulting securities take into account the
--------
rights and preferences set forth in the Company's Amended and Restated Articles
of Incorporation as in effect immediately prior to such Public Offering.
11. Restrictive Legend; Additional Restriction on Transfer. Each
------------------------------------------------------
certificate evidencing Consultant Stock and each certificate issued in exchange
for or upon the transfer of any Consultant Stock (if such shares remain
Consultant Stock after such transfer) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS PURSUANT TO A CONSULTANT STOCK
AGREEMENT, DATED AS OF MAY, 1999 AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND HENRY I. BOREEN, AS AMENDED
AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH CONSULTANT
STOCK AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Consultant
Stock outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be Consultant
Stock in accordance with the definition of Consultant Stock set forth in Section
14 hereof.
12. Participation Rights.
--------------------
(a) If the Bain Stockholders or the Bear Stearns Stockholders propose to
enter into any sale to an unaffiliated third party (including Bear Stearns or
its Affiliates in the case of Bain, or Bain or its Affiliates, in the case of
Bear Stearns) pursuant to which such party or parties acquire more than 5% of
any class of capital stock held by the Bain Stockholders or Bear Stearns
Stockholders in any transaction or series of transactions (excluding Public
Sales and transfers and/or distributions to partners of the Bain Stockholders or
the Bear Stearns Stockholders), then the Consultant will be afforded an
opportunity to participate in such transaction on, subject to Section 9, the
same terms and conditions as applicable to the other holders of such class of
capital stock participating in such transaction. If any stockholder other than
the Bain Stockholders or the Bear Stearns Stockholders, as the case may be (each
a "Transferring Stockholder") has elected to participate in such sale, the
------------------------
Transferring Stockholder shall be entitled to sell in the contemplated sale a
number of shares of any class of capital stock equal to the product of (i) the
quotient determined by dividing the percentage of such class of capital stock
owned by the Transferring Stockholder by the aggregate percentage of Common
Stock owned by the stockholders participating in such sale (which in the case of
a sale by Bain Stockholders may include the Bear Stearns Stockholders and which
in the case of a sale by Bear
14
<PAGE>
Stearns Stockholders may include the Bain Stockholders) and (ii) the number of
shares of such class of capital stock to be sold in the contemplated sale. Each
holder of Consultant Stock participating in any such transaction will take all
necessary or desirable actions in connection with the consummation of any such
transaction as requested by the Bain Stockholders including without limitation
executing the applicable purchase agreement.
(b) Notwithstanding the foregoing, in the event that the Bain Stockholders
intend to transfer shares of more than one class of capital stock, each
Transferring Stockholder will not be entitled to participation rights pursuant
to this Section 12 unless such Transferring Stockholder and sells in the
contemplated sale a pro rata portion of shares of all such classes of capital
stock, which portion shall be determined in the manner set forth in Section
12(a).
(c) The Bain Stockholders will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of any
Transferring Stockholders in any contemplated sale, and the Bain Stockholders
will not transfer any class of capital stock to the prospective transferee(s)
unless (i) the prospective transferee(s) agree to allow the participation of the
Transferring Stockholders or (ii) the Bain Stockholders agree to purchase on the
same terms and conditions the number of such class of capital stock from any
Transferring Stockholders which such Transferring Stockholders would have been
entitled to sell pursuant to this Section 12.
13. Transfer. Prior to transferring any Consultant Stock (other than a
--------
Public Sale or an Approved Sale or pursuant to Section 12) to any Person,
Consultant shall cause the prospective transferee to be bound by this Agreement
and to execute and deliver to the Company a counterpart of this Agreement.
14. Definition of Consultant Stock. For all purposes of this Agreement,
------------------------------
Consultant Stock will continue to be Consultant Stock in the hands of any holder
other than Consultant (except for the Company, purchasers pursuant to an
offering registered under the Securities Act or purchasers pursuant to a Rule
144 transaction (other than a Rule 144(k) transaction occurring prior to the
time the Company is a Public Company) and subsequent transferees), and each such
other holder of Consultant Stock will succeed to all rights and obligations
attributable to Consultant as a holder of Consultant Stock hereunder.
Consultant Stock will also include shares of the Company's capital stock issued
with respect to shares of Consultant Stock by way of a stock split, stock
dividend or other recapitalization.
15. Holdback Agreement. Before and after, the effective date of any
------------------
underwritten Public Offering, no holder of Consultant Stock will effect any sale
or distribution of Common Stock during the period designated by the underwriters
managing such underwritten Public Offering with respect to such holder of
Consultant Stock, but in no event shall any such period following the effective
date of any such underwritten Public Offering exceed 180 days.
16. Definitions. The following terms are defined as follows:
-----------
15
<PAGE>
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). It is understood and agreed that any portfolio company in which a
Bain Stockholder or any other Affiliates thereof which is a private equity fund
holds in excess of 30% of the outstanding capital stock is an "Affiliate" of
such Bain Stockholder for purposes of this Agreement and that any portfolio
company in which a Bear Stearns Stockholder or any Affiliate thereof that
invests primarily in equity securities holds in excess of 30% of the outstanding
capital stock is an "Affiliate" of such Bear Stearns Stockholder for purposes of
this Agreement.
"Bain Exit" means (i) a sale of all or substantially all of the
---------
consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates or (ii) the transfer or other disposition of
capital stock to any Person after giving effect to which the Bain Stockholders
and their Affiliates own less than 5% of the outstanding shares of capital stock
of the Company and any capital stock received in connection with an Organic
Change (as hereinafter defined) (in each case, whether by merger, consolidation,
sale of the Company's capital stock or otherwise).
"Bain Sale of the Company" means (i) a sale of all or substantially all of
------------------------
the consolidated assets of the Company to one or more of the Bain Stockholders
or their Affiliates or (ii) the transfer or other disposition to the Bain
Stockholders or their Affiliates of outstanding shares of capital stock of the
Company (in each case, whether by merger, consolidation, sale of the Company's
capital stock or otherwise) such that after giving effect to such transfer the
Bain Stockholders and their Affiliates own all or substantially all of the
outstanding shares of the Company's capital stock (in each case, whether by
merger, consolidation, sale of the Company's capital stock or otherwise).
"Bain Stockholders" means the Persons listed on the signature pages hereto
-----------------
as Bain Stockholders.
"Bear Stearns Stockholders" means the Persons listed on the signature pages
-------------------------
hereto as Bear Stearns Stockholders.
"Board" means the Company's Board of Directors.
-----
"Cause" means (i) the commission of a felony, (ii) the commission of fraud
-----
having an adverse effect on the Company or any of its Subsidiaries or any of
their directors or shareholders, (iii) any material act or omission involving
dishonesty having an adverse effect on the Company or any of its Subsidiaries or
any of their directors or shareholders, (iv) gross negligence or willful
misconduct with respect to the Company or any of its Subsidiaries or substantial
failure to otherwise perform duties as reasonably directed, in any such case
described in this clause (iv), for thirty days after written notice from the
Board and an opportunity to cure.
16
<PAGE>
"Class A Common" means the Company's Class A Common, par value $.01 per
--------------
share.
"Class B Common" means the Company's Class B Common Stock, par value $.01
--------------
per share.
"Class L Common" means the Company's Class L Common Stock, par value $.01
--------------
per share.
"Common Stock" means, collectively, Class A Common, Class B Common Stock,
------------
Class L Common and any other common stock authorized by the Company.
"Consultant Stock" means (i) all shares of Post-Recapitalization Stock and
----------------
(ii) all shares of Common Stock issued with respect to the shares referred to in
clause (i) above by way of stock dividend or stock split in connection with any
conversion, merger, consolidation or recapitalization or other reorganization
affecting the Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time.
"Fair Market Value" of each share of Consultant Stock means the average of
-----------------
the closing prices of the sales of the appropriate class of Common Stock on all
securities exchanges on which such class of Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day such Common Stock is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 4:00 P.M., New York time, or, if on any day such Common Stock is not
quoted in the NASDAQ System, of the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Fair Market Value is being determined and the 20 consecutive business
days prior to such day. If at any time such class of Common Stock is not listed
on any securities exchange or quoted in the NASDAQ System or the over-the-
counter market, the Fair Market Value will be the fair value of such class of
Common Stock determined in good faith by the Board based on such factors as the
members thereof, in the exercise of their business judgment, consider relevant
without taking into account a discount for a minority position or illiquidity
but taking into account whether the Company is a privately held company or a
public company (with it being understood that as of the day immediately
following the date hereof, the Fair Market Value for each share of Class A
Common shall be $0.22 and for each share of Class L Common shall be $18 per
share notwithstanding that the Company is a private company). If the Consultant
in good faith disagrees with such determination, the Board and the Consultant
will negotiate in good faith to agree on such Fair Market Value. If such
agreement is not reached within 30 days after the delivery of the Company
Repurchase Notice, the Initial Repurchase Notice or the Supplemental Repurchase
Notice, Fair Market Value shall be determined by an independent and unaffiliated
appraiser (which shall be one of Valuation Research, BT Alex Brown, Broadview
Associates or Morgan Stanley) selected by the Board, which appraiser shall be
instructed to submit to the Board and the Consultant a report within 30 days of
its engagement setting forth such determination. The first $7,000 of the
expenses of such appraiser shall be borne by the Consultant (and the remainder
shall be borne by the Company) unless the appraiser's valuation is at least 25%
17
<PAGE>
greater than the amount determined by the Board, in which case, the costs of the
appraiser shall be borne by the Company. In the absence of manifest error, the
determination of such appraiser shall be final and binding upon all parties.
Notwithstanding the foregoing, to the extent that the Company has determined
Fair Market Value through an independent and unaffiliated appraiser at any time
within the six month period prior to Consultant's Termination Date, the Fair
Market Value set forth in such appraisal shall conclusively be deemed to be
"Fair Market Value" hereunder and shall be binding upon all parties hereto,
unless the Board, in its good faith discretion determines that acquisitions,
divestitures or other material events consummated during such six-month period
affect the valuation set forth in such appraisal.
"Family Group" means a Participant's spouse and descendants of Participant
------------
or his or her parents (whether natural or adopted) and any trust solely for the
benefit of such Participant and/or such Participant's spouse and/or descendants
(natural or adopted) of Participant or his or her parents and any corporation,
limited liability company, partnership or other entity the equity holders of
which solely include such Participant, his or her spouse or descendants (natural
or adopted) or any trust for the benefit of such Participant, his or her spouse
or descendants (natural or adopted).
"Independent Third Party" means any Person who, immediately prior to the
-----------------------
contemplated transaction, does not own in excess of 5% of the Common Stock on a
fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock.
"Organic Change" means any recapitalization, reorganization,
--------------
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Public Company" means a company any of whose securities are registered
--------------
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Sale" means any sale of Common Stock to the public pursuant to an
-----------
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 (other than Rule
144(k) prior to the time the Company is a Public Company) adopted under the
Securities Act.
"Qualified Initial Public Offering" means the initial sale by the Company
---------------------------------
of any class or classes of the Common Stock in an offering registered under the
Securities Act of 1933, as amended from time to time, other than an offering
made solely in connection with a business acquisition or
18
<PAGE>
combination or an employee benefit plan, but only if the aggregate gross
proceeds received by the Company and/or its stockholders in such initial sale or
series of such sales in the aggregate are in excess of $50 million.
"Repurchase Date" means the date that Consultant directly or indirectly,
---------------
either for himself or for any other person, partnership, corporation or company,
(i) owns, manages, controls, participates in, consults with, renders services
for, permits his name to be used or in any other manner engages in any business
or enterprise which manufactures, designs, produces or sells products which
compete with products that the Company or any of its Subsidiaries currently
produces or is in the process of developing anywhere in the world where the
Company or any of its Subsidiaries currently conducts its business, (ii) induces
or attempts to induce any employee of the Company or any Subsidiary to leave the
employ of the Company or such Subsidiary (other than by mass advertising to the
general public, including by newspaper or internet, but not including any
solicitation by phone), (iii) hires or employs any person who was an employee of
the Company or any Subsidiary at any time during the Consulting Period to
perform services described in (i) above, or (iv) calls on, solicits, or services
any customer, supplier, licensee, licensor or other business relation or
prospective client of the Company or any of its Subsidiaries with respect to
products and/or services that have been provided by the Company or any of its
Subsidiaries, are currently being provided by the Company or any of its
Subsidiaries or which the Company or any of its Subsidiaries is currently in the
process of developing, (v) induces or attempts to induce any customer, supplier,
licensee, licensor or other business relation of the Company or any of its
Subsidiaries to cease doing business with the Company or such Subsidiary. For
purposes of this Agreement, the term "participate" includes any direct or
indirect interest in any enterprise, whether as an officer, director, employee,
partner, sole proprietor, agent, representative, independent contractor,
consultant, franchisor, franchisee, creditor, owner or otherwise; provided that
--------
the activities referred to in this paragraph shall not include passive ownership
of less than 2% of the stock of a publicly-held corporation whose stock is
traded on a national securities exchange or automated quotation system or in the
over-the-counter market, serving on the Board of Directors of any organization
that does not compete with the Company or its subsidiaries or providing services
to U.S. Publications, Inc. so long as it does not compete with the Company or
its Subsidiaries.
"Sale of the Company" means (i) a Bain Sale of the Company, or (ii) an
-------------------
Unaffiliated Sale of the Company.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For
19
<PAGE>
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association or
other business entity if such Person or Persons shall be allocated a majority of
partnership, limited liability company, association or other business entity
gains or losses or shall be or control the managing director, managing member,
manager or a general partner of such partnership, limited liability company,
association or other business entity.
"Unaffiliated Sale of the Company" means (i) a sale of all or substantially
--------------------------------
all of the consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates, or (ii) the transfer or other disposition to
any Person other than the Bain Stockholders or their Affiliates of more than 50%
of the outstanding shares of capital stock of the Company (in each case, whether
by merger, consolidation, sale of the Company's capital stock or otherwise).
"Valuation Date" shall mean (i) with respect to any Repurchase Option, the
--------------
date, if any, that the Company delivers a Repurchase Notice to a holder of
Consultant Stock or (ii) with respect to any Put Right, the date, if any, that
the holder(s) of Consultant Stock deliver a Put Notice to the Company.
17. Notices. Any notice provided for in this Agreement must be in writing
-------
and must be personally delivered, received by certified mail, return receipt
requested, or sent by guaranteed overnight delivery service, to the Investors at
the addresses indicated in the Company's records and to the other recipients at
the address indicated below:
20
<PAGE>
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: President
With copies to:
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
ICST Acquisition Corp.
c/o Bear, Stearns & Co. Inc.
New York, NY 10167
Attn: John D. Howard
Bodil M. Arlander
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey Hammes, P.C.
Jeffrey Seifman
and
Kirkland & Ellis
21
<PAGE>
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
To Consultant:
at Consultant's last address
on the records of the Company
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
18. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
19. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
Without limiting the foregoing, all executive stock and stock option agreements
between the Company and Consultant which existed immediately prior to the Merger
are hereby canceled and terminated.
20. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
21. Successors and Assigns; Transfer. This Agreement is intended to bind
--------------------------------
and inure to the benefit of and be enforceable by Consultant and the Company and
their respective successors, heirs and assigns, provided that Consultant may not
assign any of his rights or obligations, except as expressly provided by the
terms of this Agreement. Prior to transferring any shares of Consultant Stock
(other than in a Public Sale or any Approved Sale) to any person or entity,
Consultant will cause the prospective transferee to execute and deliver to the
Company an agreement containing the rights and restrictions set forth herein
with respect to such shares of Consultant Stock.
22
<PAGE>
22. Governing Law. The corporate law of the Commonwealth of Pennsylvania
-------------
will govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the law of any jurisdiction other than the Commonwealth of
Pennsylvania.
23. Remedies. The parties hereto acknowledge and agree that money damages
--------
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party hereto will have the right to injunctive relief, in addition
to all of its other rights and remedies at law or in equity, to enforce the
provisions of this Agreement.
24. Effect of Transfers in Violation of Agreement. The Company will not
----------------------------------------------
be required (a) to transfer on its books any shares of Consultant Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Consultant Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Consultant Stock have been transferred in violation of this
Agreement.
25. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company (with
approval of the Board) and Consultant; provided that Sections 1, 2, 3, 4, 8, 12,
-------- ----
27 and 31 are for the express benefit of the Bain Stockholders and/or the Bear
Stearns Stockholders and there shall be no amendment to (or other amendment
which has the effect of amending) any of Sections 1, 2, 3, 4, 8, 12, 27 or 31 or
this Section 25 in a manner adverse to the Bain Stockholders without first
obtaining the written consent of the Bain Stockholders or in a manner adverse to
the Bear Stearns Stockholders without first obtaining the written consent of the
Bear Stearns Stockholders, as applicable.
26. Expenses. The Company agrees to pay, and hold Consultant harmless
--------
against liability for the payment of his reasonable fees and expenses arising in
connection with the preparation and execution of this Agreement and the other
agreements, documents and instruments contemplated hereby and thereby, and the
consummation of the transactions contemplated hereby and thereby.
27. Rights Granted to the Bain Stockholders, the Bear Stearns Stockholders
----------------------------------------------------------------------
and their Affiliates. Any rights granted to the Bain Stockholders, the Bear
- --------------------
Stearns Stockholders and their Affiliates hereunder may also be exercised (in
whole or in part) by their designees (which may be Affiliates).
28. Offset. Whenever the Company or any of its Subsidiaries is to pay any
------
sum to Consultant or any Affiliate or related person thereof, any amounts that
such Consultant or such Affiliate or related person owes to the Company or any
of its Subsidiaries may be deducted from that sum before payment.
23
<PAGE>
29. Further Assurances. Consultant shall execute and deliver all
------------------
documents, provide all information, and take or refrain from taking such actions
as may be necessary or appropriate to achieve the proposes of this Agreement.
In addition, in connection with any Sale of the Company structured to achieve
pooling of interest accounting treatment, Consultant will take such actions
reasonably requested by the Board as are necessary to achieve and maintain
pooling of interest accounting treatment.
30. Deemed Transfer of Consultant Stock. If the Bain Stockholders, the
-----------------------------------
Bear Stearns Stockholders and/or the Company shall make available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Consultant Stock to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such shares shall be
deemed purchased in accordance with the applicable provisions hereof and the
Bain Stockholders, the Bear Stearns Stockholders and the Company, as the case
may be, shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
31. Certain Transactions with Bain. Following the date of the consummation
------------------------------
of the Merger, (i) the Company will not effect a Sale of the Company to a
portfolio company of the Bain Stockholders, and (ii) the Company will not, and
the Company will not permit any Subsidiary to, agree to consummate (or
consummate) any non-material transaction other than on an arms-length basis or
otherwise enter into or consummate any material transaction whether or not on an
arms-length basis, with the Bain Stockholders or their Affiliates other than
pursuant to agreements entered on or prior to the date hereof or agreed upon by
the Non-Bain Directors, in each case unless such transaction has been approved
by the Non-Bain Directors (which for purposes of this Section 31 shall include
the approval of any director appointed by the Bear Stearns Stockholders pursuant
to the Voting Agreement).
32. Construction. References herein to this Agreement or any other
------------
agreement shall be a reference to such agreement, as amended, modified,
supplemented or waived from time to time.
* * * * *
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Consultant Stock
Agreement on the day and year first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
------------------------------------
Name: Hock E. Tan
Its: President
/s/ Henry I. Boreen
----------------------------------------
Henry I. Boreen
[Signature Page to Consultant Stock Agreement]
<PAGE>
with respect to paragraphs 1, 2, 3, 4, 8, 12,
---------------------------------------------
25, 27 and 31 only:
-------------------
BAIN STOCKHOLDERS:
-----------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
------------------------------------
Name: Michael Krupka
Its: Managing Director
BCIP TRUST ASSOCIATES II
By: /s/ Michael Krupka
------------------------------------
[Signature Page to Consultant Stock Agreement]
<PAGE>
with respect to paragraphs 1, 2, 3, 4, 8, 12,
---------------------------------------------
25, 27 and 31 only:
-------------------
BAIN STOCKHOLDERS:
-----------------
BCIP TRUST ASSOCIATES II-B
By: /s/ Michael Krupka
------------------------------------
BCIP ASSOCIATES II
By: /s/ Michael Krupka
------------------------------------
BCIP ASSOCIATES II-B
By: /s/ Michael Krupka
------------------------------------
[Signature Page to Consultant Stock Agreement]
<PAGE>
with respect to paragraphs 1, 2, 3, 4, 8, 12,
---------------------------------------------
25, 27 and 31 only:
-------------------
BAIN STOCKHOLDERS:
-----------------
BCIP ASSOCIATES II-C
By: /s/ Michael Krupka
-------------------------------
PEP INVESTMENTS PTY LTD.
By: /s/ Michael Krupka
-------------------------------
[Signature Page to Consultant Stock Agreement]
<PAGE>
with respect to paragraphs 1, 2, 3, 4, 8, 12,
---------------------------------------------
25, 27 and 31 only:
-------------------
BAIN STOCKHOLDERS:
-----------------
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Seifman
------------------------------
Its: ______________________________
RANDOLPH STREET PARTNERS 1998 DIF, L.L.C.
By: /s/ Jeffrey Seifman
------------------------------
Its: ______________________________
[Signature Page to Consultant Stock Agreement]
<PAGE>
with respect to paragraphs 1, 2, 3, 4, 8, 12,
---------------------------------------------
25, 27 and 31 only:
-------------------
BEAR STEARNS STOCKHOLDERS:
-------------------------
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
------------------------------
Its: ______________________________
[Signature Page to Consultant Stock Agreement]
<PAGE>
EXHIBIT 10.14
REGISTRATION AGREEMENT
----------------------
THIS REGISTRATION AGREEMENT (this "Agreement") is made and entered
---------
into as of May 11, 1999, by and among Integrated Circuit Systems, Inc., a
Pennsylvania corporation (the "Company"), each of the Persons listed on
-------
Schedules I and II attached hereto or certain designees thereof that execute a
counterpart to this Agreement (the "Investment Stockholders"), each of the
-----------------------
Persons listed on Schedule III attached hereto (the "Executive Stockholders")
----------------------
and the Persons listed on Schedule IV hereto (the "Other Stockholders") (the
------------------
Investment Stockholders, the Executive Stockholders and the Other Stockholders
are collectively referred to herein as the "Stockholders," and each as a
------------
"Stockholder").
-----------
The Company and ICS Merger Corp., a Pennsylvania corporation, are
parties to an Agreement and Plan of Merger dated as of January 20, 1999 (as
amended, the "Merger Agreement"). In connection with the Merger Agreement, the
----------------
Company has agreed to provide the registration rights set forth in this
Agreement. Unless otherwise provided in this Agreement, capitalized terms used
herein shall have the meanings set forth in paragraph 9 hereof.
The parties hereto, intending to be legally bound, hereby agree as
follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time after the date hereof and
-------------------------
prior to an IPO, the holders of a majority of the Class A Common may request,
and at any time after an IPO each of the holders of a majority of the Bain
Registrable Securities or, subject to the limitations set forth in Sections 1(b)
and 1(c) hereof, the holders of a majority of the Bear Stearns Registrable
Securities may request a registration under the Securities Act of all or part of
their Registrable Securities on Form S-1 or any similar long-form registration
("Long-Form Registrations") or, if available, on Form S-2 or S-3 (including
-----------------------
pursuant to Rule 415 under the Securities Act) or any similar short-form
registration ("Short-Form Registrations"). Each request for a Demand
------------------------
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten (10) days after receipt of any such request, the Company
will give written notice of such requested registration to all other holders of
Registrable Securities and, subject to paragraph 1(d) below, will include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within fifteen (15) days
after the receipt of the Company's notice. All registrations requested pursuant
to this paragraph 1(a) are referred to herein as "Demand Registrations." Subject
--------------------
to the penultimate sentence of paragraph 1(b) hereof, notwithstanding anything
to the contrary contained in this Agreement, the holders of Bear Stearns
Registrable Securities shall only be entitled to request one Long-Form
Registration or one Short-Form Registration.
(b) Long-Form Registrations. The holders of Bain Registrable
-----------------------
Securities will be entitled to request (i) three Long-Form Registrations in
which the Company will pay all Registration
<PAGE>
Expenses and (ii) any other number of Long-Form Registrations in which
Registration Expenses will be paid in accordance with Section 5(c) hereof. If,
------------
and only if, holders of Bain Registrable Securities have not sold Registrable
Securities pursuant to a Demand Registration within eighteen months of an IPO or
within any consecutive twelve month period thereafter and the aggregate fair
market value of Bear Stearns Registrable Securities at the time of such request
exceeds $5,000,000, subject to the last sentence of Section 1(a), the holders of
Bear Stearns Registrable Securities will be entitled to request one Long-Form
Registration (and the Company will pay all Registration Expenses in connection
therewith). A registration shall not count as one of the permitted Long-Form
Registrations until it has become effective and the holders of Registrable
Securities initially requesting the Long-Form Registration are able to register
and sell at least 95% of the Registrable Securities requested to be included in
such registration by such holders; provided that in any event the Company will
--------
pay all Registration Expenses in connection with any registration initiated as a
Long-Form Registration whether or not it has become effective and whether or not
such registration has counted as one of the permitted Long-Form Registrations.
All Long-Form Registrations shall be underwritten registrations unless otherwise
agreed to by the holders of a majority of the Bain Registrable Securities.
(c) Short-Form Registrations. In addition to the Long-Form
------------------------
Registrations provided pursuant to Section 1(b), holders of Bain Registrable
------------
Securities will be entitled to request unlimited Short-Form Registrations in
which the Company will pay all Registration Expenses. If, and only if, holders
of Bain Registrable Securities have not sold Registrable Securities pursuant to
a Demand Registration within eighteen months of an IPO or within any consecutive
twelve month period thereafter and the aggregate fair market value of Bear
Stearns Registrable Securities at the time of such request exceeds $5,000,000,
subject to the last sentence of Section 1(a), the holders of Bear Stearns
Registrable Securities will be entitled to request one Short-Form Registration
(and the Company will pay all Registration Expenses in connection therewith).
Notwithstanding anything contained herein to the contrary, Demand Registrations
will be Short-Form Registrations whenever the Company is permitted to use any
applicable short form. After the Company has become subject to the reporting
requirements of the Securities Exchange Act, the Company will use its best
efforts to make Short-Form Registrations available for the sale of Registrable
Securities.
(d) Priority on Demand Registrations. The Company will not include in
--------------------------------
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the Bain
Registrable Securities or, in the case where the holders of Bear Stearns
Registrable Securities have requested the Demand Registration pursuant to
Section 1, the holders of a majority of Bear Stearns Registrable Securities. If
a Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing (with a copy to each party hereto requesting
registration of Registrable Securities) that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities requested
to be included in such offering exceeds the number of Registrable Securities and
other securities, if any, which can be sold therein without adversely affecting
the marketability of the offering, the Company will include in such registration
prior to the inclusion of any securities which are not Registrable Securities
the number of Registrable Securities requested to be included which in the
opinion of such underwriters can be sold without adversely affecting the
marketability of the offering, first pro rata among the respective holders of
the Registrable Securities on the basis of the amount of Registrable
-2-
<PAGE>
Securities owned by each such holder and then, to the extent that any securities
which are not Registrable Securities can still be included, pro rata among the
respective holders thereof on the basis of the amount of such securities owned
by each such holder. Any Persons other than holders of Registrable Securities
who participate in Demand Registrations which are not at the Company's expense,
if any, must pay their share of the Registration Expenses as provided in Section
-------
5 hereof.
- -
(e) Restrictions on Demand Registrations. The Company will not be
------------------------------------
obligated to effect any Demand Registration after the effective date of a
previous Demand Registration to the extent a LockUp Period (as herein after
defined) is in effect. The Company may postpone for up to six months (from the
date of the request) the filing or the effectiveness of a registration statement
for a Demand Registration if the Company and the holders of at least a majority
of the Bain Registrable Securities or, in the case where the holders of Bear
Stearns Registrable Securities have requested the Demand Registration pursuant
to Section 1, the holders of a majority of Bear Stearns Registrable Securities,
agree that such Demand Registration would reasonably be expected to have an
adverse effect on any financing, acquisition, corporate reorganization, or other
material transaction or development involving the Company or any of its
Subsidiaries or affiliates; provided that in such event, the holders of a
--------
majority of Registrable Securities requesting such Demand Registration will be
entitled to withdraw such request and, if such request is withdrawn, the Company
will pay all Registration Expenses in connection with such registration.
(f) Restrictions on Executive Securities. If the underwriter in an
------------------------------------
underwritten Demand Registration advises the holders of Registrable Securities
that inclusion of Executive Stockholder Registrable Securities in such Demand
Registration could materially and adversely affect such offering, the Bain
Stockholders and the Company's chief executive officer, on behalf of the
Executive Stockholders, shall negotiate in good faith with the underwriter
selected pursuant to Section 1(g) hereof to reach an agreement with the
------------
underwriter with respect to the number of Executive Stockholder Registrable
Securities to be included in such Demand Registration (with it being understood
that the terms negotiated by the chief executive officer shall be binding and
conclusive upon the holders of Executive Stockholder Registrable Securities).
(g) Selection of Underwriters. The holders of a majority of the Bain
-------------------------
Registrable Securities or, in the case where the holders of Bear Stearns
Registrable Securities have requested the Demand Registration pursuant to
Section 1, the holders of a majority of Bear Stearns Registrable Securities,
will have the right to select the investment banker(s) and manager(s) to
administer the offering.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any
------------------
of its securities (including any proposed registration of the Company's
securities by any third party) under the Securities Act (other than (i) in
connection with the IPO, unless any holders of Registrable Securities are
permitted by the Company and the underwriters to participate in the IPO, (ii)
pursuant to a Demand Registration (which is covered by Section 1) or (iii)
pursuant to a registration on Form S-4 or S-8 or any successor or similar forms)
and the registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), whether or not for sale for
----------------------
its own account, the Company will give prompt written notice to all holders of
Registrable Securities
-3-
<PAGE>
of its intention to effect such a registration and will include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.
(b) Piggyback Expenses. Subject to the qualifications set forth in
------------------
Section 5, the Registration Expenses of the holders of Registrable Securities
- ---------
will be paid by the Company in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second,
----- ------
the Registrable Securities requested to be included in such registration, pro
rata among the holders of such Registrable Securities on the basis of the number
of shares owned by each such holder and (iii) third, other securities requested
-----
to be included in such registration pro rata among the holders of such
securities on the basis of the number of shares owned by each such holder.
(d) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities (other than the parties hereto) who have been granted contractual
demand registration rights, and the managing underwriters advise the Company in
writing (with a copy to each party hereto requesting registration of Registrable
Securities) that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company will include in such registration (i) first, the securities requested to
-----
be included therein by the holders requesting such registration and the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such securities on the basis of the number of shares owned
by each such holder and (ii) second, other securities requested to be included
------
in such registration pro rata among the holders of such securities on the basis
of the amount of such securities owned by each such holder.
(e) Restrictions on Executive Securities. If the underwriter in an
------------------------------------
underwritten Piggyback Registration advises the holders of Registrable
Securities that inclusion of Executive Stockholder Registrable Securities in
such Piggyback Registration could materially and adversely affect such offering,
the Bain Stockholders the Company's chief executive officer, on behalf of the
and Executive Stockholders, shall negotiate in good faith with the underwriter
selected pursuant to Section 2(f) hereof to reach an agreement with the
underwriter with respect to the number of Executive Stockholder Registrable
Securities to be included in such Piggyback Registration (with it being
understood that the terms negotiated by the chief executive officer shall be
binding and conclusive upon the holders of Executive Stockholder Registrable
Securities).
-4-
<PAGE>
(f) Selection of Underwriters. The Board will have the right to
-------------------------
select the investment banker(s) and manager(s) to administer the offering,
subject to the approval of the Bain Stockholders, not to be unreasonably
withheld.
