<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 28, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-21374
THE DII GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1224426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6273 Monarch Park Place
Suite 200
Niwot, Colorado 80503
(Address and zip code of principal executive offices)
(303) 652-2221
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS November 9, 1997
----- ----------------
Common Stock, Par Value $0.01 25,310,631
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THE DII GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------------- -----------------------------
SEPT. 28, 1997 SEPT. 29, 1996 SEPT. 28, 1997 SEPT. 29, 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales:
Contract electronics manufacturing $ 141,503 62,248 349,089 203,271
Other 71,361 45,953 184,952 132,970
--------- --------- --------- ---------
Total net sales 212,864 108,201 534,041 336,241
Cost of sales 179,562 87,753 441,880 271,104
--------- --------- --------- ---------
Gross profit 33,302 20,448 92,161 65,137
Selling, general and administrative expenses 17,098 11,977 51,424 35,219
Merger costs -- 3,545 -- 4,649
Interest income (256) (379) (654) (1,362)
Interest expense 2,504 1,547 5,924 4,619
Amortization of intangibles 1,033 832 2,762 2,355
Other, net 245 (465) 919 (616)
--------- --------- --------- ---------
Income before income taxes 12,678 3,391 31,786 20,273
Income tax expense 2,723 1,900 9,214 7,110
--------- --------- --------- ---------
Net income $ 9,955 1,491 22,572 13,163
========= ========= ========= =========
Earnings per share:
Primary $ 0.38 0.06 0.87 0.52
Fully diluted $ 0.35 0.06 0.81 0.52
Weighted average number of common shares and equivalents outstanding:
Primary 26,532 24,992 25,999 25,082
Fully diluted 31,203 24,992 31,014 25,082
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 3
THE DII GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
<TABLE>
<CAPTION>
SEPT. 29, DECEMBER 29,
1997 1996
--------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 94,441 25,010
Accounts receivable, net 125,802 79,851
Inventories 78,399 47,008
Other 9,047 8,829
--------- ---------
Total current assets 307,689 160,698
Property, plant and equipment, net 198,018 106,977
Intangible assets, net 77,890 66,207
Other 5,671 1,969
--------- ---------
$ 589,268 335,851
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 102,604 46,748
Accrued expenses 37,693 14,729
Accrued interest payable 3,507 1,116
Current installments of long-term financing obligations 6,360 10,572
Notes payable to sellers of businesses acquired -- 826
--------- ---------
Total current liabilities 150,164 73,991
Senior subordinated notes payable 150,000 --
Convertible subordinated notes payable 86,250 86,250
Long-term financing obligations, excluding current installments 8,377 12,938
Notes payable to sellers of businesses acquired 1,523 1,262
Other 1,998 2,373
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized;
none issued -- --
Common stock, $0.01 par value; 45,000,000 shares
authorized; 25,220,020 and 23,928,830 shares issued and outstanding 252 240
Additional paid-in capital 100,886 91,856
Retained earnings 97,355 74,783
Cumulative foreign currency translation adjustments (4,078) (3,849)
Deferred stock compensation (3,459) (3,993)
--------- ---------
Total stockholders' equity 190,956 159,037
--------- ---------
$ 589,268 335,851
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 4
THE DII GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
--------------------------------
SEPT. 28, 1997 SEPT. 29, 1996
-------------- --------------
<S> <C> <C>
Net cash provided by operating activities $ 41,660 17,746
--------- ---------
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired (7,939) (2,056)
Additions to property, plant and equipment (106,103) (20,026)
Proceeds from sales of equipment 2,578 181
--------- ---------
Net cash used by investing activities (111,464) (21,901)
--------- ---------
Cash flows from financing activities:
Debt issuance costs (4,934) (314)
Repayments of long-term financing obligations (10,973) (4,039)
Proceeds from long-term financing obligations -- 1,260
Proceeds from line-of-credit borrowings 84,430 --
Repayments of line-of-credit borrowings (84,430) --
Repayments of notes payable to sellers of businesses acquired (826) (16,836)
Proceeds from senior subordinated notes payable 150,000 --
Proceeds from notes receivable -- 1,000
Proceeds from stock issued under stock plans 6,064 1,384
--------- ---------
Net cash provided (used) by financing activities 139,331 (17,545)
--------- ---------
Effect of exchange rate changes on cash (96) (3)
--------- ---------
Net increase (decrease) in cash and cash equivalents 69,431 (21,703)
Cash and cash equivalents at beginning of period 25,010 55,533
--------- ---------
Cash and cash equivalents at end of period $ 94,441 33,830
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 5
THE DII GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Financial information as of December 29, 1996 has been derived
from the audited consolidated financial statements of The DII Group, Inc. and
subsidiaries (the "Company" or "DII").
The condensed consolidated financial statements do not include all information
and notes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to the consolidated
financial statements as of and for the year ended December 29, 1996 included in
the annual report on Form 10-K previously filed with the Securities and Exchange
Commission (the "SEC"). In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included in the accompanying condensed consolidated
financial statements. Operating results for the nine-month period ended
September 28, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 28, 1997.
On August 22, 1996, the DII Group changed its fiscal year end from December 31
to the Sunday nearest to December 31, beginning with the fiscal year ended
December 29, 1996. Accordingly, fiscal 1996 and 1997 each comprise 52 weeks and
end on December 29, 1996 and December 28, 1997, respectively. The accompanying
condensed consolidated financial statements are therefore presented as of and
for the three and nine-month periods ended September 28, 1997 and September 29,
1996.
(2) INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPT. 28, DECEMBER 29,