3. Holdback Agreements.
-------------------
(a) Notwithstanding anything else in this Agreement to the contrary
(but subject to the proviso in the last sentence of this paragraph 3(a)), to the
extent not inconsistent with applicable law, each holder of Registrable
Securities agrees not to effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or any securities,
options or rights convertible into or exchangeable or exercisable for such
securities during the period (the "LockUp Period") that is agreed to with
-------------
respect to such holder by the underwriter managing the registered public
offering and the Company, with the consent of the holders of a majority of the
Bain Registrable Securities (in the case of a Piggyback Registration) or the
underwriter managing the registered public offering and the holders of a
majority of the Bain Registrable Securities included in such registration (in
the case of a Demand Registration); provided that the LockUp Period shall not be
more restrictive upon the holders of Bear Stearns Registrable Securities than
upon the holders of Bain Registrable Securities. The LockUp Period may include a
period before and a period after the effective date of any (i) underwritten
Demand Registration (except as part of such underwritten registration), or (ii)
underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to registrations of Form S-4 or Form S-8 or any
successor form); provided that the LockUp Period shall in no event exceed the
180-day period following such registration.
(b) The Company (i) agrees not to effect any public sale or
distribution of its equity securities, or any securities, options or rights
convertible into or exchangeable or exercisable for such securities, during the
LockUp Period imposed by holders of Bain Registrable Securities and (ii) agrees
to reasonable best efforts to cause, to the extent not inconsistent with
applicable law, each holder of its equity securities, or any securities, options
or rights convertible into or exchangeable or exercisable for equity securities
purchased from the Company at any time after the date of this Agreement that
holds more than 1% of the Company's common equity securities on fully diluted
basis (other than in a registered public offering) to agree not to effect any
public sale or distribution (including sales pursuant to Rule 144) of any such
securities during the LockUp Period with respect to such holder.
4. Registration Procedures. Whenever the holders of Registrable
-----------------------
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Securities and Exchange Commission a registration statement with respect to such
Registrable Securities and thereafter use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration
-5-
<PAGE>
statement or prospectus or any amendments or supplements thereto, the Company
will furnish to the counsel selected by the holders of a majority of the Bain
Registrable Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to review of
such counsel);
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of either (i) not less than six months (subject
to extension pursuant to paragraph 7(b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph (d), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
-6-
<PAGE>
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system;
(g) provide a transfer agent and registrar for all Registrable
Securities and a CUSIP number for all Registrable Securities not later than the
effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement and assist
and, at the request of any participating underwriter, cause such officers or
directors to participate in presentations to prospective purchasers;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or
-7-
<PAGE>
authorities as may be necessary to enable the sellers thereof to consummate the
disposition of such Registrable Securities.
(n) obtain one or more comfort letters, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), from the Company's independent public accountants in customary form
and covering such matters of the type customarily covered by comfort letters as
the holders of a majority of the Registrable Securities being sold reasonably
request (provided that such Registrable Securities constitute at least 10% of
the securities covered by such registration statement); and
(o) provide a legal opinion of the Company's outside counsel, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature.
(p) use reasonable efforts to cause certificates for the Registrable
Securities covered by such registration statement to be delivered by the holders
thereof to the underwriters in such denominations and registered in such names
as the underwriters may request.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
5. Registration Expenses.
---------------------
(a) Subject to Section 5(b) below, all expenses incident to the
------------
Company's performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, travel expenses, filing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne by the Company, except as otherwise
----------------------
expressly provided in the last sentence of Section 1(d) of this Agreement,
------------
except that the Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
the NASD automated quotation system (or any successor or similar system).
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the holders of Registrable Securities
covered by such
-8-
<PAGE>
registration for the fees and disbursements (other than underwriting
commissions) incurred in connection with such Demand or Piggyback Registration
(but only the fees and expenses of one counsel (in addition to local counsel),
one accounting firm, one valuation expert and other professionals retained on
their own behalf by the holders of a majority of the Bain Registrable Securities
included in such registration or, in the case where the holders of Bear Stearns
Registrable Securities have requested the Demand Registration pursuant to
Section 1, the holders of a majority of Bear Stearns Registrable Securities) and
for the reasonable fees and disbursements of each additional counsel retained by
any holder of Registrable Securities for the purpose of rendering a legal
opinion on behalf of such holder in connection with any underwritten Demand
Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
will be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered
for each seller.
6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless, to the full
extent permitted by law, each holder of Registrable Securities, its officers,
directors, agents and employees and each Person who controls such holder (within
the meaning of the Securities Act) against any losses, claims, damages,
liabilities, joint or several, together with reasonable costs and expenses
(including reasonable attorney's fees) to which such holder or any such director
or officer or controlling Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of material fact
contained (A) in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or (B) in any
application or other document or communication (in this paragraph 6 collectively
called an "application") executed by or on behalf of the Company or based upon
-----------
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify any securities covered by such registration
statement under the "blue sky" or securities laws thereof, or (ii) any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer and controlling Person for
any legal or any other expenses incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company will not be liable in any such case to the
--------
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement, or omission or alleged omission, made in such
registration statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, or in any application, in reliance upon, and in
conformity with, written information prepared and furnished to the Company by
such holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
-9-
<PAGE>
offering, the Company will indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the full extent permitted by law, will indemnify and hold
harmless the Company, its directors, officers, agents and employees and each
other Person who controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities, severally together with
reasonable costs and expenses (including reasonable attorney's fees), to which
such holder, the Company or any such director, officer, agent, employee or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or in any application or (ii) any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is made in such registration statement,
any such prospectus or preliminary prospectus or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information prepared and furnished to the Company by such holder expressly for
use therein, and such holder will reimburse the Company and each such director,
officer and controlling Person for any legal or any other expenses incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the obligation to indemnify will
--------
be individual to each holder and will be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
-10-
<PAGE>
(d) The indemnifying party shall not, except with the approval of
each indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to each indemnified party of a release from all
liability in respect to such claim or litigation without any payment or
consideration provided by such indemnified party.
(e) If the indemnification provided for in this Paragraph 6 is
unavailable to or is insufficient to hold harmless an indemnified party under
the provisions above in respect to any losses, claims, damages or liabilities
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect not
only the relative benefits received by the Company on the one hand and the
sellers of Registrable Securities and any other sellers participating in the
registration statement on the other from the sale of Registrable Securities
pursuant to the registered offering of securities as to which indemnity is
sought but also the relative fault of the indemnified party and the indemnifying
party as well as any other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other in connection with the
registration statement or in connection with the statement or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) to the Company bear to the total net proceeds from the
offering (before deducting expenses) to the sellers of Registrable Securities
and any other sellers participating in the registration statement. The relative
fault of the Company on the one hand and of the sellers of Registrable
Securities and any other sellers participating in the registration statement on
the other shall be determined by reference to, among other things, whether the
untrue or alleged omission to state a material fact relates to information
supplied by the Company or by the sellers of Registrable Securities or other
sellers participating in the registration statement and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the sellers of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Paragraph 6
were determined by pro rata allocation (even if the sellers of Registrable
Securities were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Paragraph 6, no seller of Registrable Securities shall be
required to contribute any amount in excess of the net proceeds received by such
Seller from the sale of Registrable Securities covered by the registration
statement
-11-
<PAGE>
filed pursuant hereto. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnification and contribution by any such party provided
for under this Agreement shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant to
law or contract and will remain in full force and effect regardless of any
investigation made or omitted by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and will
survive the transfer of securities.
7. Participation in Underwritten Registrations.
-------------------------------------------
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of Registrable
Securities will be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; provided that no
--------
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except (x) to the extent the holders of a majority of Bain Registrable
Securities are doing so or (y) as otherwise provided in Section 6 hereof.
---------
(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph 4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such paragraph 4(e). If
the Company gives any such notice, the applicable time period mentioned in
paragraph 4(b) during which a Registration Statement is to remain effective will
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to this paragraph to and including the
date when each seller of a Registrable Security covered by such registration
statement has received the copies of the supplemented or amended prospectus
contemplated by paragraph 4(e).
8. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will take such
-12-
<PAGE>
further action as any holder or holders of Registrable Securities may reasonably
request, all to the extent required to enable such holders to sell Registrable
Securities pursuant to Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission.
9. Definitions.
-----------
"Bain Registrable Securities" means (i) any shares of Common Stock
---------------------------
issued to the Bain Stockholders pursuant to the Merger Agreement, (ii) any other
shares of Common Stock held by affiliates of the Bain Stockholders and (iii) any
shares of Common Stock issued or issuable directly or indirectly with respect to
the securities referred to in clauses (i) or (ii) by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, including a recapitalization or
exchange; provided that in the event that pursuant to such recapitalization or
--------
exchange, equity securities are issued which do not participate in the residual
equity of the Company ("Non-Participating Securities"), such Non-Participating
----------------------------
Securities will not be Registrable Securities.
"Bain Stockholders" means the Persons listed on Schedule I hereto.
-----------------
"Bear Stearns Registrable Securities" means (i) any shares of Common
-----------------------------------
Stock issued to the Bear Stearns Stockholders pursuant to the Merger Agreement,
(ii) any other shares of Common Stock held by affiliates of the Bear Stearns
Stockholders; and (iii) any shares of Common Stock issued or issuable directly
or indirectly with respect to the securities referred to in clauses (i) or (ii)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
including a recapitalization or exchange; provided that in the event that
--------
pursuant to such recapitalization or exchange, Non-Participating Securities are
issued, such Non-Participating Securities will not be Registrable Securities.
"Bear Stearns Stockholders" means the Persons listed on Schedule II
-------------------------
hereto.
"Class A Common" means the Class A Common Stock, par value $.01 per
--------------
share, of the Company.
"Class L Common" means the Class L Common Stock, par value $.01 per
--------------
share, of the Company.
"Common Stock" means, collectively, the Class L Common, the Class B
------------
Common and Class A Common.
"Executive Stock Agreements" means the Executive Stock Agreements,
--------------------------
dated as of the date hereof, by and among the Company and the Persons listed on
Schedule III.
-13-
<PAGE>
"Executive Stockholder Registrable Securities" means (i) any shares of
--------------------------------------------
Common Stock acquired or retained by the Executive Stockholders pursuant to the
Executive Stock Agreements, and (ii) any equity securities issued or issuable
directly or indirectly with respect to the securities referred to in clause (i)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
including a recapitalization or exchange; provided that in the event that
--------
pursuant to such recapitalization or exchange, Non-Participating Securities are
issued, such Non-Participating Securities will not be Registrable Securities;
and provided that "Executive Stockholder Registrable Securities" shall not
--------
include any securities of the Company that are subject to vesting to the extent
that such securities have not vested or which the holder thereof has agreed with
the Company not to transfer in an underwritten public offering of securities (it
being understood that shares issuable pursuant to the Executive Stock and Option
Agreements executed on the date hereof are not subject to vesting).
"Group" means each of the Bain Stockholders, the Bear Stearns
-----
Stockholders, the Executive Stockholders and the holders of Other Registrable
Securities.
"IPO" means the initial sale of Common Stock to the public pursuant to
---
an underwritten offering registered under the Securities Act.
"Other Registrable Securities" means any shares of Common Stock held
----------------------------
by Other Stockholders or other Persons that are a party to this Agreement that
are of the same class and type as Bain Registrable Securities but that do not
constitute Bain Registrable Securities, Bear Stearns Registrable Securities or
Executive Registrable Securities.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a limited liability company, a trust, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Registrable Securities" means collectively the Bain Registrable
----------------------
Securities, Bear Stearns Registrable Securities, Executive Stockholder
Registrable Securities and Other Registrable Securities. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected, and, except
as set forth in the definition of "Executive Stockholder Registrable
Securities", such Person shall be entitled to exercise the rights of a holder of
Registrable Securities hereunder. As to any particular shares constituting
Registrable Securities, such shares will cease to be Registrable Securities when
they have been (x) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, or (y) sold to
the public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
-14-
<PAGE>
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
the date hereof, by and among the Company and the Persons listed on Schedules I
and II.
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Merger Agreement.
10. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement; provided however that the provisions in this Agreement are subject
--------
to the restrictions on transfer contained in the Stockholders Agreement and the
Executive Stock Agreements.
(b) Adjustments Affecting Registrable Securities. The Company will
--------------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. The parties hereto agree and acknowledge that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, no
----------------------
modification, amendment, or waiver of any provision of this Agreement shall be
effective against the Company or the holders of Registrable Securities unless
such modification, amendment, or waiver is approved in writing by the Company,
and the holders of at least a majority of the Bain Registrable Securities then
in existence; provided that no such amendment or modification (or any other
--------
action that has the effect of amending or modifying any provision hereof) that
would adversely affect holders of one class of Registrable Securities or Group
in a manner different than holders of any other class of Registrable Securities
or Group (other than amendments and modifications required to implement the
provisions of Section 10(e)), shall be effective against the holders of such
-------------
class or group of Registrable Securities without the prior written consent of
holders of at least a majority of Registrable Securities of such class or Group
adversely affected thereby; provided further that any such amendment or
-------- -------
modification or other action which has the effect of amending or modifying any
provision hereof in a manner that is adversely different to the holders of the
Bear
-15-
<PAGE>
Stearns Registrable Securities, or otherwise reducing or diminishing any rights
that are applicable to the holders of Bear Stearns Registrable Securities
without reducing or diminishing the same rights applicable to the holders of
Bain Registrable Securities in the same manner, shall require the consent of the
holders of a majority of the Bear Stearns Registrable Securities (it being
understood that the issuance or creation of new or additional Registrable
Securities, or new or additional equity securities of the Company which will
constitute Registrable Securities, in each case or the addition of new parties
to this Agreement in accordance with this Agreement, shall not be deemed to
alter such rights). No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
(e) Additional Parties. The Board of Directors of the Company shall
------------------
be entitled, but not obligated, with the consent of Person(s) holding at least a
majority of the Bain Registrable Securities, to allow any purchaser of equity
securities (or securities or rights convertible or exercisable into equity
securities), of the same type and class of the Registrable Securities, to
execute a counterpart to this Agreement and become a party hereto (each, an
"Additional Party"), in which case the equity securities issued or issuable to
----------------
any such Additional Party shall be deemed a holder of "Executive Stockholder
Registrable Securities," "Bain Registrable Securities", "Bear Stearns
Registrable Securities" or "Other Registrable Securities", as the case may be,
in accordance with the definitions thereof; provided, however, that if allowing
-------- -------
such Person to become an Additional Party shall adversely affect any Group in a
manner adversely different than any other Group, no such Person shall become an
Additional Party without the prior written consent of such Group adversely
affected thereby (with it being understood that if the admission of an
Additional Party is adversely different to the holders of Bear Stearns
Registrable Securities or otherwise reduces or diminishes any rights applicable
to the holders of Bear Stearns Registrable Securities without reducing or
diminishing the same rights applicable to the holders of Bain Registrable
Securities in the same manner, such admission shall require the consent of the
holders of a majority of the Bear Stearns Registrable Securities). Except as set
forth in this Section 10(e) and in Section 1(h), the Company will not grant to
------------- ------------
any other Persons any registration rights.
(f) Successors and Assigns. All covenants and agreements in this
----------------------
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not and in accordance with the definitions of Bain
Registrable Securities, Bear Stearns Registrable Securities, Executive
Stockholder Registrable Securities and Other Registrable Securities. In
addition, whether or not any express assignment has been made, the provisions of
this Agreement which are for the benefit of the purchasers or holders of any
type of Registrable Securities are, except as otherwise described herein, also
for the benefit of, and enforceable by, any subsequent holder of Registrable
Securities. Notwithstanding the foregoing, in order to obtain the benefit of
this Agreement, any subsequent holder of Registrable Securities must execute a
counterpart to this Agreement, thereby agreeing to be bound by the terms hereof.
(g) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of
-16-
<PAGE>
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or the
effectiveness or validity of any provision in any other jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
(h) Counterparts. This Agreement may be executed simultaneously in
------------
two or two or more counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together will
constitute one and the same Agreement.
(i) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
(j) Governing Law. The corporate law of the Commonwealth of
-------------
Pennsylvania shall govern all questions concerning the relative rights of the
Company and its stockholders. All other issues concerning the enforceability,
validity and binding effect of this Agreement will be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
Commonwealth of Pennsylvania or any other jurisdiction) that would cause the
application of the law of any jurisdiction other than the Commonwealth of
Pennsylvania.
(k) Construction. References herein to this Agreement and any other
------------
agreement shall be references to such agreement, as amended, modified,
supplemented or waived from time to time.
(l) Notices. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or one day after being
sent by a reputable overnight courier service. Such notices, demands and other
communications will be sent to the Stockholders at the addresses indicated in
the Company's records and to the Company at the address indicated below:
-17-
<PAGE>
To the Company:
--------------
Integrated Circuit Systems
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chairman of the Board
With copies to:
--------------
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: David Dominik
Michael Krupka
Yoo Jin Kim
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
and to:
------
ICST Acquisition Corp.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 20/th/ Floor
New York, New York 10167
Attn: John Howard
Bodil M. Arlander
and to:
------
Kirkland & Ellis
-18-
<PAGE>
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Agreement
on the day and year first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
----------------------------
Name: Hock E. Tan
Its: Chief Executive Officer
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
----------------------------
Name: Michael Krupka
Its: Managing Director
BCIP TRUST ASSOCIATES II
By: /s/ Michael Krupka
-----------------------------
BCIP TRUST ASSOCIATES II-B
By: /s/ Michael Krupka
----------------------------
BCIP ASSOCIATES II
By: /s/ Michael Krupka
----------------------------
BCIP ASSOCIATES II-B
By: /s/ Michael Krupka
----------------------------
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BCIP ASSOCIATES II-C
By: /s/ Michael Krupka
----------------------------
PEP INVESTMENTS PTY LTD.
By: /s/ Michael Krupka
----------------------------
<PAGE>
BAIN STOCKHOLDERS:
-----------------
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Seifman
----------------------------
Its:
----------------------------
RANDOLPH STREET PARTNERS 1998
DIF, L.L.C.
By: /s/ Jeffrey Seifman
-----------------------------
Its:
-----------------------------
<PAGE>
OTHER STOCKHOLDERS:
------------------
INTEGRATED CIRCUIT SYSTEMS EQUITY INVESTORS,
L.L.C.
By: /s/ Illegible
-----------------------------
Its:
-----------------------------
<PAGE>
BEAR STEARNS STOCKHOLDERS:
-------------------------
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
-----------------------------
Its:
-----------------------------
<PAGE>
EXECUTIVE STOCKHOLDERS:
----------------------
/s/ Henry I. Boreen
----------------------------------
Henry I. Boreen
/s/ Christopher J. Bland
----------------------------------
Christopher J. Bland
/s/ Barry E. Olsen
----------------------------------
Barry E. Olsen
/s/ Hock E. Tan
----------------------------------
Hock E. Tan
/s/ Paul A. Lessard
----------------------------------
Paul A. Lessard
/s/ Alan C. Silfies
----------------------------------
Alan C. Silfies
/s/ Lewis C. Eggebrecht
----------------------------------
Lewis C. Eggebrecht
/s/ Justine F. Lien
----------------------------------
Justine F. Lien
/s/ Ed M. Christiansen
----------------------------------
Ed M. Christiansen
/s/ K. Venkateswaran
----------------------------------
K. Venkateswaran
/s/ Thomas J. Gosse
----------------------------------
Thomas J. Gosse
<PAGE>
/s/ John R. Lucas
----------------------------------
John R. Lucas
/s/ Steven H. Bolger
----------------------------------
Steven H. Bolger
/s/ Dennis K. VanDalsen
----------------------------------
Dennis K. VanDalsen
/s/ Paul W. Self
----------------------------------
Paul W. Self
<PAGE>
Schedule I
----------
Bain Capital Fund VI, L.P.
BCIP Trust Associates II
BCIP Trust Associates II-B
BCIP Associates II
BCIP Associates II-B
BCIP Associates II-C
PEP Investments PTY Ltd.
Randolph Street Partners II
Randolph Street Partners 1998 DIF, L.L.C.
<PAGE>
Schedule II
-----------
ICST Acquisition Corp.
<PAGE>
Schedule III
------------
Henry I. Boreen
Christopher J. Bland
Barry E. Olsen
Hock E. Tan
Paul A. Lessard
Alan C. Silfies
Lewis C. Eggebrecht
Justine F. Lien
Ed M. Christiansen
K. Venkateswaran
Thomas J. Gosse
John R. Lucas
Steven H. Bolger
Dennis K. VanDalsen
Paul W. Self
<PAGE>
Schedule IV
-----------
Integrated Circuit Systems Equity Investors L.L.C.
<PAGE>
EXHIBIT 10.15
INTEGRATED CIRCUIT SYSTEMS, INC.
EXECUTIVE STOCK PURCHASE AGREEMENT
----------------------------------
THIS EXECUTIVE STOCK PURCHASE AGREEMENT (this "Agreement") is made and
---------
entered into as of May 11, 1999 by and between Integrated Circuit Systems, Inc.,
a Pennsylvania corporation (the "Company"), and Hock E. Tan ("Executive").
------- ---------
Executive desires to purchase, and the Company desires to sell, 135,000
shares of the Company's Class A Common and 15,000 shares of the Company's Class
L Common (collectively, the "Executive Stock") pursuant to the terms and
---------------
conditions contained in this Agreement. Capitalized terms used herein and not
otherwise defined are defined in Section 16 hereof.
Certain provisions of this Agreement are intended for the benefit of, and
will be enforceable by, the Bain Stockholders in connection with the merger of
ICS Merger Corp., a Pennsylvania corporation ("ICS"), with and into the Company
---
(the "Merger") pursuant to the terms of an Agreement and Plan of Merger, dated
------
January 20, 1999 (the "Merger Agreement"), between the Company and ICS.
----------------
The parties hereto agree as follows:
1. Purchase and Sale of Common Stock. Upon execution of this Agreement,
---------------------------------
Executive will purchase, and the Company will sell, 135,000 shares of Class A
Common at a price of $0.22 per share and 15,000 shares of Class L Common at a
price of $18.00 per share. The Company will deliver to Executive copies of the
certificate(s) representing such shares of Executive Stock, and Executive will
deliver to the Company a Promissory Note in the form of Annex A attached hereto
-------
in an aggregate principal amount of $300,000 (the "Executive Note").
--------------
Executive's obligations under the Executive Note shall be secured by a pledge of
all of the shares of Common Stock held by Executive from time to time, and in
connection therewith, Executive shall enter into a pledge agreement in the form
of Annex B attached hereto (the "Pledge Agreement").
------- ----------------
2. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with the
-------------------------------------------
purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a current view to, or intention of, distribution thereof in
violation of the Securities Act or any applicable state securities laws,
and the shares of Executive Stock will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.
<PAGE>
(ii) Executive is an executive or director of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his investment
in Executive Stock for an indefinite period of time because the Executive
Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or
an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the
Company and its Subsidiaries as he or she has requested. Executive has
reviewed, or has had an opportunity to review, a copy of the Merger
Agreement, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review
the Offering Memorandum related to certain of the debt financing of the
Merger, the Company's Certificate of Incorporation and the Company's Bylaws
and any credit agreements, notes and related documents to which the Company
is a party.
(v) Executive has not granted and is not a party to any proxy,
voting trust or other agreement which is inconsistent with, conflicts with
or violates any provision of this Agreement. Executive shall not grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this
Agreement.
(vi) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(viii) Executive is a resident of the State of Pennsylvania.
(b) Acknowledgment by Executive. As an inducement to the Company to issue
---------------------------
the Executive Stock to Executive, and as a condition thereto, Executive
acknowledges and agrees that, subject to any employment agreement between
Executive and the Company or applicable law, neither the issuance of Executive
Stock to Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the right
of the Company to terminate Executive's employment at any time for any reason.
(c) Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Executive as follows:
2
<PAGE>
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
(ii) The Company has all requisite corporate power and corporate
authority to execute, deliver and perform this Agreement and to consummate
the transactions provided for herein.
(iii) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby, including, but not limited to, the issuance and sale
of the Post-Recapitalization Stock to be issued by it hereunder, have been
duly authorized, and this Agreement constitutes the valid and binding
obligation of the Company, enforceable against it in accordance with the
terms hereof.
(iv) The Executive Stock issued to the Executive hereunder, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable.
(v) As of the Closing, the authorized capital stock of the Company
will consist of (A) 27,000,000 shares of Class A Common, of which
15,612,588 shares will be issued and outstanding immediately after the
Closing, (B) 7,000,000 shares of Class B Common Stock, of which 5,653,079
shares will be issued and outstanding immediately after the Closing, and
(C) 3,000,000 shares of Class L Common Stock, of which 2,362,852 shares
will be issued and outstanding immediately after the Closing. As of the
Closing, other than options to purchase up to 5,734,333 shares of the
Company's Class A Common, options to purchase up to 137,148 shares of the
Company's Class L Common and preemptive rights to purchase shares of the
Company's capital stock granted to certain of the Company's stockholders,
there will be no rights, subscriptions, warrants, options, conversion
rights, or agreements of any kind outstanding to purchase from the Company,
or otherwise require the Company to issue, any shares of capital stock of
the Company or securities or obligations of any kind convertible or
exchangeable for any shares of capital stock of the Company; provided,
--------
however, that shares of Class A Common may be converted into shares of
-------
Class B Common and shares of Class B Common may be converted into shares of
Class A Common, all subject to the terms of the Company's Articles of
Incorporation.
3. Right to Purchase Executive Stock Upon Termination of Employment.
----------------------------------------------------------------
(a) Repurchase Right. If the Repurchase Date occurs, the Executive Stock
----------------
(including any Executive Stock acquired subsequent to the Repurchase Date),
whether held by Executive or one or more transferees, will be subject to
repurchase by the Bain Stockholders, the Bear Stearns Stockholders, or the
Company pursuant to the terms and conditions set forth in this Section 3 (the
"Repurchase Option").
-----------------
3
<PAGE>
(b) Repurchase Price. Executive Stock purchased pursuant to the Repurchase
----------------
Option will be purchased at a price per share equal to the Fair Market Value of
such Executive Stock as of the Valuation Date.
(c) Repurchase Procedures. The Company may elect or decline to exercise
---------------------
the Repurchase Option by delivering written notice (the "Company Repurchase
------------------
Notice") to the holder or holders of each class of the applicable Executive
- ------
Stock, the Bain Stockholders and the Bear Stearns Stockholders within the later
of the one-year anniversary of this Agreement or 240 days after the applicable
Repurchase Date. To the extent that after giving effect to the Company's option
pursuant to the immediately preceding sentence any portion of the Executive
Stock is not being repurchased by the Company, the Bain Stockholders and the
Bear Stearns Stockholders may elect or decline to exercise the Repurchase Option
to purchase up to their pro rata share (determined based upon the number of
shares of Class A Common and Class B Common held by each) by delivering written
notice (the "Initial Repurchase Notice") to the Company, the holder or holders
-------------------------
of Executive Stock and the other within the later of (i) 10 business days after
receipt of the Company Repurchase Notice or (ii) the expiration of the later of
one-year anniversary of this Agreement or the expiration of the 240 day period
during which the Company was entitled to deliver the Company Repurchase Notice.
To the extent that the Bain Stockholders or the Bear Stearns Stockholders do not
elect to repurchase their full allotment of the remaining Executive Stock, the
other party shall be entitled to purchase all or any portion of the remaining
Executive Stock by providing written notice (the "Supplemental Repurchase
-----------------------
Notice" and together with the Initial Repurchase Notice and Company Repurchase
Notice, a "Repurchase Notice") to each of the parties receiving the Initial
-----------------
Repurchase Notice within ten business days of the expiration of the period
during which the Bain Stockholders and the Bear Stearns Stockholders were
entitled to deliver the Initial Repurchase Notice. Each Repurchase Notice will
set forth the number of shares of each class of Executive Stock to be acquired
from such holder(s), an estimate of the aggregate consideration to be paid for
such holder's shares of each such class of Executive Stock and the time and
place for the closing of the transaction. If any shares of any class of
Executive Stock are held by any transferees of Executive, the Bain Stockholders,
the Bear Stearns Stockholders and the Company, as the case may be, will purchase
such shares of such class elected to be purchased from such holder(s) of
Executive Stock, pro rata according to the number of shares of such class of
Executive Stock held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
(d) Closing. Each closing of a repurchase transaction will take place on
-------
the date designated by the Bain Stockholders, the Bear Stearns Stockholders or
the Company, as the case may be, in the latest Repurchase Notice, which date
will not be more than 60 days after the delivery of such notice, and no earlier
than any date set forth in an earlier Repurchase Notice or the final
determination of Fair Market Value per share of Executive Stock as of the
Valuation Date and the expiration of any time periods for which a repurchase
election may be revoked pursuant to Section 3(e) (the "Scheduled Closing Date").
----------------------
The Company will pay for any shares of Executive Stock to be purchased pursuant
to a Repurchase Option by delivery of cash or cashier's check payable to the
holder(s) of such shares of Executive Stock in an aggregate amount equal to
their share of the aggregate repurchase price (the "Repurchase Price"); provided
---------------- --------
that any purchase of the Executive
- ----
4
<PAGE>
Stock that occurs after the Scheduled Closing Date by the Company as a result of
the Financing Circumstances (as defined below) shall include simple interest
calculated from the Scheduled Closing Date to the date of such payment at the
rate of 6% per annum on the Repurchase Price attributable to such shares of
Executive Stock. The Bain Stockholders and the Bear Stearns Stockholders will
pay for any shares of Executive Stock to be purchased pursuant to a Repurchase
Option by delivery of cash or cashier's check payable to the holder(s) of such
shares of Executive Stock in an aggregate amount equal to their share of the
aggregate unpaid Repurchase Price for such shares of Executive Stock.
Notwithstanding anything to the contrary contained in this Agreement, all
repurchases of shares of Executive Stock pursuant to this Section 3(d) will be
subject to applicable restrictions and covenants contained in the Pennsylvania
Business Corporation Law of 1988 and in the Company's and its Subsidiaries' debt
financing agreements. If (i) any such restrictions or covenants prohibit the
repurchase of Executive Stock hereunder which the Company is otherwise entitled
to make, (ii) the Company does not have cash availability, including
availability under its revolver, of at least $15 million on a projected basis
for the next six month period (collectively, the "Financing Circumstances") then
-----------------------
the Company will not be required to make such repurchase (and may defer making
such repurchase) until it is permitted to do so under such restrictions and
covenants and until its projected cash availability is greater than $15 million
(with it being understood that the Company will make the maximum amount of
repurchases permitted and may defer making the remainder of such repurchases
until permitted to do so and it being further understood that any closing of any
such repurchase shall not occur on a date which is later than the second
anniversary of the Scheduled Closing Date). The Bain Stockholders, the Bear
Stearns Stockholders and the Company will receive customary representations and
warranties from each seller regarding the sale of shares of Executive Stock
solely with respect to such seller's ownership and title to Executive Stock and
capacity to transfer Executive Stock.
(e) Revocation of Repurchase Election. Notwithstanding anything contained
---------------------------------
in this Agreement to the contrary, if Executive objects to the Board's
determination of Fair Market Value as described in the definition of Fair Market
Value, or if the Fair Market Value of a share of Executive Stock is otherwise
determined to be an amount more than 10% greater than the per share repurchase
price for such share of Executive Stock in the Initial Repurchase Notice or
Supplemental Repurchase Notice, each of the Company, the Bain Stockholders and
the Bear Stearns Stockholders shall have the right to revoke its exercise of the
Repurchase Option for all or any portion of the Executive Stock elected to be
repurchased by it by delivering notice of such revocation in writing to the
holders of the Executive Stock, the Company, the Bain Stockholders and the Bear
Stearns Stockholders during (i) the 30 day period beginning on the date that the
Company, the Bain Stockholders and the Bear Stearns Stockholders received
Executive's written notice of objection, and (ii) the 30 day period beginning on
the date that the Company, the Bain Stockholders and/or the Bear Stearns
Stockholders are given written notice that the Fair Market Value of a share of
Executive Stock was finally determined to be an amount more than 10% greater
than the per share repurchase price for Executive Stock set forth in the Initial
Repurchase Notice or in the Supplemental Repurchase Notice.
5
<PAGE>
In the event that the Bain Stockholders deliver a notice of revocation, the
Bear Stearns Stockholders shall be entitled to purchase all or any portion of
the Executive Stock that would otherwise have been purchased by the Bain
Stockholders by providing an additional Supplemental Repurchase Notice to the
holders of the Executive Stock and the Company within 10 business days after
receipt of the Bain Stockholders' notice of revocation. The Company may
exercise the Repurchase Option for the remaining Executive Stock by delivering
an additional Company Repurchase Notice to the holder or holders of the
applicable Executive Stock within 10 business days of the expiration of the 10
business day period described in the preceding sentence.
In the event that the Bear Stearns Stockholders deliver a notice of
revocation, the Bain Stockholders shall be entitled to purchase all or any
portion of the Executive Stock that would otherwise have been purchased by the
Bear Stearns Stockholders by providing an additional Supplemental Repurchase
Notice to the holders of the Executive Stock and the Company within 10 business
days after receipt of the Bear Stearns Stockholders' notice of revocation. The
Company may exercise the Repurchase Option for the remaining Executive Stock by
delivering an additional Company Repurchase Notice to the holder or holders of
the applicable Executive Stock within 10 business days of the expiration of the
10 business day period described in the preceding sentence.
In the event that the Company delivers a notice of revocation, the Bain
Stockholders and the Bear Stearns Stockholders shall be entitled to purchase
their pro rata share (determined based on the number of shares of Class A Common
and Class B Common held by each) of all or any portion of the Executive Stock
that would otherwise have been purchased by the Company by providing an
additional Supplemental Repurchase Notice to the holders of the Executive Stock
and the other party within 10 business days after receipt of the Company's
notice of revocation. To the extent that the Bain Stockholders or the Bear
Stearns Stockholders do not elect to repurchase their full allotment of
Executive Stock, the other party shall be entitled to purchase the remaining
Executive Stock by delivering an additional Supplemental Repurchase Notice to
the holder or holders of the applicable Executive Stock within 10 business days
of the expiration of the 10 business day period described in the preceding
sentence.
(f) Termination of Repurchase Right. The Repurchase Option granted to the
-------------------------------
Bain Stockholders, Bear Stearns Stockholders and the Company shall terminated
(to the extent not previously exercised) with respect to Executive Stock at the
earliest of (i) a Bain Exit, (ii) a Qualified Initial Public Offering, or (iii)
the tenth anniversary of the Closing Date.
4. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge, transfer
---------------------------
or otherwise dispose of (a "Transfer") any interest in their Executive Stock
--------
except (i) pursuant to and in accordance with Sections 3, 4(b), 5, 6, 8 or 10
(in connection with a Transfer by the Bain Stockholders only below), (ii)
pursuant to the terms of the Registration Agreement, dated as of the date
hereof, by and between the Company and certain of its Stockholders, (iii)
pursuant to applicable laws of descent and distribution, or (iv) among
Executive's Family Group; provided, that the
--------
6
<PAGE>
restrictions contained in this Section 4 will continue to be applicable to the
shares of Executive Stock after any Transfer of the type referred to in clauses
(iii) or (iv) above and, as a condition to any such Transfer, the transferees of
such shares of Executive Stock must agree in writing to be bound by the
provisions of this Agreement. In the case of a transfer by Executive to a member
of his Family Group, after such transfer Executive must continue to own at least
50% of his shares of Executive Stock originally owned by him on a fully diluted
basis. Any transferee of Executive Stock pursuant to a Transfer in accordance
with clause (iii) or (iv) above is herein referred to as a "Permitted
---------
Transferee." Upon the proposed Transfer of Executive Stock pursuant to clause
- ----------
(iii) or (iv) above, Executive or a Permitted Transferee Transferring such
Executive Stock will deliver a written notice (a "Transfer Notice") to the
---------------
Company, which discloses in reasonable detail the identity of the Permitted
Transferee(s). Notwithstanding the foregoing, no party hereto shall avoid the
provisions of this Agreement by making one or more transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party's
interest in any such Permitted Transferee.
(b) Termination of Restrictions. The restrictions set forth in Section
---------------------------
4(a) will terminate upon a Qualified Initial Public Offering.
5. Unaffiliated Sale of the Company.
--------------------------------
(a) If the Board approves an Unaffiliated Sale of the Company (an
"Approved Sale"), then each holder of each class of Executive Stock will vote
-------------
for, consent to and raise no objections against such Approved Sale. Each holder
of each class of Executive Stock will, to the maximum extent permitted by
applicable law, waive any dissenters' rights, appraisal rights or similar rights
in connection with such Approved Sale, and if such Approved Sale is a sale of
stock, each holder of such class of Executive Stock will agree to sell
(including, without limitation, by executing and delivering definitive
agreements with respect thereto) up to all of his or her shares of Executive
Stock on the terms and conditions approved by the Board; provided that the terms
--------
and conditions of such transaction applicable to each holder of a class of
Executive Stock are the same as those applicable to the Bain Stockholders
holding such class of capital stock (including, subject to Section 7 below, the
price per share and the type of consideration, but excluding reasonable
investment banking and advisory fees customarily charged by the Bain
Stockholders and the Bear Stearns Stockholders for transactions of such type).
Each holder of Executive Stock will take all necessary or desirable actions in
connection with the consummation of the Approved Sale as requested by the Board
or the Company.
(b) If the Company or the holders of the Company's securities enter into
any negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities and Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Executive Stock appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Executive Stock declines to appoint the purchaser representative
7
<PAGE>
designated by the Company, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(c) Each of the holders of Executive Stock (if any) will bear their pro-
rata share (based upon the number of shares of Class A Common sold) of the costs
of any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all or substantially all holders of Common
Stock and are not otherwise paid by the Company or the acquiring party. Costs
incurred by each holder of Executive Stock on its own behalf will not be
considered costs of the transaction hereunder.
(d) The provisions of this Section 5 shall terminate upon a Qualified
Initial Public Offering.
6. Bain Sale of the Company.
------------------------
(a) If a majority of the members of the Board (which, for purposes of this
Section 6, shall include any director appointed by the Bear Stearns Stockholders
pursuant to the Voting Agreement, dated as of the date hereof, by and among the
Company and certain stockholders of the Company party thereto from time to time
(the "Voting Agreement")) who are not Affiliates or designees of the Bain
----------------
Stockholders (the "Non-Bain Directors") approve a Bain Sale of the Company (an
------------------
"Approved Bain Sale"), then each holder of Executive Stock that is not an
------------------
Affiliate of the Bain Stockholders will vote for, consent to and raise no
objections against such Approved Bain Sale. Each such holder of Executive Stock
will, to the maximum extent permitted by applicable law, waive any dissenters'
rights, appraisal rights or similar rights in connection with such Approved Bain
Sale, and in the event that such Approved Bain Sale is a sale of stock, each
such holder of Executive Stock will agree to sell (including, without
limitation, by executing and delivering definitive agreements with respect
thereto) up to all of his or her Executive Stock on the terms and conditions
approved by the Non-Bain Directors; provided that the terms and conditions of
such transaction applicable to each holder of a class of Executive Stock that is
not a Bain Stockholder or an Affiliate thereof are the same as those applicable
to the stockholder holding the largest number of shares of such class of capital
stock that is not a Bain Stockholder or an Affiliate thereof (including, subject
to Section 9 below, the price per share and the type of consideration, but
excluding reasonable investment banking and advisory fees customarily charged by
the Bear Stearns Stockholders for transactions of such type). Each holder of
Executive Stock will take all necessary or desirable actions in connection with
the consummation of the Approved Bain Sale as requested by the Non-Bain
Directors, the Bain Stockholders or the Company.
(b) If, in relation to an Approved Bain Sale, the Company or the holders
of the Company's securities enter into any negotiation or transaction for which
Rule 506 (or any similar rule then in effect) promulgated by the Securities and
Exchange Commission may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), the
holders of Executive Stock will, at the request of the Company or the Bain
Stockholders appoint a purchaser representative (as such term is defined in Rule
501) reasonably acceptable to the
8
<PAGE>
Company and the Bain Stockholders. If any holder of Executive Stock appoints a
purchaser representative designated by the Company or the Bain Stockholders, the
Company will pay the fees of such purchaser representative, but if any holder of
Executive Stock declines to appoint the purchaser representative designated by
the Company or the Bain Stockholders, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(c) Each of the holders of Executive Stock (if any) will bear their pro-
rata share (based upon the number of shares of Class A Common sold by
stockholders) of the costs of any sale of Executive Stock pursuant to an
Approved Bain Sale to the extent such costs are incurred for the benefit of all
or substantially all holders of Common Stock not affiliated with the Bain
Stockholders and are not otherwise paid by the Company or the acquiring party.
Costs incurred by each holder of Executive Stock on its own behalf will not be
considered costs of the transaction hereunder.
(d) The provisions of this Section 6 shall terminate upon a Qualified
Initial Public Offering.
7. Distributions upon Sale of the Company, etc. In the event of a sale
--------------------------------------------
or exchange by the holders of Executive Stock (whether by sale, merger,
recapitalization, reorganization, consolidation, combination or otherwise) in
connection with an Approved Sale or Approved Bain Sale each holder of Executive
Stock shall receive in exchange for the Executive Stock held by such holder
participating in such sale, the same portion of the aggregate consideration from
such sale or exchange that such holder would have received if such aggregate
consideration had been distributed by the Company to the holders of capital
stock of the Company participating in such sale, in complete liquidation
pursuant to the rights and preferences set forth in the Company's Amended and
Restated Articles of Incorporation as in effect immediately prior to such sale
or exchange (and assuming that the only shares of capital stock of the Company
outstanding were the shares of capital stock of the Company participating in
such sale). Each holder of Executive Stock shall take all necessary or
desirable actions in connection with the distribution of the aggregate
consideration from such sale or exchange as requested by the Company.
8. Initial Public Offering. In the event that the Board approves an
-----------------------
initial public offering and sale of Common Stock (a "Public Offering") pursuant
---------------
to an effective registration statement under the Securities Act of 1933, as
amended, the holders of Common Stock shall take all necessary or desirable
actions in connection with the consummation of the Public Offering. In the
event that such Public Offering is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the Common
Stock structure would adversely affect the marketability of the offering, each
holder of Common Stock shall consent to and vote for a recapitalization,
reorganization and/or exchange of the Common Stock into securities that the
managing underwriters and the Board find acceptable and equitable in the
circumstances and shall take all necessary or desirable actions in connection
with the consummation of the recapitalization, reorganization and/or exchange;
provided that the resulting securities take into account the rights and
- --------
9
<PAGE>
preferences set forth in the Company's Amended and Restated Articles of
Incorporation as in effect immediately prior to such Public Offering.
9. Restrictive Legend; Additional Restriction on Transfer. Each
------------------------------------------------------
certificate evidencing Executive Stock and each certificate issued in exchange
for or upon the transfer of any Executive Stock (if such shares remain Executive
Stock after such transfer) shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS PURSUANT TO AN EXECUTIVE STOCK
AGREEMENT, DATED AS OF MAY, 1999 AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND HOCK E. TAN, AS AMENDED AND
MODIFIED FROM TIME TO TIME. A COPY OF SUCH EXECUTIVE STOCK
AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Executive Stock
outstanding as of the date hereof. The legend set forth above shall be removed
from the certificates evidencing any shares which cease to be Executive Stock in
accordance with the definition of Executive Stock set forth in Section 12
hereof.
10. Participation Rights.
--------------------
(a) If the Bain Stockholders or the Bear Stearns Stockholders propose to
enter into any sale to an unaffiliated third party (including Bear Stearns or
its Affiliates in the case of Bain, or Bain or its Affiliates, in the case of
Bear Stearns) pursuant to which such party or parties acquire more than 5% of
any class of capital stock held by the Bain Stockholders or Bear Stearns
Stockholders in any transaction or series of transactions (excluding Public
Sales and transfers and/or distributions to partners of the Bain Stockholders or
the Bear Stearns Stockholders), then the Executive will be afforded an
opportunity to participate in such transaction on, subject to Section 7 above,
the same terms and conditions as applicable to the other holders of such class
of capital stock participating in such transaction. If any stockholder other
than the Bain Stockholders or the Bear Stearns Stockholders, as the case may be
(each a "Transferring Stockholder") has elected to participate in such sale, the
-----------------------
Transferring Stockholder shall be entitled to sell in the contemplated sale a
number of shares of any class of capital stock equal to the product of (i) the
quotient determined by dividing the percentage of such class of capital stock
owned by the Transferring Stockholder by the aggregate percentage of Common
Stock owned by the stockholders participating in such sale (which in the case of
a sale by Bain Stockholders may include the Bear Stearns Stockholders and which
in the case of a sale by Bear Stearns Stockholders may include the Bain
Stockholders) and (ii) the number of shares of such class of capital stock to be
sold in the contemplated sale. Each holder of Executive Stock participating in
any such transaction will take all necessary or desirable actions in connection
with
10
<PAGE>
the consummation of any such transaction as requested by the Bain Stockholders
including without limitation executing the applicable purchase agreement.
(b) Notwithstanding the foregoing, in the event that the Bain Stockholders
intend to transfer shares of more than one class of capital stock, each
Transferring Stockholder will not be entitled to participation rights pursuant
to this Section 10 unless such Transferring Stockholder and sells in the
contemplated sale a pro rata portion of shares of all such classes of capital
stock, which portion shall be determined in the manner set forth in Section
10(a).
(c) The Bain Stockholders will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of any
Transferring Stockholders in any contemplated sale, and the Bain Stockholders
will not transfer any class of capital stock to the prospective transferee(s)
unless (i) the prospective transferee(s) agree to allow the participation of the
Transferring Stockholders or (ii) the Bain Stockholders agree to purchase on the
same terms and conditions the number of such class of capital stock from any
Transferring Stockholders which such Transferring Stockholders would have been
entitled to sell pursuant to this Section 10.
11. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will not
issue, sell or otherwise transfer to the Bain Stockholders or the Bear Stearns
Stockholders (an "Issuance") at any time prior to a Public Offering, any capital
--------
stock or debt securities (or securities convertible into or exercisable or
exchangeable for capital stock or debt securities) unless, at least 15 days
prior to such Issuance, the Company notifies each holder of Executive Stock in
writing of the Issuance (including the price, the purchasers thereof and the
other terms thereof) and grants to each holder of Executive Stock, the right
(the "Right") to subscribe for and purchase a portion of such additional shares
-----
or other securities so issued at the same price and on the same terms as issued
in the Issuance equal to the quotient determined by dividing (1) the number of
fully diluted shares of Class A Common and Class B Common held by such holder by
(2) the total number of shares of Class A Common and Class B Common outstanding
on a fully diluted basis. Notwithstanding the foregoing, if all Persons
entitled to purchase or receive such stock or securities are required to also
purchase other securities of the Company, the holders of capital stock
exercising their Right pursuant to this Section shall also be required to
purchase the same strip of securities (on the same terms and conditions) that
such other Persons are required to purchase. The Right may be exercised by such
holder at any time by written notice to the Company received by the Company
within 10 days after receipt by such holder of the notice from the Company
referred to above. The closing of the purchase and sale pursuant to the
exercise of the Right shall occur not less than 10 days after the Company
receives notice of the exercise of the Right and concurrently with the closing
of the Issuance.
(b) Notwithstanding the foregoing, the Right shall not apply to (i)
issuances of capital stock or debt securities (or securities convertible into or
exchangeable for, or options to purchase, capital stock or debt securities), pro
rata to all holders of any class of Stock, as a dividend on, subdivision of or
other distribution in respect of, such class of capital stock, (ii) conversions
or
11
<PAGE>
exchanges of one class or form of capital stock into another class or form of
capital stock, (iii) issuances of capital stock upon exercise of any debt
security issued by the Company, or (iv) the issuance of capital stock (or
securities convertible into or exchangeable for, or options to purchase, capital
stock) on customary, arm's length terms in connection with the provision by the
Bain Stockholders or the Bear Stearns Stockholders of debt financing to the
Company or its Subsidiaries.
(c) The provisions of this Section 11 will terminate upon the consummation
of a Public Offering or upon a Bain Exit.
12. Transfer. Prior to transferring any Executive Stock (other than a
--------
Public Sale or an Approved Sale or pursuant to Section 10) to any Person,
Executive shall cause the prospective transferee to be bound by this Agreement
and to execute and deliver to the Company a counterpart of this Agreement.
13. Definition of Executive Stock. For all purposes of this Agreement,
-----------------------------
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company, purchasers pursuant to an offering
registered under the Securities Act or purchasers pursuant to a Rule 144
transaction (other than a Rule 144(k) transaction occurring prior to the time
the Company is a Public Company) and subsequent transferees), and each such
other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder. Executive
Stock will also include shares of the Company's capital stock issued with
respect to shares of Executive Stock by way of a stock split, stock dividend or
other recapitalization.
14. Holdback Agreement. Before and after, the effective date of any
------------------
underwritten Public Offering, no holder of Executive Stock will effect any sale
or distribution of Common Stock during the period designated by the underwriters
managing such underwritten Public Offering with respect to such holder of
Executive Stock, but in no event shall any such period following the effective
date of any such underwritten Public Offering exceed 180 days.
15. Voting Agreement. Except as otherwise provided herein, from and after
----------------
the date hereof until the provisions of this Section 15 cease to be effective,
Executive and Executive's transferees shall vote all of their Executive Stock
and take all other necessary or desirable actions within their control
(including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings) as requested from time to time by the holders of a majority of the
voting shares of Common Stock. The provisions of this Section 15 shall cease to
be effective upon the earlier of the consummation of (i) a Qualified Initial
Public Offering, or (ii) a Bain Exit.
16. Definitions. The following terms are defined as follows:
-----------
12
<PAGE>
"Affiliate" means, when used with reference to a specified Person, any
---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). It is understood and agreed that any portfolio company in which a
Bain Stockholder or any other Affiliates thereof which is a private equity fund
holds in excess of 30% of the outstanding capital stock is an "Affiliate" of
such Bain Stockholder for purposes of this Agreement and that any portfolio
company in which a Bear Stearns Stockholder or any Affiliate thereof that
invests primarily in equity securities holds in excess of 30% of the outstanding
capital stock is an "Affiliate" of such Bear Stearns Stockholder for purposes of
this Agreement.
"Bain Exit" means (i) a sale of all or substantially all of the
---------
consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates or (ii) the transfer or other disposition of
capital stock to any Person after giving effect to which the Bain Stockholders
and their Affiliates own less than 5% of the outstanding shares of capital stock
of the Company and any capital stock received in connection with an Organic
Change (as hereinafter defined) (in each case, whether by merger, consolidation,
sale of the Company's capital stock or otherwise).
"Bain Sale of the Company" means (i) a sale of all or substantially all of
------------------------
the consolidated assets of the Company to one or more of the Bain Stockholders
or their Affiliates, or (ii) the transfer or other disposition to the Bain
Stockholders or their Affiliates of outstanding shares of capital stock of the
Company (in each case, whether by merger, consolidation, sale of the Company's
capital stock or otherwise) such that after giving effect to such transfer the
Bain Stockholders and their Affiliates own all or substantially all of the
outstanding shares of the Company's capital stock (in each case, whether by
merger, consolidation, sale of the Company's capital stock or otherwise).
"Bain Stockholders" means the Persons listed on the signature pages hereto
-----------------
as Bain Stockholders.
"Bear Stearns Stockholders" means the Persons listed on the signature pages
-------------------------
hereto as Bear Stearns Stockholders.
"Board" means the Company's Board of Directors.
-----
"Cause" means (i) the commission of a felony, (ii) the commission of fraud
-----
having an adverse effect on the Company or any of its Subsidiaries or any of
their directors or shareholders, (iii) any material act or omission involving
dishonesty having an adverse effect on the Company or any of its Subsidiaries or
any of their directors or shareholders, (iv) gross negligence or willful
misconduct with respect to the Company or any of its Subsidiaries or substantial
failure to otherwise perform duties as reasonably directed, in any such case
described in this clause (iv), for thirty days after written notice from the
Board and an opportunity to cure.
13
<PAGE>
"Class A Common" means the Company's Class A Common, par value $.01 per
--------------
share.
"Class B Common" means the Company's Class B Common Stock, par value $.01
--------------
per share.
"Class L Common" means the Company's Class L Common Stock, par value $.01
--------------
per share.
"Common Stock" means, collectively, Class A Common, Class B Common, Class L
------------
Common and any other common stock authorized by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time.
"Executive Stock" means (i) all shares of Executive Stock referred to in
---------------
the recitals hereto and (ii) all shares of Common Stock issued with respect to
the shares referred to in clause (i) above by way of stock dividend or stock
split in connection with any conversion, merger, consolidation or
recapitalization or other reorganization affecting the Common Stock.
"Fair Market Value" of each share of Executive Stock means the average of
-----------------
the closing prices of the sales of the appropriate class of Common Stock on all
securities exchanges on which such class of Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day such Common Stock is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 4:00 P.M., New York time, or, if on any day such Common Stock is not
quoted in the NASDAQ System, of the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Fair Market Value is being determined and the 20 consecutive business
days prior to such day. If at any time such class of Common Stock is not listed
on any securities exchange or quoted in the NASDAQ System or the over-the-
counter market, the Fair Market Value will be the fair value of such class of
Common Stock determined in good faith by the Board based on such factors as the
members thereof, in the exercise of their business judgment, consider relevant
without taking into account a discount for a minority position or illiquidity
but taking into account whether the Company is a privately held company or a
public company (with it being understood that as of the day immediately
following the date hereof, the Fair Market Value for each share of Class A
Common shall be $0.22 and for each share of Class L Common shall be $18 per
share notwithstanding that the Company is a private company). If the Executive
in good faith disagrees with such determination, the Board and the Executive
will negotiate in good faith to agree on such Fair Market Value. If such
agreement is not reached within 30 days after the delivery of the Company
Repurchase Notice, the Initial Repurchase Notice or the Supplemental Repurchase
Notice, Fair Market Value shall be determined by an independent and unaffiliated
appraiser (which shall be one of Valuation Research, BT Alex Brown, Broadview
14
<PAGE>
Associates or Morgan Stanley) selected by the Board, which appraiser shall be
instructed to submit to the Board and the Executive a report within 30 days of
its engagement setting forth such determination. The first $7,000 of the
expenses of such appraiser shall be borne by the Executive (and the remainder
shall be borne by the Company) unless the appraiser's valuation is at least 25%
greater than the amount determined by the Board, in which case, the costs of the
appraiser shall be borne by the Company. In the absence of manifest error, the
determination of such appraiser shall be final and binding upon all parties.
Notwithstanding the foregoing, to the extent that the Company has determined
Fair Market Value through an independent and unaffiliated appraiser at any time
within the six month period prior to Executive's Termination Date, the Fair
Market Value set forth in such appraisal shall conclusively be deemed to be
"Fair Market Value" hereunder and shall be binding upon all parties hereto,
unless the Board, in its good faith discretion determines that acquisitions,
divestitures or other material events consummated during such six-month period
affect the valuation set forth in such appraisal.
"Family Group" means a Participant's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of such Participant
and/or such Participant's spouse and/or descendants (natural or adopted) of
Participant and any corporation, limited liability company, partnership or other
entity the equity holders of which solely include such Participant, his or her
spouse or descendants (natural or adopted) or any trust for the benefit of such
Participant, his or her spouse or descendants (natural or adopted).
"Independent Third Party" means any Person who, immediately prior to the
-----------------------
contemplated transaction, does not own in excess of 5% of the Common Stock on a
fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock.
"Organic Change" means any recapitalization, reorganization,
--------------
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation ) stock, securities or assets with respect to or in
exchange for Common Stock.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Public Company" means a company any of whose securities are registered
--------------
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
15
<PAGE>
"Public Sale" means any sale of Common Stock to the public pursuant to an
-----------
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 (other than Rule
144(k) prior to the time the Company is a Public Company) adopted under the
Securities Act.
"Qualified Initial Public Offering" means the initial sale by the Company
---------------------------------
of any class or classes of the Common Stock in an offering registered under the
Securities Act of 1933, as amended from time to time, other than an offering
made solely in connection with a business acquisition or combination or an
employee benefit plan, but only if the aggregate gross proceeds received by the
Company and/or its stockholders in such initial sale or series of such sales in
the aggregate are in excess of $50 million.
"Repurchase Date" means the date that Executive ceases to be employed by
---------------
the Company for any reason.
"Sale of the Company" means (i) a Bain Sale of the Company, or (ii) an
-------------------
Unaffiliated Sale of the Company.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability company,
association or other business entity gains or losses or shall be or control the
managing director, managing member, manager or a general partner of such
partnership, limited liability company, association or other business entity.
"Unaffiliated Sale of the Company" means (i) a sale of all or substantially
--------------------------------
all of the consolidated assets of the Company to any Person other than the Bain
Stockholders or their Affiliates, or (ii) the transfer or other disposition to
any Person other than the Bain Stockholders or
16
<PAGE>
their Affiliates of more than 50% of the outstanding shares of capital stock of
the Company (in each case, whether by merger, consolidation, sale of the
Company's capital stock or otherwise).
"Valuation Date" shall mean (i) with respect to any Repurchase Option, the
--------------
date, if any, that the Company delivers a Repurchase Notice to a holder of
Executive Stock or (ii) with respect to any Put Right, the date, if any, that
the holder(s) of Executive Stock deliver a Put Notice to the Company.
17. Notices. Any notice provided for in this Agreement must be in writing
-------
and must be personally delivered, received by certified mail, return receipt
requested, or sent by guaranteed overnight delivery service, to the Investors at
the addresses indicated in the Company's records and to the other recipients at
the address indicated below:
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: President
With copies to:
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
17
<PAGE>
ICST Acquisition Corp.
c/o Bear, Stearns & Co. Inc.
New York, NY 10167
Attn: John D. Howard
Bodil M. Arlander
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey Hammes, P.C.
Jeffrey Seifman
and
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
To Executive:
at Executive's last address
on the records of the Company
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
18. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
19. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements
18
<PAGE>
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way. Without limiting the foregoing,
all executive stock and stock option agreements between the Company and
Executive which existed immediately prior to the Merger are hereby canceled and
terminated.
20. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
21. Successors and Assigns; Transfer. This Agreement is intended to bind
--------------------------------
and inure to the benefit of and be enforceable by Executive and the Company and
their respective successors, heirs and assigns, provided that Executive may not
assign any of his rights or obligations, except as expressly provided by the
terms of this Agreement. Prior to transferring any shares of Executive Stock
(other than in a Public Sale or any Approved Sale) to any person or entity,
Executive will cause the prospective transferee to execute and deliver to the
Company an agreement containing the rights and restrictions set forth herein
with respect to such shares of Executive Stock.
22. Governing Law. The corporate law of the Commonwealth of Pennsylvania
-------------
will govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the law of any jurisdiction other than the Commonwealth of
Pennsylvania.
23. Remedies. The parties hereto acknowledge and agree that money damages
--------
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party hereto will have the right to injunctive relief, in addition
to all of its other rights and remedies at law or in equity, to enforce the
provisions of this Agreement.
24. Effect of Transfers in Violation of Agreement. The Company will not
----------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
25. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company (with
approval of the Board) and Executive; provided that Sections 3, 5, 6, 10, 30 and
-------- ----
31 are for the express benefit of the Bain Stockholders and/or the Bear Stearns
Stockholders and there shall be no amendment to (or other amendment to the
Agreement which has the effect of amending) any of Sections 3, 5, 6, 10, 30 and
19
<PAGE>
31 or this Section 25 in a manner adverse to the Bain Stockholders without first
obtaining the written consent of the Bain Stockholders or in a manner adverse to
the Bear Stearns Stockholders without first obtaining the written consent of the
Bear Stearns Stockholders, as applicable
26. Expenses. The Company agrees to pay, and hold Executive harmless
--------
against liability for the payment of his reasonable fees and expenses arising in
connection with the preparation and execution of this Agreement and the other
agreements, documents and instruments contemplated hereby and thereby, and the
consummation of the transactions contemplated hereby and thereby.
27. Offset. Whenever the Company or any of its Subsidiaries is to pay any
------
sum to Executive or any Affiliate or related person thereof, any amounts that
such Executive or such Affiliate or related person owes to the Company or any of
its Subsidiaries may be deducted from that sum before payment.
28. Further Assurances. Executive shall execute and deliver all
------------------
documents, provide all information, and take or refrain from taking such actions
as may be necessary or appropriate to achieve the proposes of this Agreement.
In addition, in connection with any Sale of the Company structured to achieve
pooling of interest accounting treatment, Executive will take such reasonable
actions as requested by the Board as required to achieve and maintain pooling of
interest accounting treatment.
29. Deemed Transfer of Executive Stock. If the Bain Stockholders, the
----------------------------------
Bear Stearns Stockholders and/or the Company shall make available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Executive Stock to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such shares shall be
deemed purchased in accordance with the applicable provisions hereof and the
Bain Stockholders, the Bear Stearns Stockholders and the Company, as the case
may be, shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
30. Rights Granted to the Bain Stockholders, the Bear Stearns Stockholders
----------------------------------------------------------------------
and their Affiliates. Any rights granted to the Bain Stockholders, the Bear
- --------------------
Stearns Stockholders and their Affiliates hereunder may also be exercised (in
whole or in part) by their designees (which may be Affiliates).
31. Certain Transactions with Bain. Following the date of the consummation
------------------------------
of the Merger, (i) the Company will not effect a Sale of the Company to a
portfolio company of the Bain Stockholders, and (ii) the Company will not, and
the Company will not permit any of its Subsidiaries to, agree to consummate (or
consummate) any non-material transaction other than on an arms-length
20
<PAGE>
basis or otherwise enter into or consummate any material transaction whether or
not on an arms-length basis with the Bain Stockholders or their Affiliates other
than pursuant to agreements entered on or prior to the date hereof or agreed
upon by the Non-Bain Directors, in each case unless such transaction has been
approved by the Non-Bain Directors (which for purposes of this Section 31 shall
include the approval of any director appointed by the Bear Stearns Stockholders
pursuant to the Voting Agreement).
32. Construction. References herein to this Agreement, or any other
------------
agreement shall be a reference to such agreement as amended, modified,
supplemented or waived from time to time.
* * * * *
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Executive Stock
Agreement on the day and year first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
---------------------------------
Name: Hock E. Tan
Its: President
/s/ Hock E. Tan
-------------------------------------
Hock E. Tan
[Signature Page to Executive Stock Purchase Agreement]
<PAGE>
with respect to paragraphs 3, 5, 6, 10, 25, 30 and
--------------------------------------------------
31 only:
--------
BAIN STOCKHOLDERS:
-----------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
---------------------------------
Name: Michael Krupka
Its: Managing Director
BCIP TRUST ASSOCIATES II
By: /s/ Michael Krupka
-------------------------------
[Signature Page to Executive Stock Purchase Agreement]
<PAGE>
with respect to paragraphs 3, 5, 6, 10, 25, 30 and
--------------------------------------------------
31 only:
--------
BAIN STOCKHOLDERS:
-----------------
BCIP TRUST ASSOCIATES II-B
By: /s/ Michael Krupka
------------------------------
BCIP ASSOCIATES II
By: /s/ Michael Krupka
------------------------------
BCIP ASSOCIATES II-B
By: /s/ Michael Krupka
------------------------------
[Signature Page to Executive Stock Purchase Agreement]
<PAGE>
with respect to paragraphs 3, 5, 6, 10, 25, 30 and
--------------------------------------------------
31 only:
--------
BCIP ASSOCIATES II-C
By: /s/ Michael Krupka
------------------------------
PEP INVESTMENTS PTY LTD.
By: /s/ Michael Krupka
------------------------------
[Signature Page to Executive Stock Purchase Agreement]
<PAGE>
with respect to paragraphs 3, 5, 6, 10, 25, 30 and
--------------------------------------------------
31 only:
--------
BAIN STOCKHOLDERS
-----------------
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Seifman
------------------------------
Its:
------------------------------
RANDOLPH STREET PARTNERS 1998
DIF, L.L.C.
By: /s/ Jeffrey Seifman
------------------------------
Its:
------------------------------
[Signature Page to Executive Stock Purchase Agreement]
<PAGE>
with respect to paragraphs 3, 5, 6, 10, 25, 30 and
--------------------------------------------------
31 only:
--------
BEAR STEARNS STOCKHOLDERS:
-------------------------
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
------------------------------
Its:
------------------------------
[Signature Page to Executive Stock Purchase Agreement]
<PAGE>
Annex A
-------
PROMISSORY NOTE
[Attached hereto]
<PAGE>
Annex B
-------
PLEDGE AGREEMENT
[Attached hereto]
<PAGE>
Exhibit 10.16
PROMISSORY NOTE
May 11, 1999 $300,000
Hock E. Tan (the "Employee"), for value received, hereby promises to pay to
--------
Integrated Circuit Systems, Inc., a Pennsylvania corporation (the "Company"),
-------
the principal amount of Three Hundred Thousand dollars ($100,000) on May 11,
2006 (the "Maturity Date").
-------------
Reference is hereby made to the Executive Stock Purchase Agreement, dated
as of the date hereof ("Executive Stock Agreement"), pursuant to which Employee
-------------------------
has purchased from the Company 15,000 shares of Class L Common Stock and 135,000
shares of Class A Common Stock (such shares of Class L Common Stock and Class A
Common Stock, the "Purchased Shares"), for an aggregate purchase price of
----------------
$300,000 (the "Purchase Price"). The Company has loaned 100% of the Purchase
--------------
Price to Employee and Employee has issued this Recourse Promissory Note (this
"Note") to the Company.
- -----
The amounts due under this Note are secured by a pledge of the Employee
Shares, and the payment of the principal amount and accrued interest under this
Note is subject to certain offset rights under the Executive Stock Agreement.
1. Definitions. For purposes of this Note, the following capitalized
-----------
terms have the following meaning.
"Class A Common Stock" means the Company's Class A Common Stock, par value
--------------------
$.01 per share.
"Class L Common Stock" means the Company's Class L Common Stock, par value
--------------------
$.01 per share.
"Employee Shares" means (i) all Purchased Shares, (ii) all other shares of
---------------
Class A Common Stock and Class L Common Stock owned from time to time by
Employee, and (iii) all shares of common stock referred to in clauses (i) and
(ii) above by way of a stock dividend or stock split or in connection with any
combination, exchange, conversion, merger, consolidation, recapitalization, or
other reorganization affecting the Class A Common Stock or Class L Common Stock.
<PAGE>
2. Payment of Principal.
--------------------
(a) Scheduled Payment. The Employee will pay the entire unpaid principal
-----------------
amount of this Note on the Maturity Date.
(b) Optional Prepayment. Subject to Section 3 hereof, the Employee may
-------------------
prepay the principal amount of this Note, in whole or in any $1,000 increment,
at any time and from time to time.
(c) Mandatory Prepayments.
---------------------
(i) If the Employee receives any bonus from the Company or any of
the Company's subsidiaries, then, on the date of the payment of such bonus
to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to 50% of the amount of such bonus (net of the
amount of any customary withholding taxes) and such amount paid to the
Company shall first reduce accrued interest on this Note pursuant to
Section 3 hereof and any remaining amount paid to the Company shall reduce
the principal amount of this Note.
(ii) If the Employee sells or otherwise transfers any of the
Employee Shares, then, on the date of the consummation of such sale or
transfer, the Employee shall be obligated, to the extent the Employee has
obligations to the Company under this Note, to pay to the Company an amount
equal to the net after-tax proceeds received by the Employee for the
Employee Shares sold or otherwise transferred and such amount paid to the
Company shall first reduce accrued interest on this Note pursuant to
Section 3 hereof and any remaining amount paid to the Company shall reduce
the principal amount of this Note.
(iii) If the Employee receives any cash dividends or other
distributions with respect to any of the Employee Shares, then, on the date
of the payment of such cash dividends or other distributions, as the case
may be, to the Employee, the Employee shall be obligated, to the extent the
Employee has obligations to the Company under this Note, to pay to the
Company an amount equal to the amount of such cash dividends or other
distributions (net of any tax liability in connection therewith), as the
case may be, and such amount paid to the Company shall first reduce accrued
interest on this Note pursuant to Section 3 hereof and any remaining amount
paid to the Company shall reduce the principal amount of this Note.
3. Interest. Interest will accrue at the rate of eight percent (8%) per
--------
annum (computed on the basis of a 360-day year, as appropriate, and the actual
number of days elapsed in any year) on the unpaid principal amount of this Note
outstanding from time to time, or (if less) at the highest rate then permitted
under applicable law. Interest accruing hereunder, will be payable to the
Company in cash, in arrears, on the Maturity Date or in connection with any
optional prepayment with respect to the principal being repaid. Interest will
accrue on any amount of principal until such time as payment therefor is
actually delivered to the Company.
2
<PAGE>
4. Events of Default.
-----------------
(a) Definition. An "Event of Default" will be deemed to have occurred if:
---------- ----------------
(i) the Employee fails to pay any amount of the principal of or
interest on this Note as and when required pursuant to the terms hereof; or
(ii) the Employee makes an assignment for the benefit of creditors or
admits in writing his or her inability to pay his or her debts generally as
they become due; or an order, judgment or decree is entered adjudicating
the Employee bankrupt or insolvent; or any order for relief with respect to
the Employee is entered under the Federal Bankruptcy Code; or the Employee
commences any proceeding relating to the Employee under any bankruptcy
reorganization, arrangement, insolvency, or readjustment of debt law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Employee and either (A) the Employee
by any act indicates its approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not dismissed
within 30 days.
The foregoing will constitute Events of Default whatever the reason or cause for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(b) Consequences of Events of Default.
---------------------------------
(i) If an Event of Default has occurred and is continuing, then the
aggregate principal amount of this Note (together with all accrued interest
thereon and all other amounts due and payable with respect thereto) will
become immediately due and payable without any action on the part of the
Company.
(ii) If any Event of Default has occurred and is continuing, the
interest rate on this Note will increase immediately by an increment of 6
percentage points (i.e., 600 basis points), to the extent permitted by
applicable law. Any such increase of the interest rate resulting from the
operation of this Section 4(b)(ii) will terminate as of the close of
business on the next date on which no Event of Default exists (subject to
subsequent increases pursuant to this Section).
(iii) The Company will also have any other rights which the Company
may have been afforded under any contract or agreement at any time and any
other rights which the Company may have pursuant to applicable law, subject
to the limitation set forth in Section 14 of this Note. The Employee hereby
waives diligence, presentment, protest and demand and notice of protest and
demand, dishonor and nonpayment of this Note, and expressly agrees that
this Note, or any payment thereunder, may be extended from time to time and
that the Company may accept security for this Note or release security for
this Note, all without
3
<PAGE>
in any way affecting the liability of the Employee thereunder. If the
Employee fails to pay any amounts due hereunder when due, then the Employee
shall pay to the Company, in addition to the amounts due, all costs of
collection, including reasonable attorneys fees.
5. Amendment and Waiver. None of the terms or provisions of this Note may
--------------------
be altered, modified or amended except by an instrument in writing, duly
executed by the Company (with approval of its board of directors) and the
Employee. The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Company (with the approval of
its board of directors), and then only to the extent therein set forth. A waiver
by the Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion. No failure to exercise nor any delay in exercising on
the part of the Company, any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
6. Cancellation. After all principal and accrued interest at any time
------------
owed on this Note have been paid in full, this Note will be surrendered to the
Employee for cancellation.
7. Payments. All cash payments to be made to the Company will be made in
--------
the lawful money of the United States of America in immediately available funds.
Payments of principal and interest in respect of this Note will be delivered to
the Company at the Company's chief executive office.
8. Descriptive Headings; Governing Law. The descriptive headings of the
-----------------------------------
several Sections of this Note are inserted for convenience only and do not
constitute a part of this Note. This Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to any rules, principles or provisions of choice of law or conflict of
laws.
9. Business Days. If any payment is due, or any time period for giving
-------------
notice or taking action expires, on a day which is a Saturday, Sunday or legal
holiday in the State of Pennsylvania, then the payment will be due and payable
on, and the time period will automatically be extended to, the next business day
immediately following such Saturday, Sunday or legal holiday, and interest will
continue to accrue at the required rate under this Note until any such payment
is made.
10. Usury Laws. It is the intention of the Employee and the Company to
----------
conform strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Note will be subject to reduction to the amount not
in excess of the maximum legal amount allowed under the applicable usury laws as
now or hereafter construed by the courts having jurisdiction over such matters.
If the maturity of this Note is accelerated by reason of an Event of Default,
voluntary prepayment by the Employee or otherwise, then earned interest may
never include more than the maximum amount permitted by law, computed from the
date hereof until payment, and any interest
4
<PAGE>
in excess of the maximum amount permitted by law will be canceled automatically
and, if theretofore paid, will at the option of the Company either be rebated to
the Employee or credited on the principal amount of this Note, or if this Note
has been paid, then the excess will be rebated to the Employee. The aggregate of
all interest (whether designated as interest, service charges, points or
otherwise) contracted for, chargeable, or receivable under this Note will under
no circumstances exceed the maximum legal rate upon the unpaid principal balance
of this Note remaining unpaid from time to time. If such interest does exceed
the maximum legal rate, it will be deemed a mistake and such excess will be
canceled automatically and, if theretofore paid, rebated to the Employee or
credited on the principal amount of this Note, or if this Note has been repaid,
then such excess will be rebated to the Employee.
11. Severability. If any provision of this Note is held by any court of
------------
competent jurisdiction to be illegal, void or unenforceable, such provision will
be of no force and effect, but such holding shall have no effect upon the
enforceability of any other provision.
12. General. This Note:
-------
(a) constitutes the entire agreement among the parties with respect to the
subject matter hereof;
(b) supersedes any and all prior understandings relating to such subject
matter; and
(c) will be binding upon and inure to the benefit of the parties and their
respective heirs, executors, administrators, successors and assigns.
13. Waiver of Jury Trial. THE EMPLOYEE (AND, BY ITS ACCEPTANCE OF THIS
--------------------
NOTE, THE COMPANY) HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS NOTE OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
14. Partial-Recourse Note. If for any reason Executive fails to pay the
---------------------
full amount due under this Note, Executive's maximum personal liability shall be
an amount equal to 50% multiplied by the principal amount of this Note and the
Company's sole recourse for any remaining amounts due and payable hereunder
shall be against the Employee Shares pursuant to the Pledge Agreement and by
application of Section 3(c) hereof.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the Employee has executed and delivered this Promissory
Note as of the date specified above.
/s/ Hock E. Tan
---------------------
Hock E. Tan
6
<PAGE>
EXHIBIT 10.17
PLEDGE AGREEMENT
This Pledge Agreement (this "Pledge Agreement") is made as of May 11, 1999,
----------------
between Hock E. Tan ("Pledgor"), and Integrated Circuit Systems, Inc., a
-------
Pennsylvania corporation (the "Company").
-------
Reference is hereby made to the Executive Stock Agreement, dated as of the
date hereof, pursuant to which Pledgor has purchased from the Company 15,000
shares of Class L Common Stock and 135,000 shares of Class A Common Stock (such
shares of Class L Common Stock and Class A Common Stock, the "Purchased
---------
Shares"), for an aggregate purchase price of $300,000 (the "Purchase Price").
- ------ --------------
The Company has loaned 100% of the Purchase Price to Pledgor and Pledgor has
issued to the Company a promissory note (the "Note") in an aggregate principal
----
amount equal to 100% of the Purchase Price. This Pledge Agreement provides the
terms and conditions upon which the Note is secured by a pledge to the Company
of (i) all Purchased Shares, (ii) all other shares of Class A Common Stock and
Class L Common Stock owned by Employee, and (iii) all shares of common stock
referred to in clauses (i) and (ii) above by way of a stock dividend or stock
split or in connection with any combination, exchange, conversion, merger,
consolidation, recapitalization, or other reorganization affecting the Class A
Common Stock or Class L Common Stock (collectively, the "Pledged Shares").
--------------
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Company to accept the Note, Pledgor and
the Company hereby agree as follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
------
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note and full payment and performance of the obligations and liabilities of
Pledgor thereunder.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
--------------------------
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment or stock
powers sufficient to transfer title thereto to the Company.
3. Voting Rights. Notwithstanding anything to the contrary contained
-------------
herein, during the term of this Pledge Agreement until such time as there exists
a default in the payment of principal on the Note or any other default under the
Note or hereunder, Pledgor shall be entitled to all voting rights with respect
to the Pledged Shares. Upon the occurrence of and during the continuance of any
such default, Pledgor shall no longer be able to vote the Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge Agreement
-----------------------------------
is in effect, Pledgor becomes entitled to receive or receives any securities or
other property in addition to, in substitution of, or in exchange for any of the
Pledged Shares (whether as a distribution in connection with any
recapitalization, reorganization or reclassification, a stock distribution or
dividend or
<PAGE>
otherwise), Pledgor shall accept such securities or other property on behalf of
and for the benefit of the Company as additional security for Pledgor's
obligations under the Note and shall promptly deliver such additional security
to the Company together with duly executed forms of assignment or stock powers,
and such additional security shall be deemed to be part of the Pledged Shares
hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon acceleration or
otherwise) or any other event of default under the Note or this Pledge Agreement
occurs (including the bankruptcy or insolvency of Pledgor), the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares) and shall have and may exercise
without demand any and all the rights and remedies granted to a secured party
upon default under the Uniform Commercial Code of Pennsylvania or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to Pledgor, in a
commercially reasonable manner. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided that after payment in full of the indebtedness
evidenced by the Note, the balance of the proceeds of sale then remaining shall
be paid to Pledgor and Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the hands of the Company. Pledgor shall be liable
for any deficiency if the remaining proceeds are insufficient to pay the
indebtedness under the Note in full, including the reasonable fees of any
attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses (including
-------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon payment in
-----------------------------------------------------
full of the indebtedness evidenced by the Note (including all principal and
accrued interest thereof), the Company shall surrender the Pledged Shares to
Pledgor together with all forms of assignment or stock powers.
8. No Other Liens; No Sales or Transfers. Pledgor hereby represents and
-------------------------------------
warrants that he or she has good and valid title to all of the Pledged Shares,
free and clear of all liens, security interests and other encumbrances, and
Pledgor hereby covenants that, until such time as all of the outstanding
principal of and interest on the Note has been repaid, Pledgor shall not (i)
create, incur, assume or suffer to exist any pledge, security interest,
encumbrance, lien or charge of any kind against the Pledged Shares or Pledgor's
rights or a holder thereof, other than pursuant to this Pledge Agreement, or
(ii) without the prior written consent of the Company (with approval of the
Company's board of directors), sell or otherwise transfer any Pledged Shares or
any interest therein.
2
<PAGE>
9. Further Assurances. Pledgor agrees that at any time and from time to
------------------
time upon the written request of the Company, Pledgor shall execute and deliver
such further documents (including UCC financing statements) and do such further
acts and things as the Company may reasonably request in order to effect the
purposes of this Pledge Agreement.
10. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. No Waiver; Cumulative Remedies. The Company shall not by any act,
------------------------------
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company (with approval of the Company's board of directors), and then only
to the extent therein set forth. A waiver by the Company of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No failure
to exercise nor any delay in exercising on the part of the Company, any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
12. Amendments; Applicable Law. None of the terms or provisions of this
--------------------------
Pledge Agreement may be altered, modified or amended except by an instrument in
writing, duly executed by the Company (with approval of the Company's board of
directors) and Pledgor. This Agreement and all obligations of the Pledgor
hereunder shall together with the rights and remedies of the Company hereunder,
inure to the benefit of the Company and its successors and assigns. This Pledge
Agreement shall be governed by and construed in accordance with the laws of the
state of Pennsylvania, without giving effect to any rules, principles or
provisions of choice of law or conflict of laws.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock Tan
--------------------------------
Name:
Title:
/s/ Hock E. Tan
-----------------------------------
Hock E. Tan
<PAGE>
EXHIBIT 10.18
INTEGRATED CIRCUIT SYSTEMS, INC.
VOTING AGREEMENT
----------------
THIS VOTING AGREEMENT (this "Agreement") is made as of May 11, 1999, by and
---------
among Integrated Circuit Systems, Inc., a Pennsylvania corporation (the
"Company"), each of the Persons listed on Schedule I attached hereto (the "Bain
------- ---------- ----
Stockholders"), each of the Persons listed on Schedule II attached hereto (the
- ------------ -----------
"Bear Stearns Stockholders") and each of the Persons listed on Schedule III
------------------------- ------------
attached hereto (the "Executive Stockholders"). The Bain Stockholders, the Bear
----------------------
Stearns Stockholders and the Executive Stockholders are collectively referred to
as the "Stockholders" and individually as a "Stockholder".
------------ -----------
WHEREAS, as of the date hereof, (i) the Bain Stockholders' and the Bear
Stearns Stockholders' shares of common stock of ICS Merger Corp., a Pennsylvania
corporation ("ICS"), will be converted into shares of the Company's Class A
---
Common Stock, par value $.01 per share, Class B Common Stock, par value $.01 per
share, and Class L Common Stock, par value $.01 per share (collectively, the
"Common Stock") pursuant to a Merger Agreement, dated as of January 20, 1999,
------------
between ICS and the Company (as amended, the "Merger Agreement"), and (ii) the
----------------
Executive Stockholders will acquire shares of Common Stock by exchanging
existing shares of capital stock of the Company for shares of Common Stock
pursuant to the terms of (x) the Merger Agreement and (y) Executive Stock
Agreements executed by the Company and each of the Executive Stockholders.
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes of establishing the composition of the Company's
Board of Directors (the "Board").
-----
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Board of Directors.
------------------
(a) From and after the Closing (as defined in the Merger Agreement), each
Stockholder shall vote all of his voting shares of Common Stock and any other
voting securities of the Company over which such holder has voting control and
shall take all other necessary or desirable actions within his control (whether
in his capacity as a stockholder, director, member of a board committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings), and the Company shall
take all reasonably necessary or desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) the authorized number of directors on the Board shall be
established at six (6) directors;
(ii) the following individuals shall be elected to the Board:
(A) 1 representative designated by Bain Capital Fund VI, L.P.;
<PAGE>
(B) 1 representative designated by BCIP Associates II together
with BCIP Associates II-B;
(C) 1 representative designated by BCIP Trust Associates II;
(D) 1 representative designated by the Bear Stearns
Stockholders, which representative shall initially be John D. Howard;
(E) The chief executive officer of the Company; and
(F) Henry I. Boreen ("Boreen"), so long as he continues to own
at least 50% of the Common Stock he owns on a fully diluted basis as
of the date hereof (with it being understood that at such time as the
condition in clause (F) hereof is no longer satisfied, the
Stockholders shall consider appointing a member of the Company's
management then party to an Executive Stock Agreement, an Executive
Stock Purchase Agreement, or Executive Stock and Option Agreement, in
each case executed as of the date hereof, or any other Person not
affiliated with the Bain Stockholders or the Bear Stearns
Stockholders, to fill the Board seat previously held by Boreen);
(iii) the composition of the board of directors of each of the
Company's Subsidiaries (a "Sub Board") shall be as determined by majority
---------
vote of the Board; provided that at the request of the Bain Stockholders or
-------- ----
if the Bain Stockholders otherwise designate more than one member on any
Sub Board, the composition of the Sub Board shall be the same as that of
the Board;
(iv) any committees of the Board or a Sub Board shall be created only
upon the approval of a majority of the members of the Board;
(v) the removal from the Board or a Sub Board (with or without
cause) of any representative designated hereunder by the Bain Stockholders
shall be at the Bain Stockholders' written request, but only upon such
written request and under no other circumstances (in each case, determined
on the basis of a vote of the holders of a majority of the Common Stock
held by the Bain Stockholders);
(vi) the removal from the Board or a Sub Board (with or without
cause) of any representative designated hereunder by the Bear Stearns
Stockholders shall be at the Bear Stearns Stockholders' written request,
but only upon such written request and under no other circumstances (in
each case, determined on the basis of a vote of the holders of a majority
of the Common Stock held by the Bear Stearns Stockholders); and
(vii) in the event that any representative designated hereunder by
the Bain Stockholders or the Bear Stearns Stockholders ceases to serve as a
member of the Board or a Sub Board during his term of office, the resulting
vacancy on the Board or the Sub Board shall be filled by a representative
designated by the Bain Stockholders or the Bear Stearns Stockholders, as
the case may be, as provided hereunder.
-2-
<PAGE>
(viii) the chief executive officer of the Company shall resign his
position as a member of the Board not later than 10 days after he ceases to
be employed by the Company as the Chief Executive Officer for any reason;
and
(ix) Boreen shall resign his position as a member of the Board not
later than 10 days after he ceases to own at least 50% of the Common Stock
he owns on a fully diluted basis as of the date hereof (with it being
understood that Boreen may not be removed from the Board or any Sub Board
other than pursuant to this clause (ix) or for death or disability).
(b) The Company shall pay the reasonable out-of-pocket expenses incurred
by each director in connection with attending the meetings of the Board, any Sub
Board and any committee thereof.
(c) If (and for so long as) any party fails to designate a representative
to fill a directorship pursuant to the terms of this Section 1 or a vacancy
otherwise exists, the election of a person to such directorship shall be
accomplished in accordance with the Company's or its Subsidiaries' bylaws and
applicable law; provided that the parties shall take all necessary actions to
remove such individual if the party or parties which failed (and are otherwise
entitled) to designate such director so directs; provided further that no
-------- -------
affiliate of the Bain Stockholders or the Bear Stearns Stockholders shall be
appointed to fill a vacancy created by the resignation of Boreen.
2. Notices. Any notice provided for in this Agreement must be in writing
-------
and must be personally delivered, received by certified mail, return receipt
requested, or sent by guaranteed overnight delivery service, to the Investors at
the addresses indicated in the Company's records and to the other recipients at
the address indicated below:
-3-
<PAGE>
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, Pennsylvania 19482
Attn: President
With a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
ICST Acquisition Corp.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 20/th/ Floor
New York, New York 10167
Attn: John Howard
Bodil M. Arlander
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey Hammes, P.C.
Jeffrey Seifman
-4-
<PAGE>
and
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
To Executive Stockholders:
at each Executive's last address
on the records of the Company
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
3. Termination. This Agreement shall terminate and be of no further
-----------
force and effect upon the earlier of (i) consummation of the initial sale by the
Company of any class or classes of the Common Stock in an offering registered
under the Securities Act of 1933, as amended from time to time (other than an
offering made solely in connection with a business acquisition or combination or
an employee benefit plan) where the aggregate gross proceeds received by the
Company and its stockholders in such initial sale or series of such sales in the
aggregate are in excess of $50 million, or (ii) the date on which the Bain
Stockholders and their Affiliates no longer hold at least 50% of the Common
Stock (as adjusted to reflect stock splits, stock dividends, stock combinations
or recapitalizations) that they hold as of the date hereof.
4. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
5. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
6. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
7. Successors and Assigns; Transfer. This Agreement is intended to bind
--------------------------------
and inure to the benefit of and be enforceable by the Company, the Bain
Stockholders, the Bear Stearns Stockholders, the Executive Stockholders and
their respective successors and assigns; provided that
-5-
<PAGE>
the Executive Stockholders may not assign any of their rights hereunder without
the written consent of the Bain Stockholders.
8. Governing Law. The corporate law of the Commonwealth of Pennsylvania
-------------
shall govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law or conflict of law provision or rule (whether of the Commonwealth
of Pennsylvania or any other jurisdiction) that would cause the application of
the law of any jurisdiction other than the Commonwealth of Pennsylvania.
9. Remedies. The parties hereto acknowledge and agree that money damages
--------
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party hereto will have the right to injunctive relief, in addition
to all of its other rights and remedies at law or in equity, to enforce the
provisions of this Agreement.
10. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived upon the prior written consent of the Stockholders holding a
majority of the outstanding voting common stock of the Company; provided that
-------- ----
Section 1 of this Agreement may not be amended in a manner adverse to the Bain
Stockholders without the prior written consent of the Bain Stockholders or
(other than to increase the size of the Board by one member) in a manner adverse
to the Bear Stearns Stockholders, or otherwise reduce or diminish any rights
that are applicable to the Bear Stearns Stockholders unless the same rights
applicable to the Bain Stockholders are reduced or diminished in the same manner
without the prior written consent of the Bear Stearns Stockholders; provided
--------
further that if, at any time as a result of rules, regulations, interpretations
- -------
or promulgations adopted or modified by the FASB or other governmental agency,
the Company would no longer be able to be a part of a business combination,
commencing on or after the second anniversary of the date hereof, that would
qualify for pooling of interests accounting treatment, the parties hereto will
take such action requested by the Bain Stockholders to increase the Board by one
member and to amend the restrictions contained in the Articles of Incorporation
with respect to the conversion of Class B Common Stock into Class A Common
Stock, and take such other actions as the Bain Stockholders may reasonably
request in connection therewith.
* * * * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on the
day and year first above written.
THE COMPANY:
-----------
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
--------------------------------
Name:
Its:
[Signature Page to Voting Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
---------------------------------------
Name: Michael Krupka
Its: Managing Director
BCIP TRUST ASSOCIATES II
By: /s/ Michael Krupka
---------------------------------------
BCIP TRUST ASSOCIATES II-B
By: /s/ Michael Krupka
---------------------------------------
BCIP ASSOCIATES II
By: /s/ Michael Krupka
---------------------------------------
BCIP ASSOCIATES II-B
By: /s/ Michael Krupka
---------------------------------------
[Signature Page to Voting Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
BCIP ASSOCIATES II-C
By: /s/ Michael Krupka
-------------------------------------
PEP INVESTMENTS PTY LTD.
By: /s/ Michael Krupka
-------------------------------------
[Signature Page to Voting Agreement]
<PAGE>
BAIN STOCKHOLDERS:
-----------------
RANDOLPH STREET PARTNERS II
By: /s/ Jeffrey Seifman
------------------------------
Its:
------------------------------
RANDOLPH STREET PARTNERS 1998
DIF, L.L.C.
By: /s/ Jeffrey Seifman
------------------------------
Its:
------------------------------
[Signature Page to Voting Agreement]
<PAGE>
BEAR STEARNS STOCKHOLDERS:
-------------------------
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
------------------------------
Its:
-----------------------------
[Signature Page to Voting Agreement]
<PAGE>
EXECUTIVE STOCKHOLDERS:
----------------------
/s/ Henry I Boreen
--------------------------------
Henry I. Boreen
/s/ Christopher J. Bland
--------------------------------
Christopher J. Bland
/s/ Barry E. Olsen
--------------------------------
Barry E. Olsen
Solely with respect to Section 1:
--------------------------------
/s/ Hock E. Tan
--------------------------------
Hock E. Tan
[Signature Page to Voting Agreement]
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- --------------------------------
Class A Class B Class L
Voting Non-Voting Voting
--------- ---------- ---------
<S> <C> <C> <C>
Bain Capital Fund VI, L.P. 5,606,914 4,143,220 1,083,349
BCIP Associates II 1,142,187 844,017 146,428
BCIP Trust Associates II 336,921 248,967 123,876
BCIP Associates II-B 150,760 111,404 33,324
BCIP Trust Associates II-B 97,858 72,312 30,197
BCIP Associates II-C 296,838 219,348 57,354
PEP Investments PTY Ltd. 18,690 13,811 3,611
Randolph Street Partners II 90,000 -- 10,000
Randolph Street Partners 1998 DIF, 45,000 -- 5,000
L.L.C.
in each case:
c/o Bain Capital, Inc.
Two Copley Place, 7/th/ Floor
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey Hammes, P.C.
Jeffrey Seifman
</TABLE>
-13-
<PAGE>
SCHEDULE II
-----------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- ------------------------------
Class A Class B Class L
Voting Non-Voting Voting
--------- ---------- -------
<S> <C> <C> <C>
ICST Acquisition Corp. 4,434,416 -- 492,713
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 20/th/ Floor
New York, New York 10167
Attn: John Howard
Bo Arlander
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
</TABLE>
-14-
<PAGE>
SCHEDULE III
------------
<TABLE>
<CAPTION>
Name and Address Number of Stockholder Shares
- ---------------- ------------------------------
Class A Class B Class L
Voting Non-Voting Voting
--------- ---------- -------
<S> <C> <C> <C>
Henry I. Boreen 2,065,500 -- 289,500
Christopher J. Bland 450,002 -- 50,000
Barry E. Olsen 450,002 - 50,000
</TABLE>
-15-
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
---------
May 11, 1999, between Integrated Circuit Systems, Inc., a Pennsylvania
corporation (the "Company") and Hock E. Tan ("Executive").
------- ---------
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties intending to be legally bound agree as follows:
1. Employment. The Company shall employ Executive, and Executive hereby
----------
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in paragraph 5 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the President
and Chief Executive Officer of the Company, subject to the overall direction and
authority of the Company's Board of Directors (the "Board").
-----
(b) Executive shall report to the Board, and Executive shall devote his
best efforts and his full business time and attention to the business and
affairs of the Company and its Subsidiaries; provided, however, that nothing in
-------- -------
this Agreement (i) will in any way restrict Executive from serving as a director
of another company or engaging in charitable or civic activities that do not
unreasonably interfere with the performance of his duties hereunder (provided
that Executive shall not be entitled, without the consent of the Board, not to
be unreasonably withheld, to serve on more than two boards of directors of any
organization not affiliated with the Company) or (ii) will require Executive to
perform any duties or implement any policies which are illegal. During the term
of this Agreement, Executive shall be furnished with such office space,
secretarial assistance and other facilities (including computers, cellular
phones and cellular phone service) that are no less favorable to Executive than
those provided to Executive in the six-month period prior to the date hereof.
Executive will be entitled to perform his duties under this Agreement at the
Company's offices in Valley Forge, Pennsylvania or any other office within a
reasonable commuting distance of Executive's residence as of the date hereof
(with it being understood that Executive shall spend as much time as necessary
at the Company's offices in San Jose, California and other Company offices in
order to discharge his duties to the Company).
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the time owned
or
<PAGE>
controlled, directly or indirectly, by the Company or one or more of the other
Subsidiaries of the Company or a combination thereof, or (ii) if a partnership,
limited liability company, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by the Company or one or more
Subsidiaries of the Company or a combination thereof. For purposes hereof, the
Company and its Subsidiaries shall be deemed to have a majority ownership
interest in a partnership, limited liability company, association or other
business entity if the Company and its Subsidiaries, on a collective basis,
shall be allocated a majority of partnership, limited liability company,
association or other business entity gains or losses or shall be or control the
managing director, managing member, manager or a general partner of such
partnership, limited liability company, association or other business entity.
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
$250,000 per year (the "Base Salary"), which salary shall be payable in regular
-----------
installments in accordance with the Company's general payroll practices and
shall be subject to required withholding. In addition, during the Employment
Period, Executive shall be entitled to participate in all of the Company's
employee benefit programs for which senior executive employees of the Company
and its Subsidiaries are generally eligible.
(b) The Company shall reimburse Executive for all out-of-pocket expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, Executive will be eligible to earn an
annual target bonus of up to 120% of the Base Salary to be based upon specific
bonus targets to be established on an annual basis by the Board. Such bonus
targets will generally focus on revenue growth and EBITDA growth.
4. Board Membership. With respect to all elections of directors during
----------------
the Employment Period and until the consummation of a Sale of the Company or a
Public Offering, Bain Capital Fund VI, L.P. and its affiliates will nominate and
vote for (and will not seek removal of) Executive to serve as a member of the
Board. Upon termination of the Employment Period, Executive shall resign as a
director of the Company and its Subsidiaries, as the case may be. Capitalized
terms used but not otherwise defined in this paragraph 4 shall have the meanings
set forth in the Executive Stock Purchase Agreement, dated as of the date
hereof, by and between the Company and Executive.
-2-
<PAGE>
5. Term.
----
(a) The Employment Period shall begin on the date hereof and shall
terminate (i) upon Executive's resignation (including for Good Reason), death or
Disability (as defined below), (ii) upon the termination by the Company without
Cause (as defined below) upon thirty (30) days written notice to Executive, and
(iii) upon the termination by the Company at any time with Cause.
(b) If the Employment Period is terminated by the Company without Cause or
the Executive resigns for Good Reason during the term of this Agreement, the
Company shall provide, and the Executive shall be entitled to receive, until the
later of (i) the third anniversary hereof, or (ii) the twelve (12) months
immediately following the termination of the Employment Period, the following
payments and benefits: (x) 125% of Executive's then current Base Salary, (y)
with respect to the period of time from the beginning of the fiscal year in
which termination occurs to the date of such termination, the bonus described in
Section 3(c) above if Executive would have otherwise been entitled to receive
such bonus had he not been terminated, it being understood that if the date of
such termination occurs prior to the last day of the fiscal year in respect of
which such bonus is awarded, then such bonus shall be prorated based upon the
number of days elapsed prior to Executive's date of termination, and (z) health
benefits currently being provided to Executive or otherwise comparable to those
provided by the Company to its senior executive employees. Any such amounts
payable under this Section 5(b) will be payable at such times as such amounts
would have been payable had Executive not been terminated. Notwithstanding
anything in this Agreement to the contrary, the Company shall have no obligation
to pay any amounts payable under this paragraph 5(b) during such times as
Executive is in material breach of any of paragraphs 6, 7 or 8 hereof. As a
condition to the Company's obligations (if any) to make severance payments
pursuant to this paragraph 5(b), Executive will execute and deliver a general
release in form and substance satisfactory to the Company.
(c) If the Employment Period is terminated by the Company for Cause or is
terminated pursuant to clause (a)(i) above (other than by Executive for
resignation for Good Reason), Executive shall be entitled to receive his Base
Salary through the date of termination.
(d) Except as otherwise provided above, all of Executive's rights to
fringe benefits and bonuses hereunder (if any) which accrue or become payable
after the termination of the Employment Period shall cease upon such
termination. The Company may offset any amounts Executive owes it or its
Subsidiaries against any amounts it owes Executive hereunder.
(e) For purposes of this Agreement, "Disability" shall mean any physical
----------
or mental incapacitation which results in Executive's inability to perform his
duties and responsibilities for the Company for a total of 120 days during any
twelve-month period, as determined by the Board in its good faith judgment.
(f) For purposes of this Agreement, "Cause" shall mean (i) the commission
-----
of a felony, (ii) or any other act or omission involving fraud with respect to
the Company or any of its
-3-
<PAGE>
Subsidiaries or any of their directors or shareholders, (iii) any material act
or omission involving dishonesty having an adverse effect on the Company or any
of its Subsidiaries or any of their directors or shareholders, (iv) gross
negligence or willful misconduct with respect to the Company or any of its
Subsidiaries or substantial failure (other than by reason of illness or
incapacity) to otherwise perform duties as reasonably directed, in any such case
described in this clause (iv) for thirty days after written notice from the
Board and an opportunity to cure, or (v) any other material breach of this
Agreement.
(g) For purposes of this Agreement, "Good Reason" shall mean without
-----------
Executive's consent, (i) a material reduction in Executive's status, title,
position, scope of duties, authority or responsibilities or material and
permanent assignment of duties and responsibilities to Executive which are
inconsistent with or additional to the duties and responsibilities generally
assigned to a chief executive officer, (ii) during such time as Executive serves
as Chief Executive Officer, removal from the Board other than in connection with
termination for Cause, or death or Disability of Executive, (iii) a reduction
(other than a reduction applicable to executive employees of the Company
generally) in Executive's Base Salary or maximum annual target bonus percentage
set forth in Section 3(c), (iv) a requirement by the Company that the Executive
relocate his principal residence or, subject to compliance with the last
sentence of Section 2(b), a requirement by the Company that the Executive
perform duties which would make continuation of his current residence
unreasonably difficult, (v) the failure to pay to Executive when due his Base
Salary or target bonus within 15 days after written demand therefor by
Executive, (vi) the adverse and substantial alteration in the nature or quality
of the office space within which Executive performs his duties or the
secretaries or administrative support provided to Executive, or (vii) the
failure by the Company to obtain an agreement from any successor or assign of
the Company to assume and agree to perform this Agreement.
6. Confidential Information. Executive acknowledges that the information,
------------------------
observations and data (including without limitation trade secrets, know-how,
research and product plans, customer lists, software, inventions, processes,
formulas, technology, designs, drawings, specifications, marketing and
advertising materials, distribution and sales methods and systems, sales and
profit figures and other technical or business information) disclosed or
otherwise revealed to him, or discovered or otherwise obtained by him, directly
or indirectly, while employed by the Company and its Subsidiaries concerning the
business or affairs of the Company or any of its Subsidiaries ("Confidential
------------
Information") are the property of the Company or such Subsidiary. Therefore,
- -----------
Executive agrees that, except as required by applicable law (in which case
Executive shall disclose the minimum amount required to be disclosed by
applicable law and shall consult with the Company to the maximum extent
practicable in developing such disclosure), he shall not disclose to any
unauthorized person or use for his own purposes (other than in his capacity as
an employee or director of the Company) any Confidential Information without the
prior written consent of the Board, unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of Executive's or any other senior or junior
management employee's acts or omissions. Executive shall deliver to the Company
at the termination of the Employment Period, or at any other time the Company
may request, all memoran-
-4-
<PAGE>
da, notes, plans, records, reports, computer tapes, printouts and software and
other documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined below) or the business of the Company or
any Subsidiary which he may then possess or have under his control. Executive
further agrees that he will not, during the Employment Period, improperly use or
disclose any proprietary or confidential information or trade secrets of any
former employer or other person or entity with which he has an agreement or duty
to keep such information or trade secrets in confidence, if any, and that he
will not bring onto the premises of the Company or any Subsidiary any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
7. Inventions and Intellectual Property Rights.
-------------------------------------------
(a) Executive agrees that he will promptly make full written disclosure to
the Board and will hold in trust for the sole right and benefit of the Company
and its Subsidiaries, and Executive hereby assigns to the Company or its
designee, his entire right, title and interest in and to, any and all
inventions, innovations, improvements, original works of authorship,
developments, concepts, methods, trade secrets, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable or
registrable under copyright or similar laws) which are solely or jointly
conceived, developed, made or reduced to practice, or caused to be conceived,
developed, made or reduced to practice, by Executive while employed by the
Company or its Subsidiaries (collectively "Work Product"); provided, however,
------------ -------- -------
that Executive shall not be required to assign to the Company Work Product that
he may develop entirely on his own time without using the Company's or any
Subsidiary's equipment, supplies, facilities or Confidential Information, except
for Work Product which either (i) relate at the time of their conception or
reduction to practice to the Company's business, or actual or demonstrably
anticipated research or development of the Company, or (ii) result from any work
performed by Executive for the Company. Executive acknowledges that any
original works of authorship which are made by him (solely or jointly with
others) within the scope of his employment and which are protectable by
copyright are "works made for hire," as that term is defined in the United
States Copyright Act.
(b) Executive represents to the Company that there are no inventions,
original works of authorship, developments, improvements or trade secrets which
were made by him prior to his employment with the Company or any Subsidiary,
which are owned by him or in which he has an interest, which may relate to the
Company's or its Subsidiaries' proposed business, products or research and
development and which are not assigned to the Company hereunder.
-5-
<PAGE>
(c) Executive agrees to assist the Company, or its designee, at the
Company's expense, during the Employment Period or thereafter, in every proper
way to secure the Company's rights in the Work Product and any copyrights,
patents, mask work rights or other intellectual property rights relating thereto
in any and all countries, including the disclosure to the Company of all
pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments, powers of attorney and all
other instruments which the Company shall deem necessary or appropriate in order
to apply for and obtain such rights and in order to assign and convey to the
Company, its successors, assigns and nominees the sole and exclusive rights,
title and interest in and to such Work Product, and any copyrights, patents,
mask work right or other intellectual property rights relating thereto.
8. Non-Compete, Non-Solicitation.
-----------------------------
(a) In further consideration of the compensation to be paid to Executive
hereunder, Executive acknowledges that in the course of his employment with the
Company he shall become familiar and during his employment with the Company
prior to the date hereof he has become familiar with the Company's trade secrets
and with other Confidential Information and Work Product concerning the Company
and its Subsidiaries and that his services have been and shall be of special,
unique and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that during the period beginning on the Closing Date and ending
on the second anniversary of the termination of the Employment Period (the
"Noncompete Period"), he shall not, directly or indirectly, either for himself
-----------------
or for any other person, partnership, corporation or company, own, manage,
control, participate in, consult with, render services for, permit his name to
be used or in any other manner engage in any business or enterprise which
manufactures, designs, produces or sells products which compete with products
that the Company currently produces or is in the process of developing anywhere
in the world where the Company currently conducts its business. For purposes of
this Agreement, the term "participate" includes any direct or indirect interest
in any enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, Executive,
franchisor, franchisee, creditor, owner or otherwise; provided that the
foregoing activities shall not include passive ownership of less than 2% of the
stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market or serving on the board of
directors of any organization that does not compete with the Company or its
Subsidiaries. Executive agrees that this covenant is reasonable with respect to
its duration, geographical area and scope.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary (other than by mass advertising to the general public, including by
newspaper or internet, but not including any solicitation by phone), (ii) hire
or employ any person who was an employee of the Company or any Subsidiary at any
time during the Employment Period to perform services described in paragraph
8(a), (iii) call on, solicit, or service any customer, supplier, licensee,
licensor or other business relation or prospective client of the Company or any
Subsidiary with respect to products and/or services that have been provided by
the
-6-
<PAGE>
Company, are currently being provided by the Company or which the Company is
currently in the process of developing, or (iv) induce or attempt to induce any
customer, supplier, licensee, licensor or other business relation of the Company
or any of its Subsidiaries to cease doing business with the Company or such
Subsidiary.
(c) Executive acknowledges that, in the course of his employment with the
Company and its Affiliates, he has and will become familiar with the
Confidential Information and Work Product of the Company and its Subsidiaries.
Executive further acknowledges that the scope of the business of the Company and
its Subsidiaries is independent of location (such that it is not practical to
limit the restrictions contained in this paragraph 8 to a specified county,
city, or part thereof) and that, therefore, as the President and Chief Executive
Officer of the Company, Executive has and will have direct or indirect
responsibility, oversight or duties with respect to all of the businesses of the
Company and its Subsidiaries and its and their current and prospective
employees, vendors, customers, clients and other business relations, and that,
accordingly, the geographical restriction contained in this paragraph 8 is
reasonable in all respects and necessary to protect the goodwill and
Confidential Information and Work Product of the Company and its Subsidiaries
and that, without such protection, the Company's and its Subsidiaries' customer
and client relations and competitive advantage would be materially adversely
effected. It is specifically recognized by Executive that his services to the
Company and its Subsidiaries are special, unique, and of extraordinary value,
that the Company and its Subsidiaries has a protectable interest in prohibiting
Executive as provided in this paragraph 8, that Executive is primarily
responsible for the growth and development of the Company and its Subsidiaries
and the creation and preservation of their goodwill, and that money damages are
insufficient to protect such interests, that such prohibitions would be
necessary and appropriate without regard to payments being made to Executive
hereunder, and that the Company would not enter this Agreement with Executive
and the merger contemplated by the Agreement and Plan of Merger executed by the
Company on January 20, 1999 would not have been consummated without the
restrictions contained in this paragraph 8. Executive further acknowledges that
the restrictions contained in this paragraph 8 do not impose an undue hardship
on him and, since he has general business skills which may be used in industries
other than that in which each of the Company and its Subsidiaries conduct their
business and do not deprive Executive of his livelihood. Executive agrees that
the covenants made in paragraphs 8(a) and 8(b) shall be construed as agreements
independent of any other provision(s) of this Agreement and shall survive any
order of a court of competent jurisdiction terminating any other provision(s) of
this Agreement.
9. Enforcement. If, at the time of enforcement of paragraph 6, 7 or 8 of
-----------
this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. Because
Executive's services are unique and because Executive has access to Confidential
Information and Work Product, and for the other reasons set forth herein, the
parties hereto agree that money damages would not be an adequate remedy for any
breach of this Agreement. Therefore, in the event a breach or threatened breach
of any of paragraphs 6, 7 or 8 of this Agreement that is continuing, the Company
or its successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to
-7-
<PAGE>
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security). In addition, in
the event of a breach or violation by Executive of paragraph 8, the Noncompete
Period shall be tolled until such breach or violation has been duly cured.
Executive agrees that the restrictions contained in paragraph 8 are reasonable.
10. Other Businesses. Except as expressly provided for herein, as long as
----------------
Executive is employed by the Company or any of its Subsidiaries, Executive
agrees that he will not, except with the express written consent of the Board,
become engaged in, or render services for, any business other than the business
of the Company, any of its Subsidiaries or any corporation, partnership or other
entity in which the Company or any of its Subsidiaries has an equity interest.
11. Executive's Representations. Executive hereby represents and warrants
---------------------------
to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
12. Survival. Paragraphs 6, 7 and 8 shall survive and continue in full
--------
force in accordance with their terms notwithstanding any termination of the
Employment Period.
13. Notices. Any notice provided for in this Agreement shall be in writing
-------
and shall be either personally delivered, mailed by first class mail (return
receipt requested), or sent by overnight courier service, to the recipient at
the address indicated below:
Notices to Executive:
--------------------
Hock E. Tan
1216 Old Gulph Road
Rosemont, PA 19010
-8-
<PAGE>
Notices to the Company:
----------------------
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chairman of the Board
With a copy to:
--------------
Pepper Hamilton LLP
3000 Two Logan Square
18/th/ and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
14. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in
-9-
<PAGE>
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Complete Agreement. This Agreement, those documents expressly referred
------------------
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
16. No Strict Construction. The language used in this Agreement shall be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
17. Counterparts. This Agreement may be executed in separate counterparts,
------------
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and inure
----------------------
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
19. Choice of Law. All issues and questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Pennsylvania, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the Commonwealth of
Pennsylvania or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the Commonwealth of Pennsylvania.
20. Amendment and Waiver. The provisions of this Agreement may be amended
--------------------
or waived only with the prior written consent of the Company (with Board
approval) and Executive, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
21. Dispute Resolution. Other than with respect to suits for injunctive or
------------------
other equitable relief, any dispute under this Agreement shall be resolved by
instituting, after thirty (30) days written notice to the other party, an
arbitration to be conducted in Philadelphia, Pennsylvania in accordance with the
Commercial Arbitration Rules (except as modified below) of the American
Arbitration Association and with the Expedited Procedures thereof (collectively,
the "Rules"). Each of the parties hereto agrees that such arbitration shall be
-----
conducted by a panel of three arbitrators, one of whom is selected by the
Company, one of whom is selected by the Executive and one of whom is mutually
agreeable to both parties; provided that such arbitrators shall each be a
retired judge or other qualified person who is experienced in deciding cases
concerning the matter which is the subject of the dispute.
-10-
<PAGE>
Each of the parties agrees that in any such arbitration that pre-arbitration
discovery shall be limited to the greatest extent provided by the Rules, that
the award shall be made in writing no more than 30 days following the end of the
proceeding, that the arbitration shall not be conducted as a class action, that
the arbitration award shall not include factual findings or conclusions of law,
that no punitive damages shall be awarded, and that all facts and circumstances
relating to such arbitration, including without limitation the existence of the
dispute and the ultimate resolution, shall be kept confidential. Any award
rendered by the arbitrators shall be final, binding and sole and exclusive with
respect to the subject matter thereof and judgment may be entered on it in any
court of competent jurisdiction. The losing party shall pay the fees and
expenses of both parties and the arbitrators. Notwithstanding the provisions of
this Section 21, nothing herein shall be construed in such a manner as to
prevent the Company from terminating Executive in accordance with the terms of
this Agreement.
* * * * *
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ illegible signature
---------------------------------
Name:
Its:
/s/ Hock E. Tan
------------------------------------
HOCK E. TAN
with respect to paragraph 4 only:
--------------------------------
BAIN CAPITAL FUND VI, L.P.
By: Bain Capital Partners VI, L.P.
Its: General Partner
By: Bain Capital Investors VI, Inc.
Its: General Partner
By: /s/ Michael Krupka
--------------------------------
Name: Michael Krupka
Its: Managing Director
<PAGE>
Exhibit 10.20
NON-COMPETE AGREEMENT
---------------------
THIS AGREEMENT is made and entered into as of May 11, 1999, by and among
Integrated Circuit Systems, Inc., a Pennsylvania corporation (the "Company"),
-------
and Hock E. Tan ("Executive").
---------
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of January 20, 1999 (as amended, the "Merger Agreement"), by and among
----------------
the Company and ICS Merger Corp., a Pennsylvania corporation ("ICS"), pursuant
---
to which ICS will be merged with and into the Company and the Company shall be
the surviving corporation. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Merger Agreement.
WHEREAS, Executive possesses certain knowledge and proprietary
information with respect to the Company, which, if disclosed or made available
to the Company's competitors, would have a material adverse effect on the
Company, and the Executive has been primarily responsible for the creation of
the goodwill inherent in the Company.
NOW, THEREFORE, in consideration of the mutual convenants contained
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree:
1. Non-Compete, Non-Solicitation.
-----------------------------
(a) In order to protect the value of the capital stock of the
Company acquired by ICS's stockholders pursuant to the Merger Agreement
(including the goodwill inherent in the Company as of the Closing Date),
Executive agrees that during the period beginning on the date of this Agreement
and ending on the second anniversary thereof (the "Noncompete Period"), he shall
-----------------
not, directly or indirectly, either for himself or for any other person,
partnership, corporation or company, own, manage, control, participate in,
consult with, render services for, permit his name to be used or in any other
manner engage in any business or enterprise which manufactures, designs,
produces or sells products which compete with products that the Company
currently produces or is in the process of developing anywhere in the world
where the Company currently conducts its business. For purposes of this
Agreement, the term "participate" includes any direct or indirect interest in
any enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, Executive,
franchisor, franchisee, creditor, owner or otherwise; provided that the
foregoing activities shall not include passive ownership of less than 2% of the
stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market or serving on the board of
directors of any organization that does not compete with the Company or its
Subsidiaries. Executive agrees that the covenant is reasonable with respect to
its duration, geographical area and scope.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary (other than by mass advertising to the general public, including by
newspaper or internet, but not including any solicitation by phone), (ii) hire
or
<PAGE>
employ any person who was an employee of the Company or any Subsidiary at any
time within the 180 day period prior to the date hereof to perform services
described in paragraph 1(a), (iii) call on, solicit, or service any customer,
supplier, licensee, licensor or other business relation or prospective client of
the Company or any Subsidiary with respect to products and/or services that have
been provided by the Company, are currently being provided by the Company or
which the Company is currently in the process of developing, or (iv) induce or
attempt to induce any customer, supplier, licensee, licensor, or other business
relation of the Company or any of its Subsidiaries to cease doing business with
the Company or such Subsidiary.
(c) Executive acknowledges that, in the course of his employment with the
Company and its Affiliates, he has become familiar with the Confidential
Information (as defined below) and Work Product (as defined below) of the
Company and its Subsidiaries. Executive further acknowledges that the scope of
the business of the Company and its Subsidiaries is independent of location
(such that) it is not practical to limit the restrictions contained in this
paragraph 1 to a specified county, city, or part thereof) and that, therefore,
as the President and Chief Executive Officer of the Company, Executive has had
direct or indirect responsibility, oversight or duties with respect to all of
the businesses of the Company and its Subsidiaries and its and their current and
prospective employees, vendors, customers, clients and other business relations,
and that, accordingly, the geographical restriction contained in this paragraph
1 is reasonable in all respects and necessary to protect the goodwill and
Confidential Information and Work Product of the Company and its Subsidiaries
and that, without such protection, the Company's and its Subsidiaries' customer
and client relations and competitive advantage would be materially adversely
effected. It is specifically recognized by Executive that his services to the
Company and its Subsidiaries have been special, unique, and of extraordinary
value, that the Company and its Subsidiaries has a protectable interest in
prohibiting Executive as provided in this paragraph 1, that Executive has been
primarily responsible for the growth and development of the Company and its
subsidiaries and the creation and preservation of their goodwill, and that money
damages are insufficient to protect such interests, that such prohibitions would
be necessary and appropriate without regard to payments being made to Executive
hereunder, and that the Company would not enter this Agreement with Executive
and the merger contemplated by the Merger Agreement would not have been
consummated without the restrictions contained in this paragraph 1. Executive
further acknowledges that the restrictions contained in this paragraph 1 do not
impose an undue hardship on him and, since he has general business skills which
may be used in industries other than that in which each of the Company and its
Subsidiaries conduct their business and do not deprive Executive of his
livelihood. Executive agrees that the covenants made in paragraph 1(a) and 1(b)
shall be construed as agreements independent of any other provision(s) of this
Agreement and shall survive any order of a court of competent jurisdiction
terminating any other provision(s) of this Agreement.
2. Confidential Information. Executive acknowledges that the information,
------------------------
observations and data (including without limitation trade secrets, know-how,
research and product plans, customer lists, software, inventions, processes,
formulas, technology, designs, drawings, specifications, marketing and
advertising materials, distribution and sales methods and systems, sales
and profit figures and other technical or business information) disclosed or
otherwise revealed to him, or discovered or otherwise obtained by him, directly
or indirectly, while employed by the Company and its Subsidiaries concerning the
business or affairs of the Company or any of its Subsidiaries
<PAGE>
("Confidential Information") are the property of the Company or such Subsidiary.
------------------------
Therefore, Executive agrees that, except as required by applicable law (in which
case Executive shall disclose the minimum amount required to be disclosed by
applicable law and shall consult with the Company to the maximum extent
practicable in developing such disclosure) he shall not disclose to any
unauthorized person or use for his own purposes (other than in his capacity as
an employee or director of the Company) any Confidential Information without the
prior written consent of the Board, unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of Executive's or any other senior or junior
management employee's acts of omissions. Executive shall deliver to the Company,
at any time as the Company may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product or
other business of the Company or any Subsidiary which he may then possess or
have under his control.
3. Inventions and Intellectual Property Rights.
-------------------------------------------
(a) Executive agrees that he will promptly make full written
disclosure to the Board and will hold in trust for the sole right and benefit of
the Company and its Subsidiaries, and Executive hereby assigns to the Company or
its designee, his entire right, title and interest in and to, any and all
inventions, innovations, improvements, original works of authorship,
developments, concepts, methods, trade secrets, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable or
registrable under copyright or similar laws) which have been solely or jointly
conceived, developed, made or reduced to practice, or caused to be conceived,
developed, made or reduced to practice, by Executive while employed by the
Company or its Subsidiaries (collectively "Work Product"): provided, however,
------------ -------- -------
that Executive shall not be required to assign to the Company Work Product that
he developed entirely on his own time without using the Company's or any
Subsidiary's equipment, supplies, facilities or Confidential Information, except
for Work Product which either (i) related at the time of their conception or
reduction to practice to the Company's business, or actual or demonstrably
anticipated research or development of the Company, or (ii) resulted from any
work performed by Executive for the Company. Executive acknowledges that any
original works of authorship which were made by him (solely or jointly with
others) within the scope of his employment and which are protectable by
copyright are "works made for hire," as that term is defined in the United
States Copyright Act.
(b) Executive represents to the Company that there are no
inventions, original works of authorship, developments, improvements or trade
secrets which were made by him prior to his employment with the Company or any
Subsidiary, which are owned by him or in which he has an interest, which may
relate to the Company's or its Subsidiaries' proposed business, products or
research and development and which are not assigned to the Company hereunder.
4. Enforcement. If, at the time of enforcement of paragraph 1, 2 or
-----------
3 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. Because
Executive's services are unique and because Executive has access to confidential
Information and work Product, and for
3
<PAGE>
the other reasons set forth herein, the parties hereto agree that money damages
would not be an adequate remedy for any breach of this Agreement. Therefore, in
the event a breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security). In addition, in the event of an alleged breach or violation by
Executive of paragraph 1, the Noncompete Period shall be tolled until such
breach or violation has been duly cured.
5. Executive's Representations. Executive hereby represents and warrants
---------------------------
to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
6. Survival. Paragraphs 1, 2 and 3 shall survive and continue in full
--------
force in accordance with their terms notwithstanding any termination of this
Agreement.
7. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail
(return receipt requested), or sent by overnight courier service, to the
recipient at the address indicated below:
Notices to Executive:
--------------------
Hock E. Tan
1216 Old Gulph Road
Rosemont, PA 19010
Notices to the Company:
----------------------
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chairman of the Board
With a copy to:
--------------
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
4
<PAGE>
Philadelphia, PA 19103
Facsimile: (215) 981-4570
Attn: Robert A. Friedel
and
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
8. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
9. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
10. No Strict Construction. The language used in this Agreement shall be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
5
<PAGE>
11. Counterparts. This Agreement may be executed in separate counterparts,
------------
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
12. Successors and Assigns. This Agreement is intended to bind and inure
----------------------
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
13. Choice of Law. All issues and questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Pennsylvania, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the Commonwealth of
Pennsylvania or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the Commonwealth of Pennsylvania.
14. Amendment and Waiver. The provisions of this Agreement may be amended
--------------------
or waived only with the prior written consent of the Company (with Board
approval) and Executive, and no course of conduct of failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
* * * * *
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Hock E. Tan
--------------------------
Name:
Its:
/s/ Hock E. Tan
-----------------------------
HOCK E. TAN
<PAGE>
Exhibit 10.21
BAIN CAPITAL ADVISORY AGREEMENT
This ADVISORY AGREEMENT (this "Agreement") is made and entered into as of
May 11, 1999, by and between Integrated Circuit Systems, Inc., a Pennsylvania
corporation (the "Company"), and Bain Capital Partners VI, L.P., a Delaware
limited partnership Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Agreement and Plan of Merger, dated as of
January 20, 1999, as amended, by and among the Company and ICS Merger Corp., a
Pennsylvania corporation (the "Merger Agreement").
WHEREAS, the Company desires to retain Bain and Bain desires to perform for
the Company and its subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of ten (10)
years commencing on the date hereof (the "Term"), and shall be automatically
extended thereafter on a year to year basis unless the Company or Bain provides
written notice of its desire to terminate this Agreement to the other party 90
days prior to the expiration of the Term or any extension thereof provided that
the Term shall terminate after giving effect to such time (if any) that the Bain
Stockholders and their Affiliates no longer hold at least 50% of the Common
Stock of the Company that they own as of the date hereof. No termination of this
Agreement, whether pursuant to this paragraph or otherwise, shall affect the
Company's obligations with respect to the fees, costs and expenses incurred by
Bain in rendering services hereunder and not reimbursed by the Company as of the
effective date of such termination. For purposes hereof, "Bain Stockholders"
shall mean Bain Capital Fund VI, L.P., BCIP Trust Associates II, BCIP Trust
Associates II-B, BCIP Associates II-B, BCIP Associates, and BCIP Associates
II-C, PEP Investments PTY Limited., Randolph Street Partners II and Randolph
Street Partners 1998 DIF, L.L.C.
2. Services. Bain shall perform or cause to be performed such services for
the Company and its subsidiaries as directed by the Company's board of
directors, which may include, without limitation, the following:
(a) general executive and management services;
(b) identification, support, negotiation and analysis of acquisitions
and dispositions by the Company or its subsidiaries;
(c) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements;
<PAGE>
(e) marketing functions, including monitoring of marketing plans and
strategies;
(f) human resource functions, including searching and hiring of
executives; and
(g) other services for the Company and its subsidiaries upon which the
Company's board of directors and Bain agree.
3. Advisory Fee. Payment for services rendered by Bain and/or its
affiliates incurred in connection with the performance of services pursuant to
this Agreement shall be $750,000 per annum, plus reasonable out-of-pocket
expenses of Bain and/or its affiliates, payable by the Company to Bain or its
designees on a quarterly basis in advance commencing as of the date hereof.
4. Transaction Fees.
(a) The Company hereby agrees to pay to Bain or its designees on the
Closing Date a fee for services rendered in connection with the structuring
of the financing for the transactions contemplated by the Merger Agreement
and certain other management services. Such fees shall be payable to Bain
or its designees by wire transfer in an amount not to exceed 1.67% of the
aggregate value of the financing for the transactions contemplated by the
Merger Agreement ("Closing Fee") plus reasonable out-of-pocket expenses
(with it being understood that 40% of any Closing Fee actually paid shall
be directed by Bain to be paid by the Company to The Bear Stearns Companies
Inc. or its Affiliates pursuant to the terms of the Bear Stearns Advisory
Agreement, dated as of the date hereof).
(b) In addition, during the term of this Agreement, the Company shall
pay to Bain or its designees for any transaction in which Bain is
materially involved in sourcing, evaluating, financing, negotiating or
otherwise managing, a transaction fee in connection with the consummation
of each acquisition, divestiture or financing by the Company or its
subsidiaries in an amount equal to 1% of the aggregate value of such
transaction (the "Transaction Fee") plus reasonable out-of-pocket expenses
(with it being understood that 25% of any Transaction Fee actually paid
shall be directed by Bain to be paid by the Company to The Bear Stearns
Companies Inc. or its Affiliates pursuant to the terms of the Bear Stearns
Advisory Agreement, dated as of the date hereof).
5. Personnel. Bain shall provide and devote to the performance of this
Agreement such partners, employees and agents of Bain as Bain shall deem
appropriate to the furnishing of the services required.
6. Liability. Neither Bain nor any other Indemnitee (as defined in Section
7 below) shall be liable to the Company or its subsidiaries or affiliates for
any loss, liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss,
liability, damage or expense shall be proven to result directly from
-2-
<PAGE>
gross negligence, willful misconduct or bad faith on the part of an Indemnitee
acting within the scope of such person's employment or authority. Bain makes no
representations or warranties, express or implied, in respect of the services to
be provided by Bain or any of the other Indemnitees. Except as Bain may
otherwise agree in writing after the date hereof: (i) Bain shall have the right
to and shall have no duty (contractual or otherwise) not to, directly or
indirectly: (A) engage in the same or similar business activities or lines of
business as the Company, including those competing with the Company and (B) do
business with any client or customer of the Company; (ii) neither Bain nor any
officer, director, employee, partner, affiliate or associated entity thereof
shall be liable to the Company or its subsidiaries or affiliates for breach of
any duty (contractual or otherwise) by reason of any such activities of or of
such person's participation therein; and (iii) in the event that Bain acquires
knowledge of a potential transaction or matter that may be a corporate
opportunity for both the Company and Bain or any other person, Bain shall have
no duty (contractual or otherwise) to communicate or present such corporate
opportunity to the Company and, notwithstanding any provision of this Agreement
to the contrary, shall not be liable to the Company or its affiliates for breach
of any duty (contractual or otherwise) by reasons of the fact that Bain directly
or indirectly pursues or acquires such opportunity for itself, directs such
opportunity to another person, or does not present such opportunity to the
Company. In no event will either party hereto be liable to the other for any
indirect, special, incidental or consequential damages, including lost profits
or savings, whether or not such damages are foreseeable, or in respect of any
liabilities relating to any third party claims (whether based in contract, tort
or otherwise) other than the Claims (as defined in Section 7 below) relating to
the service to be provided by Bain hereunder.
7. Indemnity. The Company and its subsidiaries shall defend, indemnify and
hold harmless each of Bain, its affiliates, partners, employees and agents
(collectively, the "Indemnitees") from and against any and all loss, liability,
damage or expenses arising from any claim by any person with respect to, or in
any way related to, the performance of services contemplated by this Agreement
(including attorneys' fees) (collectively, "Claims") resulting from any act or
omission of any of the Indemnitees, other than for Claims which shall be proven
to be the direct result of gross negligence, bad faith or willful misconduct by
an Indemnitee. The Company and its subsidiaries shall defend at its own cost and
expense any and all suits or actions (just or unjust) which may be brought
against the Company, any of its subsidiaries or any of the Indemnitees or in
which any of the Indemnitees may be impleaded with others upon any Claims, or
upon any matter, directly or indirectly, related to or arising out of this
Agreement or the performance hereof by any of the Indemnitees, except that if
such damage shall be proven to be the direct result of gross negligence, bad
faith or willful misconduct by an Indemnitee, then Bain shall reimburse the
Company and its subsidiaries for the costs of defense and other costs incurred
by the Company and its subsidiaries.
-3-
<PAGE>
8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chief Executive Officer
With a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
To Bain:
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Facsimile: (617) 572-3274
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
9. Assignment. Neither party may assign any obligations hereunder to any
other party without the prior written consent of the other party (which consent
shall not be unreasonably withheld); provided that Bain may, without consent of
the Company, assign its rights and obligations under this Agreement to any of
its affiliates (but only if such affiliate is a person or entity (excluding any
Bain portfolio companies) controlled by Bain, or in the case of an affiliate
which is a partnership, only if Bain is the ultimate general partner of such
partnership). The assignor shall remain liable for the performance of any
assignee.
-4-
<PAGE>
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and conditions
hereof constitute the entire agreement between the parties hereto with respect
to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of the law of any jurisdiction other than the Commonwealth of
Massachusetts.
13. Construction. References herein to this Agreement, the Bear Stearns
Advisory Agreement or any other agreement shall be references to such agreement,
as amended, modified, supplemented or waived from time to time.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
-------------------------------
By: Hock E. Tan
Its: Chief Executive Officer
BAIN CAPITAL PARTNERS VI, L.P.
By: BAIN CAPITAL INVESTORS VI, INC.
Its: General Partner
By: /s/ Michael Krupka
--------------------------
Name:
Its:
-6-
<PAGE>
Exhibit 10.22
BEAR STEARNS ADVISORY AGREEMENT
This ADVISORY AGREEMENT (this "Agreement") is made and entered into as of
May 11, 1999, by and between Integrated Circuit Systems, Inc., a Pennsylvania
corporation (the "Company"), and ICST Acquisition Corp., a Delaware corporation
("Bear Stearns"). Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Agreement and Plan of Merger, dated as of
January 20, 1999, as amended, by and among the Company and ICS Merger Corp., a
Pennsylvania corporation (the "Merger Agreement").
WHEREAS, the Company desires to retain Bear Stearns and Bear Stearns
desires to perform for the Company and its subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of ten (10)
years commencing on the date hereof (the "Term"), and shall be automatically
extended thereafter on a year to year basis unless the Company or Bear Stearns
provides written notice of its desire to terminate this Agreement to the other
party 90 days prior to the expiration of the Term or any extension thereof
provided that this Agreement shall terminate upon the termination of the Bain
Capital Advisory Agreement as in existence on the date hereof and as amended,
modified or replaced (the "Bain Advisory Agreement"), dated as of the date
hereof, by and between the Company and Bain Capital Partners VI, L.P. (together
with its successors, assigns and designees, "Bain"). No termination of this
Agreement, whether pursuant to this paragraph or otherwise, shall effect the
Company's obligations with respect to the fees, costs and expenses incurred by
Bear Stearns in rendering services hereunder and not reimbursed by the Company
as of the effective date of such termination.
2. Services. Bear Stearns shall perform or cause to be performed such
services for the Company and its subsidiaries as directed by the Company's board
of directors, which may include, without limitation, the following:
(a) general executive and management services;
(b) identification, support, negotiation and analysis of acquisitions
and dispositions by the Company or its subsidiaries;
(c) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness;
<PAGE>
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements;
(e) marketing functions, including monitoring of marketing plans and
strategies:
(f) human resource functions, including searching and hiring of
executives; and
(g) other services for the Company and its subsidiaries upon which the
Company's board of directors and Bear Stearns agree.
3. Advisory Fee. Payment for services rendered by Bear Stearns and/or its
affiliates incurred in connection with the performance of services pursuant to
this Agreement shall be in an amount equal to one-third of the payments made by
the Company to Bain and its permitted assignees pursuant to the terms of the
Bain Advisory Agreement during the same period of time, plus reasonable
out-of-pocket expenses of Bear Stearns and/or its affiliates, payable by the
Company to Bear Stearns or its designees on a quarterly basis in advance
commencing as of the date hereof (such that, pursuant to the Bain Advisory
Agreement in effect as of the date hereof (and assuming no amendment,
modification or waiver thereof), Bain would be entitled to $750,000 per annum
and Bear Stearns would be entitled to $250,000 per annum, in each case plus
reasonable out-of-pocket expenses).
4. Transaction Fees.
(a) The Company hereby agrees to pay to Bear Stearns or its designees
on the Closing Date a fee for services rendered in connection with the
structuring of the financing for the transactions contemplated by the
Merger Agreement and certain other management services. Such fees shall be
payable to Bear Stearns or its designees by wire transfer in an amount not
to exceed 40% of the aggregate value of the closing fees paid to Bain and
its designees pursuant to clause 4(a) of the Bain Advisory Agreement, plus
reasonable out-of-pocket expenses.
(b) In addition, during the term of this Agreement, the Company shall
pay to Bear Stearns or its designees, for any transaction in which Bain
receives a transaction fee in connection with the consummation of each
acquisition, divestiture or financing by the Company or its subsidiaries in
an amount equal to 25% of the aggregate value of transaction fees paid to
Bain and its designees pursuant to clause 4(b) of the Bain Advisory
Agreement for such transaction, plus reasonable out-of-pocket expenses.
5. Personnel. Bear Stearns shall provide and devote to the performance of
this Agreement such partners, employees and agents of Bear Stearns as Bear
Stearns shall deem appropriate to the furnishing of the services required.
6. Liability. Neither Bear Stearns nor any other Indemnitee (as defined in
Section 7 below) shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage
-2-
<PAGE>
or expense arising out of or in connection with the performance of services
contemplated by this Agreement, unless such loss, liability, damage or expense
shall be proven to result directly from gross negligence, willful misconduct or
bad faith on the part of an Indemnitee acting within the scope of such person's
employment or authority. Bear Stearns makes no representations or warranties,
express or implied, in respect of the services to be provided by Bear Stearns or
any of the other Indemnitees. Except as Bear Stearns may otherwise agree in
writing after the date hereof: (i) Bear Stearns shall have the right to, and
shall have no duty (contractual or otherwise) not to, directly or indirectly:
(A) engage in the same or similar business activities or lines of business as
the Company, including those competing with the Company and (B) do business with
any client or customer of the Company; (ii) neither Bear Stearns nor any
officer, director, employee, partner, affiliate or associated entity thereof
shall be liable to the Company or its subsidiaries or affiliates for breach of
any duty (contractual or otherwise) by reason of any such activities of or of
such person's participation therein; and (iii) in the event that Bear Stearns
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for both the Company and Bear Stearns or any other person, Bear
Stearns shall have no duty (contractual or otherwise) to communicate or present
such corporate opportunity to the Company and, notwithstanding any provision of
this Agreement to the contrary, shall not be liable to the Company or its
affiliates for breach of any duty (contractual or otherwise) by reasons of the
fact that Bear Stearns directly or indirectly pursues or acquires such
opportunity for itself, directs such opportunity to another person, or does not
present such opportunity to the Company. In no event will either party hereto be
liable to the other for any indirect, special, incidental or consequential
damages, including lost profits or savings, whether or not such damages are
foreseeable, or in respect of any liabilities relating to any third party claims
(whether based in contract, tort or otherwise) other than the Claims (as defined
in Section 7 below) relating to the service to be provided by Bear Stearns
hereunder.
7. Indemnity. The Company and its subsidiaries shall defend, indemnify and
hold harmless each of Bear Stearns, its affiliates, partners, employees and
agents (collectively, the "Indemnitees") from and against any and all loss,
liability, damage or expenses arising from any claim by any person with respect
to, or in any way related to, the performance of services contemplated by this
Agreement (including attorneys' fees) (collectively, "Claims") resulting from
any act or omission of any of the Indemnitees, other than for Claims which shall
be proven to be the direct result of gross negligence, bad faith or willful
misconduct by an Indemnitee. The Company and its subsidiaries shall defend at
its own cost and expense any and all suits or actions (just or unjust) which may
be brought against the Company, any of its subsidiaries or any of the
Indemnitees or in which any of the Indemnitees may be impleaded with others upon
any Claims, or upon any matter, directly or indirectly, related to or arising
out of this Agreement or the performance hereof by any of the Indemnitees,
except that if such damage shall be proven to be the direct result of gross
negligence, bad faith or willful misconduct by an Indemnitee, then Bear Stearns
shall reimburse the Company and its subsidiaries for the costs of defense and
other costs incurred by the Company and its subsidiaries.
-3-
<PAGE>
8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Valley Forge, PA 19482
Attn: Chief Executive Officer
With a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attn: Robert A. Friedel
To Bear Stearns:
ICST Acquisition Corp.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 20th Floor
New York, NY 10167
Facsimile: (212) 272-2000
Attn: John D. Howard
Bodil M. Arlander
With a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Richard L. Perkal
To Bain:
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Facsimile: (617) 572-3274
Attn: David Dominik
Michael Krupka
Yoo Jin Kim
-4-
<PAGE>
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Jeffrey C. Hammes, P.C.
Jeffrey Seifman
9. Assignment. Neither party may assign any obligations hereunder to any
other party without the prior written consent of the other party (which consent
shall not be unreasonably withheld); provided that Bear Stearns may, without
consent of the Company, assign its rights and obligations under this Agreement
to any of its affiliates, provided that such affiliate is a person or entity
directly or indirectly controlled by or under common control with The Bear
Stearns Companies Inc. The assignor shall remain liable for the performance of
any assignee.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and conditions
hereof constitute the entire agreement between the parties hereto with respect
to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party and by Bain. All issues concerning this agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the law of any jurisdiction other than the State of New York.
13. Construction. References herein to this Agreement, the Bain Advisory
Agreement or any other agreement shall be references to such agreement, as
amended, modified, supplemented or waived from time to time.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
----------------------------------
By: Hock E. Tan
Its: Chief Executive Officer
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
----------------------------------
Name: Bodil Arlander
Its: Vice President
Acknowledged and accepted:
BAIN CAPITAL, PARTNERS VI, LP. INC.
By: BAIN CAPITAL INVESTORS VI, INC.
Its: General Partner
By: ________________________
Name: ________________________
Its: ________________________
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
----------------------------------
By: Hock E. Tan
Its: Chief Executive Officer
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
---------------------------
Name: Bodil Arlander
Its: Vice President
Acknowledged and accepted:
BAIN CAPITAL, PARTNERS VI, LP. INC.
By: BAIN CAPITAL INVESTORS VI, INC.
Its: General Partner
By:____________________________
Name:__________________________
Its:___________________________
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
-------------------------------
By: Hock E.Tan
Its: Chief Executive Officer
ICST ACQUISITION CORP.
By: /s/ Hock E. Tan
--------------------------
Name:
Its:
Acknowledged and accepted:
BAIN CAPITAL, PARTNERS VI, LP. INC.
By: BAIN CAPITAL INVESTORS VI, INC.
Its: General Partner
By: /s/ [ILLEGIBLE]
--------------------
Name: ___________________
Its: ___________________
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
--------------------------------
By: Hock E. Tan
Its: Chief Executive Officer
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
------------------------
Name: Bodil Arlander
Its: Vice President
Acknowledged and accepted:
BAIN CAPITAL, INC.
By: ____________________
Name: ____________________
Its: ____________________
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
--------------------------------
By: Hock E. Tan
Its: Chief Executive Officer
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
------------------------
Name: Bodil Arlander
Its: Vice President
Acknowledged and accepted:
BAIN CAPITAL, INC.
By: ____________________
Name: ____________________
Its: ____________________
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
INTEGRATED CIRCUIT SYSTEMS, INC.
/s/ Hock E. Tan
--------------------------------
By: Hock E. Tan
Its: Chief Executive Officer
ICST ACQUISITION CORP.
By: /s/ Bodil Arlander
------------------------
Name: Bodil Arlander
Its: Vice President
Acknowledged and accepted:
BAIN CAPITAL, INC.
By: ____________________
Name: ____________________
Its: ____________________
<PAGE>
EXHIBIT 12.1
INTEGRATED CIRCUIT SYSTEMS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Unaudited
Pro Forma
Year Ended
Fiscal Year July, 3
1995 1996 1997 1998 1999 1999
------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations,
before income taxes 13,634 4,954 (1,350) 34,220 28,363 18,444
Fixed charges:
Interest expense 715 403 63 64 2,955 18,852
Rentals (1/3 of all Lease rentals) 171 179 145 263 571 571
------ ----- ------ ------ ------ ------
Total earnings plus fixed charges 14,520 5,536 (1,142) 34,547 31,889 37,867
====== ===== ====== ====== ====== ======
Total fixed charges 886 582 208 327 3,526 19,423
Ratio of earnings to fixed charges 16.4x 9.5x (5.5x) 105.7x 9.0x 1.9x
</TABLE>
<PAGE>
Exhibit 16.1
October 6, 1999
Securities and Exchange
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Integrated Circuit Systems, Inc.
and, under the date of August 4, 1999, we reported on the consolidated financial
statements of Integrated Circuit Systems, Inc. and subsidiaries as of and for
the years ended July 3, 1999 and June 27, 1998. On August 10, 1999, we were
notified that Integrated Circuit Systems, Inc. engaged PricewaterhouseCoopers
LLP ("PwC") as its principal accountants for the fiscal year ending July 1, 2000
and that the auditor-client relationship with KPMG LLP would be terminated upon
the completion of the audit of the Company's consolidated financial statements
as of and for the year ended July 3, 1999 and the issuance of our report
thereon. We have read Integrated Circuit Systems, Inc.'s statements included
under the caption "Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure" included in the Company's Registration Statement on
Form S-4, and we agree with such statements, except that we are not in a
position to agree or disagree with Integrated Circuit Systems Inc.'s statements
in the second paragraph of the above referenced caption that PwC was consulted
on issues related to accounting principles or the type of audit opinion to be
issued with respect to the Company's financial statements or that PwC was
selected based primarily on the fact that PwC typically serves as independent
accountants for the portfolio companies of certain of their shareholders.
Very truly yours,
/s/ KPMG LLP
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
The Board of Directors and Stockholders
Integrated Circuit Systems, Inc.:
The audits referred to in our report dated August 4, 1999, included the related
financial statement schedule as of July 3, 1999, and for each of the years in
the three-year period ended July 3, 1999, included in the registration
statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Experts" and "Selected Historical Consolidated
Financial Data" in the prospectus.
/s/ KPMG LLP
Philadelphia, Pennsylvania
October 6, 1999
<PAGE>
EXHIBIT 25.1
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2) ____X___
________________________________________
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
29-2933369
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
Union Trust Building, Suite 325
501 Grant Street, Pittsburgh, PA 15219
(Address of principal executive offices) (Zip Code)
William H. McDavid
The Chase Manhattan Bank
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
Integrated Circuit Systems, Inc.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-2000174
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2435 Boulevard of the Generals
Valley Forge, PA 19482-0968
(Address of principal executive offices) (Zip Code)
-----------------------------------------------
11 1/2% Senior Subordinated Notes Due 2009
(Title of the indenture securities)
--------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
No responses are included for Items 3-15 of this Form T-1 because the obligor
is not in default as provided under Item 13.
Item 16. List of Exhibits
----------------
List below all exhibits filed as a part of this Statement of Eligibility.
1. Exhibit T1A(a) A copy of the Articles of Association of the Trustee as now
now in effect.
2. Exhibit T1A(b) A copy of the Certificate of Authority of the Trustee
(previously known as New Trust Company, National
Association,) to commence business. Also included in Exhibit
TIA(b) are letters dated November 24, 1997 from the
Comptroller of the Currency authorizing the exercise of
fiduciary powers by the Trustee and acknowledging the name
change of the Trustee.
3. Exhibit T1A(c) The Authorization of the Trustee to exercise corporate trust
powers is contained in Exhibit T1A(b).
4. Exhibit T1B A copy of the By-Laws of the Trustee as now in effect.
5. Exhibit T1C Not applicable
6. Exhibit T1D The Trustee's consent required by Section 321(b) of the Act.
7. Exhibit T1E A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its
supervising or examining authority.
8. Exhibit T1F Not applicable
9. Exhibit T1G Not applicable
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chase Manhattan Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
Philadelphia and State of Pennsylvania, on the 30th day of September, 1999.
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
By /s/ S. R. Schaaf
----------------
S. R. Schaaf
Vice President
<PAGE>
Exhibit T1A(a)
[LOGO OF CHASE MANHATTAN APPEARS HERE]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
CHARTER NO. 23548
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to perform any lawful activities of
a national bank, the undersigned do enter into the following Articles of
Association:
FIRST. The title of this Association shall be Chase Manhattan Trust Company,
National Association (the "Association").
SECOND. The main office of the Association shall be in the City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania. The business of the
Association shall be limited to the fiduciary powers and the support of
activities incidental to the exercise of those powers. The Association will
obtain the prior written approval of the Office of the Comptroller of the
Currency before amending these Articles of Association to expand the scope of
its activities and services.
THIRD. The board of directors of this Association shall consist of not less
than five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his
directorship, shall own common or preferred stock of the Association or of a
holding company owning the Association, with an aggregate par, fair market or
equity value of not less than $1,000. Any vacancy in the board of directors may
be filled by action of the shareholders or a majority of the remaining
directors.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It
shall be held at the main office or any other convenient place the board of
directors may designate, on the day of each year specified therefore in the by-
laws, or if that day falls on a legal holiday in the state in which the
Association is located, on the next following banking day. If no election is
held on the day fixed or in event of a legal holiday, on the following banking
day, an election may be held on any subsequent day within 60 days of the day
fixed, to be designated by the board of directors, or, if the directors fail to
fix the day, by shareholders representing two-thirds of the shares issued and
outstanding. Advance notice of the meeting may be duly waived by the sole
shareholder in accordance with 12 C.F.R. 7.2001.
A director may resign at any time by delivering written notice to the board of
directors, its Chairperson, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause.
FIFTH. The authorized amount of capital stock of this Association shall be five
million dollars ($5,000,000), divided into fifty thousand (50,000) shares of
common stock of the par value of one hundred dollars ($ 100) each; but said
capital stock may be increased or decreased from time to time, according to the
provisions of the laws of the United States.
<PAGE>
No holder of shares of the capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued, or sold, nor
any right to subscription to any thereof other than such, if any, as the board
of directors, in its discretion may from time to time determine and at such
price as the board of directors may from time to time fix.
Unless otherwise specified in the Articles of Association or required by law,
(1) all matters requiring shareholder action, including amendments to the
Articles of Association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors may appoint one of its members President of this
Association, and one of its members Chairperson of the board or two of its
members as Co-Chairpersons of the board, and shall have the power to appoint one
or more Vice Presidents, a Secretary who shall keep minutes of the directors'
and shareholders' meetings and be responsible for authenticating the records of
the Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the board of
directors in accordance with the by-laws.
<PAGE>
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the
Association.
(2) Delegate the performance of its duties, but not the responsibility for its
duties, to the officers, employees, and agents of the Association.
(3) Fix the compensation and enter into employment contracts with its officers
and employees upon reasonable terms and conditions consistent with
applicable law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and fix the penalty thereof.
(6) Ratify written policies authorized by the Association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of the
Association shall be made, provided that nothing herein shall restrict the
power of shareholders to increase or decrease the capital of the
Association in accordance with law.
(8) Manage and administer the business and affairs of the Association.
(9) Adopt initial by-laws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of the
Association.
(10) Amend or repeal by-laws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a board of directors to
perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other location permitted under applicable law, without
the approval of the shareholders, and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location permitted under applicable law, without the approval of the
shareholders subject to approval by the Office of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue until
termination according to the laws of the United States.
NINTH. These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The Association's board of directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
<PAGE>
Exhibit T1B
[LOGO]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
BY-LAWS
Article I. Meetings of Shareholders
Section 1.1. Annual Meeting. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the Association, or such other
place as the board may designate, and at such time in each year as may be
designated by the board of directors. Unless otherwise provided by law, notice
of the meeting may be waived by the Association's sole shareholder in accordance
with 12 C.F.R. (S) 7.2001. If, for any cause, an election of directors is not
made on that date, or in the event of a legal holiday, on the next following
banking day, an election may be held on any subsequent day within 60 days of the
date fixed, to be designated by the board, or, if the directors fail to fix the
date, by shareholders representing two thirds of the shares issued and
outstanding.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by a majority of the board of directors or by any one or more
shareholders owning, in the aggregate, not less than twenty-five percent of the
stock of the Association or by the Chairperson of the board of directors or the
President. Unless otherwise provided by law, advance notice of a special
meeting may be waived by the Association's Sole Shareholder in accordance with
12 C.F.R. (S) 7.2001.
Section 1.3. Nominations of Directors. Nominations for election to the board
of directors may be made by the board of directors or by any stockholder of any
outstanding class of capital stock of the Association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of
the existing management of the Association, shall be made in writing and shall
be delivered or mailed to the President of the Association and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than 21 days' notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
President of the Association and to the Comptroller of the Currency not later
than the close of business on the seventh (7th) day following the day on which
the notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder.
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the Association that
will be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Association owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
Section 1.4. Proxies. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing, but no officer or employee of this
Association shall act as proxy. Proxies shall be valid only for one meeting to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and filed with the records of the meeting. Proxies with rubber stamped
facsimile signatures may be used and unexecuted proxies may be counted upon
receipt of a confirming telegram from the shareholder. Proxies meeting above
requirements submitted at any time during a meeting shall be accepted.
Section 1.5. Quorum. A majority of the outstanding capital stock, represented
in person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law, or by the shareholders or directors pursuant
to Section 10.2, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. A
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
Articles of Association, or by the shareholders or directors pursuant to Section
10.2. Any action required or permitted to be taken by the shareholders may be
taken without a meeting by unanimous written consent of the
<PAGE>
shareholders to a resolution authorizing the action. The resolution and the
written consent shall be filed with the minutes of the proceedings of the
shareholders.
Article II. Directors
Section 2.1. Board of Directors. The board of directors ("board") shall have
the power to manage and administer the business and affairs of the Association.
Except as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by the board.
Section 2.2. Number. The board shall consist of not less than five nor more
than twenty-five persons, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of a majority of the shareholders at any
meeting thereof; provided, however, that a majority of the full board may not
--------- --------
increase the number of directors to a number which: (1) exceeds by more than
two the number of directors last elected by shareholders where such number was
15 or less; and (2) exceeds by more than four the number of directors last
elected by shareholders where such number was 16 or more, but in no event shall
the number of directors exceed 25.
Section 2.3. Organization Meeting. The Secretary shall notify the directors-
elect of their election and of the time at which they are required to meet at
the main office of the Association to organize the new board and elect and
appoint officers of the Association for the succeeding year. Such meeting shall
be held on the day of the election or as soon thereafter as practicable, and, in
any event, within 30 days thereof. If, at the time fixed for such meeting,
there shall not be a quorum, the directors present may adjourn the meeting, from
time to time, until a quorum is obtained.
Section 2.4. Regular Meetings. The time and location of regular meetings of
the board shall be set by the board. Such meetings may be held without notice.
Any business may be transacted at any regular meeting. The board may adopt any
procedures for the notice and conduct of any meetings as are not prohibited by
law.
Section 2.5. Special Meetings. Special meetings of the board may be called at
the request of the Chairperson or Co-Chairperson of the board, the President, or
three or more directors. Each member of the board shall be given notice stating
the time and place, by telegram, telephone, letter or in person, of each such
special meeting at least one day prior to such meeting. Any business may be
transacted at any special meeting.
Section 2.6. Action by the Board. Except as otherwise provided by law,
corporate action to be taken by the board shall mean such action at a meeting of
the board. Any action required or permitted to be taken by the board or any
committee of the board may be taken without a meeting if all members of the
board or the committee consent in writing to a resolution authorizing the
action. The resolution and the written consents thereto shall be filed with the
minutes of the proceedings of the board or committee. Any one or more members
of the board or any committee may participate in a meeting of the board or
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at such
meeting.
Section 2.7. Waiver of Notice. Notice of a special meeting need not be given
to any director who submits a signed waiver of notice, whether before or after
the meeting, or who attends the meeting without protesting, prior thereto or at
its commencement, the lack of notice to him or her.
Section 2.8. Quorum and Manner of Acting. Except as otherwise required by law,
the Articles of Association or these by-laws, a majority of the directors shall
constitute a quorum for the transaction of any business at any meeting of the
board and the act of a majority of the directors present and voting at a meeting
at which a quorum is present shall be the act of the board. In the absence of a
quorum, a majority of the directors present may adjourn any meeting, from time
to time, until a quorum is present and no notice of any adjourned meeting need
be given. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 2.9. Vacancies. In the event a majority of the full board increases
the number of directors to a number which exceeds the number of directors last
elected by shareholders, as permitted by Section 2.2, directors may be appointed
to fill the resulting vacancies by vote of such majority of the full board. In
the event of a vacancy in the board for any other cause, a director may be
appointed to fill such vacancy by vote of a majority of the remaining directors
then in office.
<PAGE>
Section 2.10. Removal of Directors. The vacancy created by the removal of a
director pursuant to this Section may be filled by the board in accordance with
Section 2.9 of these by-laws or by the shareholders.
Article III. Committees
Section 3.1. Executive Committee. There may be an executive committee
consisting of the Chairperson or Co-Chairperson of the board and not less than
two other directors appointed by the board annually or more often. Subject to
the limitations in Section 3.4(g) of these by-laws, the executive committee
shall have the maximum authority permitted by law.
Section 3.2. Audit Committee. There may be an audit committee composed of not
less than two directors, exclusive of any active officers, appointed by the
board annually or more often, whose duty it shall be to make an examination at
least once during each calendar year and within fifteen months of the last
examination into the affairs of the Association, or cause continuous suitable
examinations to be made, by auditors responsible only to the board, and to
report the results of any such examinations in writing to the board from time to
time. Such examinations shall include audits of the fiduciary business of the
Association as may be required by law or regulation.
Section 3.3. Other Committees. The board may appoint, from time to time, other
committees of one or more persons, for such purposes and with such powers as the
board may determine.
Section 3.4. General. (a) Each committee shall elect a Chairperson from among
the members thereof and shall also designate a Secretary of the committee, who
shall keep a record of its proceedings.
(b) Vacancies occurring from time to time in the membership of any
committee shall be filled by the board for the unexpired term of the member
whose departure causes such vacancy. The board may designate one or more
alternate members of any committee, who may replace any absent member or members
at any meeting of such committee.
(c) Each committee shall adopt its own rules of procedure and shall
meet at such stated times as it may, by resolution, appoint. It shall also meet
whenever called together by its Chairperson or the Chairperson of the board.
(d) No notice of regular meetings of any committee need be given.
Notice of every special meeting shall be given either by mailing such notice to
each member of such committee at his or her address, as the same appears in the
records of the Association, at least two days before the day of such meeting, or
by notifying each member on or before the day of such meeting by telephone or by
personal notice, or by leaving a written notice at his or her residence or place
of business on or before the day of such meeting. Waiver of notice in writing
of any meeting, whether prior or subsequent to such meeting, or attendance at
such meeting, shall be equivalent to notice of such meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at any
special meeting.
(e) All committees shall, with respect to all matters, be subject to
the authority and direction of the board and shall report to it when required.
(f) Unless otherwise required by law, the Articles of Association or
these by-laws, a quorum at any meeting of any committee shall be one-third of
the full membership and present shall be the act of the committee.
(g) No committee shall have authority to take any action which is
expressly required by law or regulation to be taken at a meeting of the board or
by a specified proportion of directors.
Article IV. Officers and Employees
Section 4.1. Chairperson of the Board. The board shall appoint one of its
members to be the Chairperson of the board, or two persons to serve as Co-
Chairperson of the board to serve at its pleasure. Such person shall preside at
all meetings of the board. The Chairperson or Co-Chairpersons of the board
shall supervise the carrying out of the policies adopted or approved by the
board; shall have general executive powers, as well as the specific powers
conferred by these by-laws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board.
Section 4.2. President. The board may appoint one of its members to be the
President of the Association. In the absence of the Chairperson or Co-
Chairpersons, the President shall preside at any meeting of the board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of President, or imposed by these by-laws. The
<PAGE>
President shall also have and may exercise such further powers and duties as
from time to time may be conferred, or assigned by the board.
Section 4.3. Vice President. The board may appoint one or more Vice
Presidents. Each Vice President shall have such powers and duties as may be
assigned by the board.
Section 4.4. Secretary. The board shall appoint a Secretary, Cashier, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these by-laws; shall be custodian of the
corporate seal, records, documents and papers of the Association; shall provide
for the keeping of proper records of all transactions of the Association; shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Cashier, or imposed by these by-laws;
and shall also perform such other duties as may be assigned from time to time,
by the board.
Section 4.5. Other Officers. The board may appoint one or more Assistant Vice
Presidents, one or more Trust Officers, one or more Assistant Secretaries, one
or more Assistant Cashiers, one or more Managers and Assistant Managers of
branches and such other officers and attorneys in fact as from time to time may
appear to the board to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the board, the Chairperson or Co-Chairpersons of the board,
or the President. The board may authorize an officer to appoint one or more
officers or assistant officers.
Section 4.6. Resignation. An officer may resign at any time by delivering
notice to the Association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
Article V. Fiduciary Activities
Section 5.1. Trust Committee. There shall be a Trust Committee of this
Association composed of four or more members, who shall be capable and
experienced officers or directors of the Association. The Committee is charged
with the responsibility for the investment, retention, or disposition of assets
held in accounts with respect to which the Association has investment authority;
for the review of the assets of accounts for which the Association has
investment authority promptly after the acceptance of such an account and at
least once during every calendar year thereafter to determine the advisability
of retaining or disposing of such assets; for the determination of the manner in
which proxies received for accounts for which the Association has responsibility
for the voting of proxies shall be voted; for the determination of all
substantial questions involving discretionary authority of the Association of a
non-investment nature, including, but not limited to, distribution of principal
and/or income in respect of any account; for providing advice as to the
investment, retention, or disposition of assets in investment advisory accounts
maintained by the Association; for the making of such reports as this board
shall require; and for such other responsibilities as may be assigned by this
board. The Trust Committee, in discharging its aforementioned responsibilities,
may authorize officers of the Association to exercise such powers and under such
conditions as the Committee may from time to time prescribe.
Section 5.2. Trust Investments. Funds held in a fiduciary capacity shall be
invested according to the instrument establishing the fiduciary relationship and
local law. Where such instrument does not specify the character and class of
investments to be made and does not vest in the Association a discretion in the
matter, funds held pursuant to such instrument shall be invested in investments
in which corporate fiduciaries may invest under applicable law.
Section 5.3. Trust Audit Committee. The board shall appoint a committee of at
least two directors, exclusive of any active officer of the association, which
shall, at least once during each calendar year make suitable audits of the
association's fiduciary activities or cause suitable audits to be made by
auditors responsible only to the board, and at such time shall ascertain whether
fiduciary powers have been administered according to law, Part 9 of the
Regulations of the Comptroller of the Currency, and sound fiduciary principles.
Section 5.4. Fiduciary Files. There shall be maintained by the association all
fiduciary records necessary to assure that its fiduciary responsibilities have
been properly undertaken and discharged.
Article VI. Stock and Stock Certificates
<PAGE>
Section 6.1. Transfers. Shares of stock shall be transferable on the books of
the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his or her shares, succeed to all rights of the prior
holder of such shares. The board may impose conditions upon the transfer of the
stock reasonably calculated to simplify the work of the Association with respect
to stock transfers, voting at shareholder meetings, and related matters and to
protect it against fraudulent transfers.
Section 6.2. Stock Certificates. Certificates of stock shall bear the
signature of the Chairperson or Co-Chairpersons of the board or President (which
may be engraved, printed or impressed), and shall be signed manually or by
facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant
Cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer, and the seal of the Association shall be
engraved thereon. Each certificate shall recite on its face that the stock
represented thereby is transferable only upon the books of the Association
properly endorsed. In case any such officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
before such certificate is issued, it may be issued by the Association with the
same effect as if such officer had not ceased to be such at the time of its
issue. The corporate seal may be a facsimile, engraved or printed.
Article VII. Corporate Seal
Section 7.1. Corporate Seal. The Chairperson, the President, the Cashier, the
Secretary or any Assistant Cashier or Assistant Secretary, or other officer
thereunto designated by the board, shall have authority to affix the corporate
seal to any document requiring such seal, and to attest the same. Such seal
shall be substantially in the following form: A circle, with the words "Chase
Manhattan Trust Company, National Association" within such circle.
Article VIII. Miscellaneous Provisions
Section 8.1. Fiscal Year. The fiscal year of the Association shall be the
calendar year.
Section 8.2. Execution of Instruments. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Association by the Chairperson or Co-Chairpersons of the board, or the
President, or any Vice Chairperson, or any Managing Director, or any Vice
President, or any Assistant Vice President, or the Chief Financial Officer, or
the Controller, or the Secretary, or the Cashier, or, if in connection with
exercise of fiduciary powers of the Association, by any of those officers or by
any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted on behalf of the Association in such other
manner and by such other officers as the board may from time to time direct.
The provisions of this Section 8.2 are supplementary to any other provision of
these by-laws.
Section 8.3. Records. The Articles of Association, the by-laws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the Secretary,
Cashier or other officer appointed to act as Secretary of the meeting.
Section 8.4. Corporate Governance Procedures. To the extent not inconsistent
with applicable Federal banking law, bank safety and soundness or these by-laws,
the corporate governance procedures found in the Delaware General Corporation
Law shall be followed by the Association.
Article IX. Indemnification
Section 9.1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Association or is or was serving at the request of
the Association as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director,
<PAGE>
officer, employee or agent, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Association
to provide broader indemnification rights than such law permitted the
Association to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section 9.3 of these by-laws with respect to proceedings to enforce
rights to indemnification, the Association shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the board.
Section 9.2. Right to Advancement of Expenses. The right to indemnification
conferred in Section 9.1 of these by-laws shall include the right to be paid by
the Association the expenses (including attorney's fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Association of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 9.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 9.1 and 9.2 of these by-laws shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
Section 9.3. Right of Indemnitee to Bring Suit. If a claim under Section 9.1
or 9.2 of these by-laws is not paid in full by the Association within sixty (60)
days after a written claim has been received by the Association except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Association to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Association to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (1) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) any suit brought by the Association to recover an
advancement of expenses pursuant to the terms of an undertaking, the Association
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Association
(including the board, the Association's independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Association (including the board, the Association's independent legal counsel,
or its shareholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Association to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article IX or otherwise shall be on the Association.
Section 9.4. Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred in this Article IX shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Association's Articles of Association, by-laws, agreement, vote of
shareholders or disinterested directors or otherwise.
Section 9.5. Insurance. The Association may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Association or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Association would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Section 9.6. Indemnification of Employees and Agents of the Association. The
Association may, to the extent authorized from time to time by the board, grant
rights to indemnification and to the advancement of expenses to
<PAGE>
any employee or agent of the Association to the fullest extent of the provisions
of this Article IX with respect to the indemnification and advancement of
expenses of directors and officers of the Association.
Article X. By-Laws
Section 10.1. Inspection. A copy of the by-laws, with all amendments, shall at
all times be kept in a convenient place at the main office of the Association,
and shall be open for inspection to all shareholders during banking hours.
Section 10.2. Amendments. The by-laws may be amended, altered or repealed, at
any regular meeting of the board by a vote of a majority of the total number of
the directors except as provided below. The Association's shareholders may
amend or repeal the by-laws even though the by-laws may be amended or repealed
by its board.
<PAGE>
EXHIBIT T1D
Consent for Records of Governmental Agencies
to be Made Available to the Commission
--------------------------------------
The undersigned, Chase Manhattan Trust Company, National Association,
pursuant to Section 321(b) of The Trust Indenture Act of 1939, hereby authorizes
the Board of Governors of the Federal Reserve System, the Federal Reserve Banks,
the Treasury Department, the Comptroller of the Currency and the Federal Deposit
Insurance Corporation, under such conditions as they may prescribe, to make
available to the Commission such reports, records or other information as they
may have available with respect to the undersigned as a prospective trustee
under an indenture to be qualified under the aforesaid Trustee Indenture Act of
1939 and to make through their examiners or other employees for the use of the
Commission, examinations of the undersigned prospective Trustee.
The undersigned also, pursuant to Section 321(b) of said Trust
Indenture Act of 1939, consents that reports of examination by the Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Commission upon request therefor.
Dated this 30th day of September, 1999.
Chase Manhattan Trust Company,
National Association
By: /s/ S. R. Schaaf
----------------
S. R. Schaaf
Vice President
<PAGE>
<TABLE>
<CAPTION>
Chase Manhattan Trust Company, National Association
Statement of Condition
June 30,1999
($000)
---------
<S> <C>
Assets
Cash and Due From Banks $ 11,056
Securities Available for Sale 4,847
Premises and Fixed Assets 499
Intangible Assets 156,549
---------
Total Assets $ 172,951
=========
Liabilities
Sundry Liabilities and Accrued Expenses $ 3,244
---------
Stockholder's Equity
Common Stock $ 5,000
Surplus 156,892
Retained Earnings 7,815
---------
Total Stockholder's Equity $ 169,707
---------
Total Liabilities and Stockholder's EquitY $ 172,951
=========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<CIK> 0000874689
<NAME> INTEGRATED CIRCUIT SYSTEMS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-3-1999
<PERIOD-END> JUL-3-1999
<CASH> 9,285
<SECURITIES> 288
<RECEIVABLES> 20,270
<ALLOWANCES> 2,150
<INVENTORY> 8,736
<CURRENT-ASSETS> 50,366
<PP&E> 23,148
<DEPRECIATION> 11,021
<TOTAL-ASSETS> 87,795
<CURRENT-LIABILITIES> 23,456
<BONDS> 170,000
0
0
<COMMON> 237
<OTHER-SE> (107,149)
<TOTAL-LIABILITY-AND-EQUITY> 87,795
<SALES> 139,063
<TOTAL-REVENUES> 139,063
<CGS> 64,496
<TOTAL-COSTS> 64,496
<OTHER-EXPENSES> 43,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,955
<INCOME-PRETAX> 28,363
<INCOME-TAX> 5,320
<INCOME-CONTINUING> 23,043
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,043
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
INTEGRATED CIRCUIT SYSTEMS, INC.
Offer to Exchange
11 1/2% Senior Subordinated Notes due 2009
for any and all outstanding
11 1/2% Senior Subordinated Notes due 2009
Which Have Been Registered Under the Securities Act of 1933
Pursuant to the Prospectus dated ______ __, 1999
--------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ______ __ , 1999
UNLESS EXTENDED.
---------------------------------------------
The Exchange Agent for the Exchange Offer is:
CHASE MANHATTAN TRUST CO., NATIONAL ASSOCIATION
<TABLE>
<CAPTION>
<S> <C> <C>
By Registered orCertified Mail: By Hand/Overnight Express: By Facsimile:
Chase Manhattan Trust Company Chase Manhattan Trust Co Fascimile: (215) 568-1449
National Association National Association
1650 Market Street 1650 Market Street To confirm by Telephone
Philadelphia, Pennsylvania 19103 Philadelphia, Pennsylvania 19103
Attn: Stephen Schaaf Attn: Stephen Schaaf
Corporate Trust Department Corporate Trust Department Telephone: (215) 988-1320
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN
SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus, dated ______ __,
1999 ("Exchange Offer"), of Integrated Circuit Systems, Inc., a Delaware
corporation (the "Company"), relating to the offer of the Company, upon the
terms and subject to the conditions set forth in the Exchange Offer and in this
Letter of Transmittal and the instructions hereto (which together with the
Exchange Offer and the instructions hereto constitute the "Offer"), to exchange
a new series of its 11 1/2% Senior Subordinated Notes due 2009 (the "New Notes")
which have been registered under the Securities Act of 1933 (the "Securities
Act") for any and all of its outstanding 11 1/2% Senior Subordinated Notes due
2009 ("Old Notes"), at the rate of $1,000 principal amount of the New Notes for
each $1,000 principal amount of the Old Notes. Capitalized terms used but not
defined herein have the meanings given to them in the Exchange Offer.
<PAGE>
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Offer.
This Letter of Transmittal is to be used whether the Old Notes are to be
physically delivered herewith, or whether guaranteed delivery procedures or
book-entry delivery procedures are being used, pursuant to the procedures set
forth under "The Exchange Offer" in the Exchange Offer. If delivery of Old
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company ("DTC"), this Letter of
Transmittal need not be manually executed, provided, however, that tenders of
Old Notes must be effected in accordance with the procedures mandated by DTC and
the procedures set forth in the Exchange Offer under the caption "The Exchange
Offer -- Procedures for Tendering Old Notes -- Book Entry Delivery." If a person
or entity in whose name Old Notes are registered on the books of the Registrar
(a "Registered Holder") desires to tender Old Notes and such Old Notes are not
immediately available or time will not permit all documents required by the
Offer to reach the Exchange Agent (or such Registered Holder is unable to
complete the procedure for book-entry transfer on a timely basis) prior to 5:00
P.M. New York City time on _________ __, 1999 (the "Expiration Date"), a tender
may be effected in accordance with the guaranteed delivery procedures set forth
in the Exchange Offer under the caption "The Exchange Offer -- Procedures for
Exchanging Old Notes -- Guaranteed Delivery Procedures." See Instruction 1.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amounts should be listed on a separate signed schedule affixed thereto. See
Instruction 7. The minimum permitted tender is $1,000 principal amount of Old
Notes; all other tenders must be in integral multiples of $1,000.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) Certificate Aggregate Principal Amount Principal Amount
of Holder(s) (Please Fill Number(s)* Represented Tendered**
in, if Blank)
- ------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry holders.
** Unless otherwise indicated in the column labeled "Principal Amount Tendered" and subject to the terms
and conditions of the Offer, the undersigned will be deemed to have tendered the entire aggregate
principal amount represented by the Old Notes indicated in the column labeled "Aggregate Principal
Amount Represented." See Instruction 8.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (See Instructions 1 and 3):
Name(s) of Registered Holder(s): ___________________________________
Window Ticket Number (if any): _____________________________________
Date of Execution of Notice of Guaranteed Delivery:_________________
Name of Eligible Institution that Guaranteed Delivery:______________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution:____________________________
Account Number: __________________________________________
Transaction Code Number: _________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________
Address:____________________________________________________________
____________________________________________________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________________________
Account Number: _____________________________________________________
Transaction Code Number: ____________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT
NUMBER SET FORTH ABOVE.
-3-
<PAGE>
If delivery of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at DTC, then tenders of Old Notes must
be effected in accordance with the procedures mandated by DTC and the procedures
set forth in the Exchange Offer under the caption "The Exchange Offer --
Procedures for Tendering Old Notes -- Book Entry Delivery."
-4-
<PAGE>
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Offer, the undersigned
hereby tenders to the Company the principal amount of the Old Notes indicated
below. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered hereby, the undersigned hereby irrevocably sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to such Old Notes and hereby irrevocably constitutes and appoints the
Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned
(with full knowledge that said exchange agent also acts as the agent of the
Company) with respect to such Old Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to take such further action as may be required in connection with the
delivery, tender and exchange of the Old Notes.
The undersigned acknowledges that this Offer is being made in reliance on
an interpretation by the staff of the Securities and Exchange Commission (the
"SEC") that the New Notes issued pursuant to the Exchange Offer in exchange for
the Old Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than (i) a broker-dealer who purchased Old Notes directly
from the Company for resale pursuant to Rule 144A under the Securities Act, or
(ii) a person that is an "affiliate" of the Company or any Guarantor within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes. See Morgan Stanley & Co. Inc., SEC No-
-------------------------
Action Letter (available June 5, 1991); The Exchange Offer under the caption
"The Exchange Offer -- Resales of the New Notes."
The undersigned acknowledges that the New Notes have not been registered or
qualified under any state securities laws. This Offer is being made to: (i)
U.S. persons pursuant to exemptions from such laws for sales to institutional
investors, and (ii) non-U.S. persons (within the meaning of Regulation S under
the Securities Act), as state securities laws do not apply to sales to persons
who are not residents of any state. The undersigned hereby represents and
warrants that the undersigned is either (i) a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act, (ii) an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act or (iii) a non-U.S. person (within the
meaning of Regulation S under the Securities Act).
THE UNDERSIGNED UNDERSTANDS AND AGREES THAT THE COMPANY RESERVES THE RIGHT
NOT TO ACCEPT TENDERED OLD NOTES FROM ANY TENDERING HOLDER IF THE COMPANY
DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION, THAT SUCH ACCEPTANCE COULD
RESULT IN A VIOLATION OF APPLICABLE SECURITIES LAWS.
The undersigned, if the undersigned is a beneficial holder, represents, or,
if the undersigned is a broker, dealer, commercial bank, trust company or other
nominee, represents that it has received representations from the beneficial
owners of the Old Notes stating, (as defined in the Exchange Offer) that (i) the
New Notes to be acquired in connection with the Exchange Offer by the Holder and
each Beneficial Owner of the Old Notes are being acquired by the Holder (as
defined in the Exchange Offer) and each Beneficial Owner in the ordinary course
of business of the Holder and each Beneficial Owner, (ii) the Holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution (within the meaning of the Securities Act) of the New Notes, (iii)
the Holder and each Beneficial Owner acknowledge and agree that any person
participating in the Exchange Offer for the purpose of distributing the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction of the New
Notes acquired by such person and cannot rely on the position of the staff of
the Commission set forth in no-action letters that are discussed in the Exchange
Offer under the caption "The Exchange Offer -- Resales of the New Notes," (iv)
that if the Holder is a broker-dealer holding Old Notes acquired for its own
account as a result of market-making activities or other trading activities, it
will deliver a
-5-
<PAGE>
prospectus meeting the requirements of the Securities Act in connection with any
resale of New Notes received in respect of such Old Notes pursuant to the
Exchange Offer; provided that the delivery of a Prospectus in connection with
the exchange of Old Notes by such Holder will not be deemed an admission that
such Holder is an underwriter (within the meaning of the Securities Act), (v)
the Holder and each Beneficial Owner understand that a secondary resale
transaction described in clause (iii) above should be covered by an effective
registration statement containing the selling security holder information
required by item 507 of Regulations S-K of the Securities Act and (vi) neither
the Holder nor any Beneficial Owner is an "affiliate," as defined under Rule 405
of the Securities Act, of the Company or any of the Guarantors.
In addition, if the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes; provided,
however, that by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an underwriter (within the
meaning of the Securities Act).
The Company has agreed, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer (as defined below) in
connection with resales of New Notes received in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer for its own account as a
result of market-making activities or other trading activities, for a period
ending 180 days after the Expiration Date or, if earlier, when all such New
Notes have been disposed of by such participating broker-dealer. In that
regard, each broker-dealer who acquired Old Notes for its own account as a
result of market-making or other trading activities (a "Participating Broker-
Dealer"), by tendering such Old Notes and executing this Letter of Transmittal,
agrees that, upon receipt of notice from the Company of the occurrence of any
event or the discovery of any fact which makes any statement contained or
incorporated by reference in the Prospectus untrue in any material respect or
which causes the Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference therein, in light
of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New Notes
pursuant to the Prospectus until the Company have amended or supplemented the
Prospectus to correct such misstatement or omission and the Company has
furnished copies of the amended or supplemented Prospectus to the Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, they shall extend the 180-day period referred to above
during which Participating Broker-Dealers are entitled to use the Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the
supplemented or amended Prospectus necessary to permit resales of the New Notes
up to and including the date on which the Company has given notice that the sale
of New Notes may be resumed, as the case may be.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or as set forth in the
Exchange Offer under the caption "The Exchange Offer -- Conditions of the
Exchange Offer," to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The term of any such purchases or offers could
differ from the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Offer, has full power and authority to tender,
exchange, assign and transfer the Old Notes tendered hereby, and that when the
same are accepted for exchange by the Company, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions charges
and encumbrances and not subject to any adverse claim
-7-
<PAGE>
or right. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be reasonably necessary
or desirable to complete the sale, assignment and transfer the Old Notes
tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described under "The Exchange Offer -- Procedures for
Tendering Old Notes" in the Exchange Offer and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described in the Exchange Offer and the instructions thereto, the
tendering holder will be deemed to have waived the right to receive any payment
in respect of interest on the Old Notes accrued up to the date of issuance of
the New Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Exchange Offer, the Company may not be required to accept for exchange any
of the Old Notes tendered. Old Notes not accepted for exchange or withdrawn
will be returned to the undersigned as the address set forth below unless
otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein in the box entitled "Special Exchange
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute certificates representing the Old
Notes not exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of a book-entry transfer of Old Notes, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions," the undersigned
hereby directs that the New Notes be delivered to the undersigned at the address
shown below the undersigned's signature. The undersigned recognizes that the
Company has no obligation pursuant to the "Special Exchange Instructions" to
transfer any Old Notes from the name of the Registered Holder thereof if the
Company does not accept for exchange any of the principal amount of such Old
Notes so tendered.
-7-
<PAGE>
SPECIAL EXCHANGE INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if Old Notes in a principal amount not exchanged and/or New
Notes are to be registered in the name of or issued to someone other than the
person or persons whose signature(s) appear(s) on this Letter of Transmittal
above.
Issue and mail: (check appropriate box(es)):
[ ] New Notes to: [ ] Old Notes not tendered to:
Name(s): ____________________________________________________________________
(Please type or print)
_____________________________________________________________________________
(Please type or print)
Address: ____________________________________________________________________
_____________________________________________________________________________
(Zip Code)
_____________________________________________________________________________
Tax Identification or Social Security No(s)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if Old Notes in a principal amount not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter of Transmittal above or to such person or
persons at an address other than that shown in the box entitled "Description of
Old Notes" on this Letter of Transmittal above.
Mail and deliver: (check appropriate box(es)):
[ ] New Notes to: [ ] Old Notes not tendered to:
Name(s):________________________________________________________________
(Please type or print)
_______________________________________________________________________________
(Please type of print)
Address:__________________________________________________________________
_______________________________________________________________________________
(Zip Code)
- --------------------------------------------------------------------------------
Tax Identification or Social Security No(s)
-8-
<PAGE>
THE UNDERSIGNED BY COMPLETING THE BOX "DESCRIPTION OF OLD NOTES" BELOW AND
SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AND MADE
CERTAIN REPRESENTATIONS DESCRIBED HEREIN AND IN THE EXCHANGE OFFER.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(SEE INSTRUCTIONS 1 AND 3 AND THE FOLLOWING PARAGRAPH)
(IMPORTANT: ALSO COMPLETE SUBSTITUTE FORM W-9 ON PAGE [__])
SIGNATURE(S) OF OWNER(S)
Dated: ______________________________________________, 1999
If the holder(s) is/are tendering any Old Notes, this Letter of Transmittal must
be signed by the Registered Holder(s) as the name(s) appear(s) on the Old Notes
or on a security position listing or by person(s) authorized to become
Registered Holder(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 3.
Name(s) _____________________________________________________________________
_____________________________________________________________________________
(Please type or print)
Capacity:____________________________________________________________________
Address:_____________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number_______________________________________________
Tax Identification or Social Security No(s)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
Authorized Signature: _______________________________________________________
Printed Name: _______________________________________________________________
Title:_______________________________________________________________________
Firm:________________________________________________________________________
Address:_____________________________________________________________________
Area Code and Telephone Number_______________________________________________
Dated:__________________________, 1998
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE OLD NOTES OR A
NOTICE OF GUARANTEED DELIVERY AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
-9-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Delivery of this Letter of Transmittal and Old Notes: Guaranteed
Delivery Procedures. To be effectively tendered pursuant to the Offer, the Old
Notes, together with a properly completed Letter of Transmittal (or manually
signed facsimile hereof) duly executed by the Registered Holder thereof, and any
other documents required by this Letter of Transmittal must be received by the
Exchange Agent at one of its addresses set forth on the front page of this
Letter of Transmittal and tendered Old Notes must be received by the Exchange
Agent at one of such addresses on or prior to the Expiration Date; provided,
however, that book-entry transfers of Old Notes may be effected in accordance
with the procedures set forth in the Exchange Offer under the caption "The
Exchange Offer -- Procedures For Tendering Old Notes -- Book Entry Delivery." If
the Beneficial Owner of any Old Notes is not the Registered Holder, then such
person may validly tender such person's Old Notes only by obtaining and
submitting to the Exchange Agent a properly completed Letter of Transmittal from
the Registered Holder. LETTERS OF TRANSMITTAL OF OLD NOTES SHOULD BE DELIVERED
ONLY BY HAND OR BY COURIER, OR TRANSMITTED BY MAIL, AND ONLY TO THE EXCHANGE
AGENT AND NOT TO THE COMPANY OR TO ANY OTHER PERSON.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER, AND IF SUCH DELIVERY
IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED. IF OLD NOTES ARE SENT BY MAIL, IT IS
SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Old Notes and such holder's Old Notes are not
immediately available or time will not permit such holder to complete the
procedures for book-entry transfer on a timely basis or time will not permit
such holder's Letter of Transmittal and other required documents to reach the
Exchange Agent on or before the Expiration Date, such holder's tender may be
effected if:
(a) such tender is made by or through an Eligible Institution (as
defined below);
(b) on or prior to the Expiration Date, the Exchange Agent has
received a telegram, facsimile transmission or letter from such Eligible
Institution setting forth the name and address of the holder of such Old
Notes, the certificate number(s) of such Old Notes (except in the case of
book-entry tenders) and the principal amount of Old Notes tendered and
stating that the tender is being made thereby and guaranteeing that, within
three business days after the Expiration Date, a duly executed Letter of
Transmittal, or facsimile thereof, together with the Old Notes, and any
other documents required by this Letter of Transmittal and Instructions,
will be deposited by such Eligible Institution with the Exchange Agent; and
(c) this Letter of Transmittal, or a manually signed facsimile hereof,
and Old Notes, in proper form for transfer (or a Book-Entry confirmation
with respect to such Old Notes), and all other required documents are
received by the Exchange Agent within three business days after the
Expiration Date.
2. Withdrawal of Tenders. Tendered Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must (i) be timely received by the Exchange Agent at one of its
addresses set forth on the first page of this Letter of Transmittal before
-10-
<PAGE>
the Exchange Agent receives notice of acceptance from the Company, (ii) specify
the name of the person who tendered the Old Notes, (iii) contain the description
of the Old Notes to be withdrawn, the certificate number(s) of such Old Notes
(except in the case of book-entry tenders) and the aggregate principal amount
represented by such Old Notes or a Book-Entry Confirmation with respect to such
Old Notes, and (iv) be signed by the holder of such Old Notes in the same manner
as the original signature appears on this Letter of Transmittal (including any
required signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Old Notes. The signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Old Notes have been tendered
(i) by a Registered Holder (which term for purposes of this document shall
include any participant tendering by book-entry transfer) of Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (ii)
for the account of an Eligible Institution. If the Old Notes have been tendered
pursuant to the procedure for book-entry tender set forth in the Exchange Offer
under the caption "Exchanging Book Entry Old Notes," a notice of withdrawal is
effective immediately upon receipt by the Exchange Agent of a written,
telegraphic or facsimile transmission notice of withdrawal even if physical
release is not yet effected. In addition, such notice must specify, in the case
of Old Notes tendered by delivery of such Old Notes, the name of the Registered
Holder (if different from that of the tendering holder) to be credited with the
withdrawn Old Notes. Withdrawals may not be rescinded, and any Old Notes
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, properly withdrawn Old Notes may be retendered by following one
of the procedures described under "The Exchange Offer --Procedures for Tendering
Old Notes" in the Exchange Offer at any time on or prior to the applicable
Expiration Date.
3. Signatures on this Letter of Transmittal, Bond Powers and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the Registered Holder of the Old Notes tendered hereby, the signature must
correspond exactly with the name as written on the face of the Old Notes without
any change whatsoever.
If any Old Notes tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any Old Notes tendered hereby are registered in different names, it will
be necessary to complete, sign and submit as many separate copies of this Letter
of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the Registered Holder or
Holders specified herein and tendered hereby, no endorsements of such Old Notes
or separate bond powers are required. If, however, New Notes are to be issued,
or any untendered principal amount of Old Notes are to be reissued to a person
other than the Registered Holder, then endorsements of any Old Notes transmitted
hereby or separate bond powers are required.
If this Letter of Transmittal is signed by a person other than the
Registered Holder or Holders, such Old Notes must be endorsed or accompanied by
appropriate bond powers, in either case signed exactly as the name or names of
the Registered Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any Old
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority so to act must be submitted.
Except as describe in this paragraph, signatures on this Letter of
Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by
an Eligible Institution which is a firm which is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or otherwise be an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution").
Signatures on this
-11-
<PAGE>
Letter of Transmittal or a notice of withdrawal, as the case may be, need not be
guaranteed if the Old Notes tendered pursuant hereto are tendered (i) by a
Registered Holder of Old Notes who has not completed either the box entitled
"Special Exchange Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) for the account of an
Eligible Institution.
Endorsement on Old Notes or signatures on bond forms required by this
Instruction 3 must be guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering holders should
indicate in the applicable box the name and address to which New Notes and/or
substitute Old Notes for the principal amounts not exchanged are to be issued or
sent, if different from the name and address of the person signing this Letter
of Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. If no such instructions are given, such Old Notes not exchanged will
be returned to the name and address of the person signing this Letter of
Transmittal.
5. Taxpayer Identification Number and Backup Withholding. Federal
income tax law of the United States requires that a holder of Old Notes whose
Old Notes are accepted for exchange provide the Company with such holder's
correct taxpayer identification number, which, in the case of a holder who is an
individual, is the holder's social security number, or otherwise establish an
exemption from backup withholding. If the Company is not provided with the
holder's correct taxpayer identification number, the exchanging holder of Old
Notes may be subject to a penalty imposed by the Internal Revenue Service. In
addition, interest on the New Notes acquired pursuant to the Offer may be
subject to backup withholding in an amount equal to 31 percent of any interest
payment. If withholding occurs and results in an overpayment of taxes, a refund
may be obtained from the Internal Revenue Service by filing a return.
To prevent backup withholding, each exchanging holder of Old Notes subject
to backup withholding must provide his correct taxpayer identification number by
completing the Substitute Form W-9 provided in this Letter of Transmittal,
certifying that the taxpayer identification number provided is correct (or that
the exchanging holder of Old Notes is awaiting a taxpayer identification number)
and that either (a) the exchanging holder has not been notified by the Internal
Revenue Service that he is subject to backup withholding as a result of failure
to report all interest or dividends or (b) the Internal Revenue Service has
notified the exchanging holder that he is no longer subject to backup
withholding.
Certain exchanging holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding requirements. A foreign individual and other exempt holders (e.g.,
corporations) should certify, in accordance with the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9, to such
exempt status on the Substitute Form W-9 provided in this Letter of Transmittal.
Nonresident aliens should submit Form W-8, available from the Exchange Agent
upon request.
6. Transfer Taxes. Holders tendering pursuant to the Offer will not be
obligated to pay brokerage commissions or fees or to pay transfer taxes with
respect to their exchange under the Offer unless the box entitled "Special
Issuance Instructions" in this Letter of Transmittal has been completed, or
unless the securities to be received upon exchange are to be issued to any
person other than the holder of the Old Notes tendered for exchange. The Company
will pay all other charges or expenses in connection with the Offer. If holders
tender Old Notes for exchange and the Offer is not consummated, such Old Notes
will be returned to the holders at the Company expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter of
Transmittal.
-12-
<PAGE>
7. Inadequate Space. If the space provided herein is inadequate, the
aggregate principal amount of the Old Notes being tendered and the security
numbers (if available) should be listed on a separate schedule attached hereto
and separately signed by all parties required to sign this Letter of
Transmittal.
8. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Old Notes, fill in the principal amount
of Old Notes which are tendered in column (iv) of the "Description of Old
Notes." In the case of partial tenders, the Old Notes in fully registered form
for the remainder of the principal amount of the Old Notes will be sent to the
persons(s) signing this Letter of Transmittal, unless otherwise indicated in the
appropriate place on this Letter of Transmittal, as promptly as practicable
after the expiration or termination of the Offer.
Unless otherwise indicated in column (iv) in the box labeled "Description
of Old Notes," and subject to the terms and conditions of the Offer, tenders
made pursuant to this Letter of Transmittal will be deemed to have been made
with respect to the entire aggregate principal amount represented by the Old
Notes indicated in column (iii) of such box.
9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
10. Validity and Acceptance of Tenders. All questions as to the
validity, form, eligibility (including time of receipt), acceptance and
withdrawal of Old Notes tendered for exchange will be determined by the Company
in its sole discretion, which determination shall be final and binding. The
Company reserves the absolute right to reject any and all Old Notes not properly
tendered and to reject any Old Notes the Company's acceptance of which might, in
the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation of the
terms and conditions of the Exchange Offer (including the Letter of Transmittal
and the instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such period of time as
the Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange but shall not incur any liability for failure to give such
notification. Tenders of the Old Notes will not be deemed to have been made
until such irregularities have been cured or waived.
11. Requests for Assistance or Additional Copies. Chase Manhattan Trust
Company, National Association is the Exchange Agent. All tendered Old Notes,
executed Letters of Transmittal and other related documents should be directed
to the Exchange Agent at the addresses or facsimile number set forth on the
first page of this Letter of Transmittal. Questions and requests for assistance
and requests for additional copies of the Prospectus, the Letter of Transmittal
and other related documents should be addressed to the Exchange Agent as
follows:
Chase Manhattan Trust Company,
National Association
1650 Market Street
Philadelphia, Pennsylvania 19103
Facsimile Transmission:
(215) 568-1449
To Confirm Receipt:
(215) 988-1320
-13-
<PAGE>
SUBSTITUTE FORM W-9
TO BE COMPLETED BY ALL EXCHANGING HOLDERS
(See Instruction 5)
<TABLE>
<CAPTION>
PAYER'S NAME: CHASE MANHATTAN TRUST CO., N.A.
- --------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX Social security number(s)
Form W-9 AT RIGHT AND CERTIFY BY SIGNING AND OR __________________________
DATING BELOW. Employer Identification Numbers
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Department of the Part 2 - Certificates - Under penalties of perjury, I certify that:
Treasury (1) The number shown on this form is my correct taxpayer identification number (or I
Internal Revenue Service am waiting for a number to be issued for me), and
Payer's Request for (2) I am not subject to backup withholding because: (a) I am exempt from backup
Taxpayer Identification withholding, or (b) I have not been notified by the internal Revenue Service (IRS)
Number ("TIN") that I am subject to backup withholding as a result of a failure to report all interest
or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
Certification Instructions - You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
- --------------------------------------------------------------------------------------------------------------------
SIGNATURE _______________________ DATE_____ Part 3 - Awaiting TIN [_]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office of (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments of the Purchase Price made to me thereafter will be withheld until I
provide a number.
Signature ________________________________ Date______________________
- --------------------------------------------------------------------------------
-14-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY
NUMBER OF --
<S> <C>
I. An individual's account The individual
II. Two or more individuals (joint account) The actual owner of the account or, if
combined funds, any one of the individuals (1)
III. Husband and wife (joint account) The actual owner of the funds, either person (1)
IV. Custodian account of a minor (Uniform Gift The minor(2)
to Minors Act)
V. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor (1)
VI. Account in the name of guardian or The ward, minor, or incompetent person (3)
committee for a designated ward, minor, or
incompetent person
VII. a. The usual revocable savings trust The grantor-trustee (1)
account (grantor is also trustee)
b. So-called trust account that is The actual owner (1)
not a legal or valid trust under
State law
VIII. Sole proprietorship account The owner (4)
IX. A valid trust, estate, or pension trust The legal entity (Do not furnish the
identifying number of the personal
representative or trustee unless the legal
entity itself is not designated in the
account title.) (5)
X. Corporate account The corporation
XI. Religious, charitable, or educational The organization
organization account
XI. Partnership account held in the name of The partnership
the business
XII. Association, club or other tax-exempt The organization
organization
XIII. A broker or registered nominee The broker or nominee
XV. Account with the Department of Agriculture The public entity
in the name of a public entity (such as a
State or local government, school
district, or prison) that receives
agricultural program payments
</TABLE>
______________________________
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer identification Number, at the local office
of the Social Security Administration or the internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an
individual retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United
States, or any political
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
- An international organization or any agency or instrumentality
thereof.
- A registered dealer in securities or commodities registered in
the U.S. or a possession of the
U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1).
- An entity registered at all times under the investment Company
Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under
Section 1441.
- Payments to partnerships not engaged in a trade or business in
the U.S. and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is
not paid in money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding
include the following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the
payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- Payments described in section 6049(b)(5) to non-resident
aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage
dividends, that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6045, and 6050A.
<PAGE>
PRIVACY ACT NOTICE.
Section 6109 requires most recipients of dividend, interest, or other
payments to give taxpayer identification numbers to payers who must report the
payments to IRS. IRS uses the numbers for identification purposes. Payers must
be given the numbers whether or not recipients are required to file tax returns.
Beginning January 1, 1984, payers must generally withhold 20% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
I. PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.
If you fail to furnish your taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not willful neglect.
II. CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.
If you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
III. CRIMINAL PENALTY FOR FALSIFYING INFORMATION.
Willfully falsifying certifications or affirmations may subject you to
criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<TABLE>
<S> <C>
Re: Integrated Circuit Systems, Inc. Chase Manhattan Trust Company, National Association
1650 Market Street
Philadelphia, Pennsylvania 19103
Tel: (215) 568-1449
Attention: Stephen Schaaf
Corporate Trust Department
</TABLE>
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
Offer to Exchange
11 1/2% Senior Subordinated Notes due 2009
for any and all outstanding
11 1/2% Senior Subordinated Notes due 2009
Which Have Been Registered Under the Securities Act of 1933
Pursuant to the Prospectus dated ______ __, 1999
----------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________ __ 1999
UNLESS EXTENDED.
----------------------------------------------------------
To Our Clients:
Enclosed for your consideration is a Prospectus dated _____ __, 1999
("Prospectus") and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Exchange Offer")
relating to an offer by Integrated Circuit Systems, Inc., a Delaware corporation
(the "Company"), to exchange all its outstanding 11 1/2% Senior Subordinated
Notes due 2009 ("Old Notes") for a new series of its 11 1/2% Senior Subordinated
Notes due 2009 upon the terms and subject to the conditions set forth in the
Exchange Offer.
WE ARE THE HOLDER OF RECORD OF OLD NOTES HELD BY US FOR YOUR ACCOUNT. A
TENDER FOR EXCHANGE OF SUCH OLD NOTES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
FOR EXCHANGE OLD NOTES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender for
exchange on your behalf any or all of such Old Notes held by us for your
account, pursuant to the terms and subject to the conditions set forth in the
Exchange Offer.
Your attention is directed to the following:
1. The Exchange Offer and withdrawal rights will expire at 5:00
P.M., New York City time, on ________ __ , 1999 unless the Exchange Offer is
extended. Your instructions to us should be forwarded to us in ample time to
permit us to submit a tender on your behalf.
-18-
<PAGE>
2. The Exchange Offer is made for all Old Notes outstanding,
constituting $100,000,000 aggregate principal amount as of the date of the
Prospectus.
3. The minimum permitted tender is $1,000 principal amount of Old
Notes, and all tenders must be in integral multiples of $1,000.
4. The Offer is conditioned upon the satisfaction of certain
conditions set forth in the Prospectus under the caption "The Exchange Offer --
Conditions of the Exchange Offer." The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered for exchange.
5. Tendering Holders (as defined in the Prospectus) will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes applicable to the
exchange of Old Notes pursuant to the Exchange Offer.
6. In all cases, exchange of Old Notes tendered and accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by Chase Manhattan Trust Company, National Association ("Exchange Agent") of (i)
certificates representing such Old Notes or timely confirmation of a book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company ("Book-Entry Transfer Facility") pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering Old Notes," (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined in the Prospectus) in connection with a book-
entry transfer, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, payment may be made to tendering Holders at different
times if delivery of the Old Notes and other required documents occurs at
different times.
The Exchange Offer is being made solely by the Prospectus and the related
Letter of Transmittal and is being made to all Holders of Old Notes. The
Company is not aware of any state where the making of the Exchange Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Company becomes aware of any valid state statute prohibiting
the making of the Exchange Offer or the acceptance of Old Notes tendered for
exchange pursuant thereto, the Company will make a good faith effort to comply
with any such state statute or seek to have such statute declared inapplicable
to the Exchange Offer. If, after such good faith effort, the Company cannot
comply with such state statute the Exchange Offer will not be made to, nor will
tenders be accepted from or on behalf of, the holders of Old Notes in such
state. In any jurisdiction where the securities, blue sky or other laws require
the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer
shall be deemed to be made on behalf of the Company by one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of the Old Notes held by us for
your account, please instruct us by completing, executing and returning to us
the instruction form contained in this letter. If you authorize a tender for
exchange of your Old Notes, the entire aggregate principal amount of such Old
Notes will be tendered for exchange unless otherwise specified in such
instruction form. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
EXCHANGE OFFER.
-19-
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY
TRANSFER PARTICIPANT FROM OWNER WITH RESPECT TO THE
INTEGRATED CIRCUIT SYSTEMS, INC.
Offer to Exchange
11 1/2% Senior Subordinated Notes due 2009
for any and all outstanding
11 1/2% Senior Subordinated Notes due 2009
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned acknowledge(s) receipt of your letter enclosing the
Prospectus dated _____ __, 1999, and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Exchange Offer") pursuant to an offer by Integrated Circuit Systems, Inc., a
Delaware corporation, to exchange all of its outstanding 11 1/2% Senior
Subordinated Notes due 2009 ("Old Notes") for a new series of its 11 1/2% Senior
Subordinated Notes due 2009 ("New Notes"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you to tender the principal amount of Old Notes
indicated below (or, if no number is indicated below, the entire aggregate
principal amount) which are held by you for the account of the undersigned, upon
the terms and subject to the conditions set forth in the Exchange Offer.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$______________ of the 11 1/2% Senior Subordinated Notes Due 2009.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered (if
any):
$______________ of the 11 1/2% Senior Subordinated Notes Due 2009.
[_] NOT to TENDER any old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary
____________________________
* Unless otherwise indicated, it will be assumed that the entire principal
amount of the Old Notes held by us for your account are to be tendered for
exchange. The minimum permitted tender is $1,000 principal amount of Old
Notes; all other tenders must be in integral multiples of $1,000.
<PAGE>
course of business of the undersigned, (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes, (iii) if the undersigned is not a broker-
dealer, or is a broker-dealer but will not receive New Notes for its own account
in exchange for Old Notes, neither the undersigned nor any such other person is
engaged in or intends to participate in the distribution of such New Notes and
(iv) neither the undersigned nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act") or, if the undersigned is an "affiliate," that
the undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Old Notes, it represents that such
Old Notes were acquired as a result of marketing-making activities or other
trading activities, and it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such new Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of Beneficial Owner(s):____________________________________
Signature(s):___________________________________________________
Name(s) (please print):_________________________________________
Address:________________________________________________________
________________________________________________________________
Telephone Number:_______________________________________________
Taxpayer identification or Social Security Number:_______________
_________________________________________________________________
Date:_____________________________________________________________
-2-
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
OFFER TO EXCHANGE
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
___________________________________________________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON __________ __, 1999,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
___________________________________________________________________
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Integrated Circuit Systems, Inc., a Delaware corporation (the "Company"),
is offering to exchange all of its outstanding 11 1/2% Senior Subordinated Notes
due 2009 ("Old Notes") for a new series of its 11 1/2% Senior Subordinated Notes
due 2009 upon the terms and subject to the conditions set forth in the
Prospectus dated ______ __, 1999 ("Prospectus") and in the related Letter of
Transmittal (which, together with any amendment or supplements thereto,
collectively constitute the "Exchange Offer") enclosed herewith.
The Exchange Offer is conditioned upon satisfaction of certain conditions
set forth in the Prospectus under the caption "The Exchange Offer -- Conditions
of the Exchange Offer." The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange.
Enclosed herewith for your information and forwarding to your clients for
whose accounts you hold Old Notes registered in your name or in the name of your
nominee are copies of the following documents:
1. The Prospectus dated _______ __, 1999.
2. The blue Letter of Transmittal to tender Old Notes for exchange
(for your use and for the information of your clients). Facsimile
copies of the Letter of Transmittal may be used to tender Old Notes
for exchange.
3. The gray Notice of Guaranteed Delivery (to be used to tender Old
Notes for exchange if certificates for Old Notes are not
immediately available or if such certificates for Old Notes and all
other required documents cannot be delivered to Chase Manhattan
Trust Company, National Association ("Exchange Agent") on or prior
to the Expiration Date or if the procedures for book-entry transfer
cannot be completed on a timely basis).
4. A yellow printed form of letter which may be sent to your clients
for whose accounts you hold Old Notes registered in your name or in
the name of your nominee, with space provided for obtaining such
clients' instructions with regard to the Exchange Offer.
<PAGE>
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
6. A return envelope addressed to the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTRACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________ __, 1999, UNLESS THE
EXCHANGE OFFER IS EXTENDED.
In order for Old Notes to be validly tendered pursuant to the Exchange
Offer, (i) a duly executed and properly completed Letter of Transmittal (or a
facsimile thereof) together with any required signature guarantees, or an
Agent's Message (as defined in the Prospectus) in connection with a book-entry
delivery of Old Notes, and any other documents required by the Letter of
Transmittal, must be received by the Depositary on or prior to the Expiration
Date, and (ii) either certificates representing tendered Old Notes must be
received by the Exchange Agent or such Old Notes must be tendered by book-entry
transfer into the Exchange Agent account maintained at the Book-Entry Transfer
Facility (as described in the Prospectus), and Book-Entry Confirmation must be
received by the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus
If Holder (as defined in the Prospectus) desires to tender Old Notes for
exchange pursuant to the Exchange Offer and such Holder's Old Note certificates
are not immediately available or such Holder cannot deliver the Old Note
certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date, or such Holder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Old Notes may
nevertheless be tendered for exchange by following the guaranteed delivery
procedures specified in the Prospectus under the caption "The Exchange Offer --
Procedures for Tendering Old Notes -- Guaranteed Delivery Procedures."
The Company will not pay any fees or commissions to any broker or dealer or
any other person for soliciting tenders of Old Notes pursuant to the Exchange
Offer. The Company will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Company will pay or cause to be paid any
transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange
Offer, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquires you may have with respect to the Exchange Offer should be
addressed to the Exchange Agent, at its address and telephone numbers set forth
on the back cover of the Prospectus. Additional copies of the enclosed material
may be obtained from the Exchange Agent.
Very truly yours,
Integrated Circuit Systems, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS THEREIN.
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<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
INTEGRATED CIRCUIT SYSTEMS, INC.
Offer to Exchange
11 1/2% Senior Subordinated Notes due 2009
for any and all outstanding
11 1/2% Senior Subordinated Notes due 2009
Which Have Been Registered Under the Securities Act of 1933
Pursuant to the Prospectus dated ______ __, 1999
As set forth in Prospectus described below, this Notice of Guaranteed
Delivery or one substantially equivalent hereto must be used to tender for
exchange 11 1/2% Senior Subordinated Notes due 2009 ("Old Notes"), of Integrated
Circuit Systems, Inc., a Delaware corporation ("Company"), pursuant to the
Exchange Offer (as defined below) if certificates for Old Notes are not
immediately available or the certificates for Old Notes and all other required
documents cannot be delivered to the Exchange Agent on or prior to the
Expiration Date (as defined in the Prospectus), or if the procedures for
delivery by book-entry transfer cannot be completed on a timely basis. This
instrument may be delivered by hand or transmitted by facsimile transmission or
mail to the Exchange Agent.
The Exchange Agent for the Exchange Offer is:
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
By Registered or Certified Mail: By Hand/Overnight Express:
Chase Manhattan Trust Company, Chase Manhattan Trust Company,
National Association National Association
1650 Market Street 1650 Market Street
Philadelphia, Pennsylvania 19103 Philadelphia, Pennsylvania 19103
Attn: Stephen Schaaf Attn: Stephen Schaaf
Corporate Trust Department Corporate Trust Department
By Facsimile Transmission:
(215) 988-1320
Confirm by telephone:
(215) 568-1449
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the Instructions to the Letter of
Transmittal, such signature guarantee must appear in the applicable space
provided in the signature box in the Letter of Transmittal.
______________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _______ __, 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
______________________________
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus dated ______ __, 1999
("Prospectus") and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Exchange
Offer"), receipt of each of which is hereby acknowledged, the principal amount
of Old Notes indicated below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering Old Notes -- Guaranteed Delivery Procedures."
Signature(s)____________________________________________________________________
Name(s) of Eligible Holders_____________________________________________________
PLEASE TYPE OR PRINT
Principal Amount of Old Notes Tendered for Exchange $___________________________
Old Note Certificate No(s). (If available)______________________________________
Dated _______________, 199_
Address(es)_____________________________________________________________________
Zip Code
Area Code and Tel. No.(s)_______________________________________________________
(Check box if shares will be tendered by book-entry transfer)
[_] The Depository Trust Company
DTC Account Number_________________________________
-2-
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in the Prospectus),
having an office or correspondent in the United States, hereby (a) represents
that the above named person(s) "own(s)" the Old Notes tendered hereby within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended ("Rule 14e-4"), (b) represents that such tender of Old Notes complies
with Rule 14e-4, and (c) guarantees to either deliver to the Exchange Agent the
certificates representing all the Old Notes tendered hereby, in proper form for
transfer, or to deliver such Old Notes pursuant to the procedure for book-entry
transfer into the Exchange Agent's account at The Depository Trust Company, in
either case together with the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Prospectus) in the case of a book-entry
transfer, and any other required documents, all within three New York Stock
Exchange trading days after the date hereof.
___________________________________ _____________________________
- - -
Name of Firm Authorized Signature
___________________________________ ______________________________
- - -
Address Please Type or Print
___________________________________ ____________________________
- - -
Zip Code Date
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-3-
<PAGE>
Exhibit 99.3
Chase Manhattan Trust Company, National Association
1650 Market Street, Suite 5210
Philadelphia, PA 19103
Attention: Corporate Trust Department
Ladies and Gentlemen:
Integrated Circuit Systems, Inc. (the "Company") is making an offer to
exchange up to $98,000,000 in principal amount of its registered 11 1/2% Senior
Subordinated Notes due 2009 (the "New Notes") for $98,000,000 in principal
amount of its outstanding unregistered 11 1/2% Senior Subordinated Notes due
2009 (the "Old Notes"), upon the terms and subject to the conditions set forth
in the Prospectus dated _______________ (the "Prospectus") and in the related
Letter of Transmittal (the "Letter of Transmittal"). The Old Notes were issued
and the New Notes will be issued pursuant to the Indenture (the "Indenture")
dated as of _______________ by and between the Company and Chase Manhattan Trust
Company, National Association, as trustee (the "Trustee"), registrar (the
"Registrar") and paying agent (the "Paying Agent"). The issuance of the New
Notes has been registered pursuant to a Registration Statement on Form S-4 filed
by the Company with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. The offer to exchange New Notes for Old Notes pursuant
to the Prospectus and the Letter of Transmittal is referred to herein as the
"Exchange Offer." Attached hereto as exhibits are the following:
Exhibit 1. The Prospectus;
Exhibit 2. The Form of the Letter of Transmittal;
Exhibit 3. The Form of the Notice of Guaranteed Delivery; and
Exhibit 4. The Form of New Note.
The Exchange Offer will commence on _____________ (the "Commencement
Date"), and will expire at 5:00 p.m., New York City time, on ______________,
unless extended by the Company as provided in the Exchange Offer (the date on
which the Exchange Offer (including as it may be extended) expires is herein
referred to as the "Expiration Date"). The Company will notify you in writing
on the day of any extension of the Exchange Offer.
The Company hereby appoints you, and you hereby agree, to act as the
exchange agent (the "Exchange Agent") in connection with the Exchange Offer. In
that capacity, you will, on behalf of the Company, receive Old Notes tendered
and deliver New Notes in exchange therefor pursuant to this Agreement and the
Letter of Transmittal. The parties hereto acknowledge that the Old Notes and
the New Notes may be held in book-entry form as well as in
<PAGE>
certificated form and that all references to the tender, delivery or exchange of
Old Notes for New Notes shall be deemed to include book-entry procedure. In
carrying out your duties as the Exchange Agent in connection with the Exchange
Offer, you and the Company agree as follows:
1. You will make a request to establish an account with respect to
the Old Notes at the Depository Trust Company ("DTC") within two business days
after the date of this Agreement. You agree that any financial institution that
is a participant in DTC's systems may make book-entry delivery of Old Notes in
accordance with DTC's Automated Tender Offer Program ("ATOP").
2. On the Commencement Date, you will send by first class mail to
each holder of Old Notes, at the address of such holder shown on the register
maintained by you as Registrar under the Indenture, for use by that holder in
forwarding and tendering the Old Notes to you as Exchange Agent, one copy of
each of the Prospectus, the Letter of Transmittal and the Notice of Guaranteed
Delivery, along with a return envelope addressed to you as Exchange Agent. Upon
request of any holder of Old Notes, you are hereby authorized and directed to
issue and mail additional copies of the foregoing documents to that holder of
Old Notes or to the persons that such holder may direct.
3. You will examine each Letter of Transmittal, certificate
evidencing Old Notes, and Notice of Guaranteed Delivery and each of the other
documents mailed or otherwise delivered to you in connection with tenders of Old
Notes (collectively, the "Tender Instruments") to ascertain whether each Letter
of Transmittal or Notice of Guaranteed Delivery has been properly completed and
duly executed and whether the certificates evidencing Old Notes accompanying the
Letter of Transmittal or received pursuant to a Notice of Guaranteed Delivery
are in proper form for transfer, in each case, in accordance with the
instructions set forth in the Letter of Transmittal. Final determination of all
questions as to the validity, form, eligibility and acceptance for exchange of
any tender of Old Notes shall be made by the Company, in its sole discretion,
and that determination shall be final and binding. The Company has reserved in
the Exchange Offer the absolute right to reject any or all tenders of Old Notes
determined by it not to be timely or in proper form or the acceptance of or
exchange for which may, in the opinion of the Company's counsel, be unlawful and
to waive any of the conditions of the Exchange Offer or any defect or
irregularity in the tender of the Old Notes, and the Company's interpretation of
the terms and conditions of the Exchange Offer will be final. The Company
promptly shall notify you, in writing, of any such rejection or waiver.
4. Subject to the provisions of Paragraph 3 hereof concerning the
Company's ability to waive defects in the tender, Old Notes must be tendered
only in accordance with the terms and conditions set forth in the Letter of
Transmittal and the section of the Prospectus under the caption "Exchange
Offer."
a. Exchange of New Notes for Old Notes tendered and accepted
for exchange pursuant to the Exchange Offer shall be made only if:
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<PAGE>
(1) you receive on or prior to the Expiration Date (A) certificates
for such Old Notes and (B) a properly completed and duly executed Letter of
Transmittal (or facsimile thereto) relating thereto; or
(2) you receive on or prior to the Expiration Date electronic
instructions tendering the Old Notes through the ATOP system that contain the
character by which the participant at DTC acknowledges its receipt of and agrees
to be bound by the Letter of Transmittal; or
(3) you receive (A) a Notice of Guaranteed Delivery relating to such
Old Notes from an Eligible Institution (as defined in the Prospectus) on or
prior to the Expiration Date and (B) certificates for such Old Notes and a
properly completed and duly executed Letter of Transmittal (or facsimile)
thereto relating thereto at or prior to 5:00 p.m., New York City time, on or
before the third New York Stock Exchange (the "NYSE") trading day after the date
of execution of that Notice of Guaranteed Delivery.
b. Exchange shall be made only if a final determination of the
adequacy of the items received, as provided in Paragraph 3 hereof, has been made
by the Company and you receive written notice from the Company that the
conditions of the Exchange Offer have been satisfied or waived.
c. You are authorized to take such actions as may be necessary
and appropriate to correct any irregularities or deficiencies associated with
any tender not in proper order and to follow the instructions of the Company
with respect to the waiver of any irregularities or deficiencies associated with
any tender.
5. A tendering holder of Old Notes may withdraw Old Notes tendered
prior to the Expiration Date as set forth in the Prospectus, in which event you
shall, as promptly as possible after notification of that withdrawal, return
such Old Notes to, or in accordance with the instructions of, that holder of Old
Notes, and such Old Notes shall thereafter be deemed not to have been validly
tendered. All questions as to the form and validity (including time of receipt)
of notices of withdrawal shall be determined by the Company, in its sole
discretion, whose determination shall be final and binding.
6. Once each week, on the day of the week fixed by notice to you
from the Company, and once each day on the Expiration Date and the four business
days immediately preceding the Expiration Date, you shall advise by telephone
and promptly thereafter confirm in writing to _______ (telephone: __________;
facsimile: _____________) at the Company and _________________ (telephone:
__________; facsimile: _____________) at ________________ (or such other person
or persons who may be designated by the Company in writing) as to the
information on the attached Exhibit A. You shall also provide the
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<PAGE>
aforementioned persons (or any other persons identified to you by the
aforementioned persons), with such other information as any of them may
reasonably request.
7. You shall record as to the date and time of receipt and preserve
as permanent records each Letter of Transmittal, Notice of Guaranteed Delivery,
and withdrawn tender of Old Notes and each facsimile transmission submitted in
lieu thereof pursuant to the Letter of Transmittal and the section of the
Prospectus under the caption "The Exchange Offer," until you are otherwise
instructed in writing by the Company. You shall match submitted Notices of
Guaranteed Delivery with Old Notes tendered pursuant thereto, although you shall
have no duty to enforce any Notices of Guaranteed Delivery.
8. You shall follow and act upon any written amendments,
modification or supplements to these instructions to which you agree in writing,
and upon any further instructions in connection with the Exchange Offer, any of
which may be given to you by the Company or those persons as it may authorize in
writing.
9. As soon as practicable after the Expiration Date, the Company
shall notify you in writing of the tendered Old Notes, if any, which have been
accepted for exchange (the "Acceptance Notice"), and that written notification
shall be irrevocable. On the date specified by the Company for delivery of the
New Notes (the "Closing Date"), you shall deliver New Notes for such tendered
Old Notes on behalf of the Company. You shall thereupon mark "Canceled" on the
certificates representing tendered Old Notes accepted for exchange and retain
such Old Notes as Registrar under the Indenture. Upon completion of the
issuance of New Notes, you will promptly provide to the Company upon the written
request or the Company (i) a list, certified by an authorized signatory, of the
Old Notes that have been canceled in accordance herewith, (ii) a list, certified
by an authorized signatory, of the New Notes that have been issued and (iii) a
list, certified by an authorized signatory, of the Old Notes not tendered for
exchange or tendered and withdrawn, each list to include the name and address of
the former or current holder, as applicable, and the principal amount of each
Old Note or New Note, as applicable.
10. If, pursuant to the provisions of the instructions to the Letter
of Transmittal, less than the entire principal amount evidenced by any
certificate delivered to you is to be tendered, you shall promptly after the
Expiration Date, and after receipt of the Acceptance Notice provided in
Paragraph 9 with respect to the tendered portion, return or cause to be returned
a new certificate evidencing the untendered remainder of the principal amount of
the Old Note that was evidence by the certificate to, or in accordance with the
instructions of the tendering holder of the Old Note.
11. If, pursuant to the terms of the Exchange Offer, the Company does
not accept for exchange all or any part of the tendered Old Notes, or Old Notes
are tendered but withdrawn in the manner provided in the Exchange Offer, you
shall promptly return to, or in accordance with the instructions of, each
tendering holder of such Old Notes the certificates evidencing the principal
amount of Old Notes not exchanged or, to the extent required, submit to
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<PAGE>
the Company (through the Registrar) for reissuance to, or in accordance with the
instructions of, each tendering holder of Old Notes certificates evidencing the
principal amount of Old Notes not tendered or exchanged, which certificates
shall be returned to you for disposition, together with a letter of notice
provide by the Company, explaining why the tendered Old Notes are being
returned.
12. Certificates evidencing the New Notes as well as certificates
evidencing principal amounts of Old Notes not exchanged shall be forwarded in
accordance with Paragraphs 9, 10 or 11 hereof, as the case may be, by (a) first-
class mail under an existing insurance policy protecting you and the Company
from loss or liability arising out of the non-receipt or non-delivery of such
certificates or (b) by registered mail insured separately for the replacement
value of such certificates.
13. Upon request of any person, you shall furnish copies of the
Prospectus, and supplements thereto, the Letter of Transmittal, Notice of
Guaranteed Delivery and other materials referred to in the Prospectus as being
available to holders of Old Notes. The Company will supply you promptly with
copies of those documents upon your request.
14. As Exchange Agent you:
a. shall have no duties or obligations other than those
specifically set forth herein or as subsequently may be requested by the Company
in writing and agreed to in writing by you, and no implied duties or obligations
shall be read into this Agreement against you;
b. will be regarded as making no representations and having no
responsibilities as to the validity, accuracy, sufficiency, value or genuineness
of (i) any certificates evidencing Old Notes deposited with you pursuant to the
Exchange Offer and (ii) any signatures or endorsements, other than your own;
c. shall not be required to make any representation or have any
responsibility as to the validity, sufficiency, value or genuineness of the
Exchange Offer of the New Notes;
d. shall not be required to initiate any legal action hereunder
that might in your judgment involve any expense or liability to you, except upon
written instructions of the Company and then only if you have been furnished by
the Company with such indemnity as shall be reasonably satisfactory to you;
e. may rely on and shall be protected in acting upon any
certificate, instrument, opinion, notice, letter, telex, telegram, facsimile
transmission or other document delivered to you and reasonably believed by you
to be genuine and to have been signed by the proper party or parties;
-5-
<PAGE>
f. may rely on and shall be protected in acting upon written or
oral instructions from the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President or the Secretary of the Company (each, an
"Authorized Officer"), or such other person or persons as may be designated by
the Company in writing, with respect to any matter relating to your actions as
Exchange Agent specifically covered by this Agreement or supplementing or
qualifying any such actions;
g. may consult with counsel satisfactory to you (including
counsel for the Company) and the advice or opinion of that counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by you hereunder in good faith and in accordance with the
advice or opinion of that counsel;
h. shall not at any time advise or be called upon to advise any
person as to the wisdom of making any tender pursuant to the Exchange Offer, the
market value or decline or appreciation in market value of the Old Notes or the
New Notes, or any other financial or legal aspect of The Exchange Offer or any
transaction related thereto;
i. shall be entitled, in the event that conflicting claims are
made, or threatened, against you with respect to the Exchange Offer, to
institute an interpleader action in any court of competent jurisdiction
requesting that court to resolve the conflicting claims; and
j. shall be entitled to receive from the Company the fees set
forth in Exhibit B hereto, together with the expenses incurred by you in
connection with your service as Exchange Agent.
15. You hereby agree that all securities, money, assets and property
(collectively, the "Property") deposited with or received by you as Exchange
Agent constitute a special, segregated account, held solely for the benefit of
the Company and holders of Old Notes tendering Old Notes, as their interests may
appear, and the Property shall not be commingled with the securities, money,
assets or property of you or any other person or entity.
16. The Company covenants and agrees to indemnify and to hold
harmless against any and all costs, expenses (including reasonable fees and
expenses of your legal counsel), losses or damages which may be paid, incurred
or suffered by you or to which you may become subject, arising from or out of,
directly or indirectly, any claim or liability resulting from your actions or
inactions as Exchange Agent pursuant hereto; provided that such covenant and
agreement does not extend to, and you shall not be indemnified and held harmless
with respect to, such costs, expenses, losses and damages incurred or suffered
by you as a result of, or arising out of, your gross negligence, bad faith, or
willful misconduct in connection with your obligations hereunder.
-6-
<PAGE>
17. All reports, notices and other communications required or
permitted hereunder (other than the telephonic advice required by Paragraph 6)
shall be in writing (unless otherwise provided herein) and shall be deemed given
when delivered by hand, telegram, telex, facsimile transmission or first-class
mail, postage prepaid, as follows:
To the Exchange Agent:
Chase Manhattan Trust Company, National Association
1650 Market Street, Suite 5210
Philadelphia, PA 19103
Attn: Stephen Schaaf
Corporate Trust Department
Telephone: 215-988-1320
Facsimile: 215-568-1449
To the Company:
Integrated Circuit Systems, Inc.
2435 Boulevard of the Generals
Norristown, Pennsylvania 19403
Attn: Hock E. Tan
Telephone: 610-630-5300
With copy to:
Pepper Hamilton, LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103
Attn: Robert A. Friedel, Esquire
Telephone: 215-981-4000
Facsimile: 215-981-4750
18. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the Commonwealth
of Pennsylvania and shall inure to the benefit of, and the obligation created
hereby shall be binding upon, the successors and assigns of each of the parties
hereto; provided, however, that no assignment by the Company shall affect the
Exchange Agent's right under Paragraph 16 hereof. This Agreement may not be
assigned by you without prior written consent of the Company.
19. Any corporation into which the Exchange Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to
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<PAGE>
which the Exchange Agent shall be a party, or any corporation to which the
Exchange Agent may transfer all or substantially all of its corporate trust
business, shall be the successor Exchange Agent hereunder, without the execution
or filing of any paper or any further act on the part of the parties hereto,
anything herein to the contrary notwithstanding.
20. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original but which together shall constitute
one and the same agreement. This Agreement may only be amended, modified or
supplemented in writing signed by all parties hereto.
21. Upon the first to occur of (a) the completion of your duties
hereunder or (b) January 31, 2000, your designation as Exchange Agent and your
obligations hereunder will terminate at the close of business on said date. The
provisions of Paragraph 16 shall survive the termination of this Agreement and
shall continue in full force and effect.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
INTEGRATED CIRCUIT SYSTEMS, INC.
By:__________________________________
Hock E. Tan
President and Chief Financial Officer
Accepted as of _________________
Chase Manhattan Trust Company, National Association,
as Exchange Agent
By:__________________________________________
Name:
Title: Vice President
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<PAGE>
EXHIBIT A
SAMPLE REPORT LETTER
DATE: _______________________
REPORT NUMBER: ___________
AS OF DATE: ________________
RE: Offered of Integrated Circuit Systems, Inc. to Exchange 11 1/2% Senior
Subordinated Notes Due 2009 of the Company ("New Notes") for Outstanding
11 1/2% Senior Subordinated Notes Due 2009 of the Company ("Old Notes").
Ladies and Gentlemen:
As Exchange Agent for the Exchange Offer (as described in the Company's
Prospectus dates as of ___________), we hereby render the following report:
Principal amount of Old Notes previously received:
__________________________________
Principal amount of Old Notes received today:
______________________________________
Total principal amount of Old Notes received to date:
________________________________
Very truly yours,
Chase Manhattan Trust Company, National
Association, as Exchange Agent
By:___________________________________
Name:________________________________
Title: _________________________________
<PAGE>
EXHIBIT B
FEE SCHEDULE
RE: Integrated Circuit Systems, Inc. proposed 11 1/2% Senior Subordinated Notes
due 2009 Registered Exchange Offering
Date Description Amount
- ---- ----------- ------
_____________, 1999 Exchange Agent Fee $4,500.00
Kindly return "copy" of this invoice with remittance (retaining original
for your file) to, Chase Manhattan Trust Company, National Association,
Corporate Trust, 1650 Market Street, Suite 5210, Philadelphia, PA 19103, Attn:
Stephen Schaaf.
To make payment by wire transfer, the following information is necessary:
ABA# 113000609. Account Name - Trust Wire Clearing - Philadelphia, PA, account
to be credited 76609060682, advise by phone to Stephen Schaaf at (215) 988-1320.
<PAGE>
EXHIBIT 1
THE PROSPECTUS
<PAGE>
EXHIBIT 2
FORM OF LETTER OF TRANSMITTAL
<PAGE>
EXHIBIT 3
FORM OF THE NOTICE OF GUARANTEED DELIVERY
<PAGE>
EXHIBIT 4
FORM OF NEW NOTE
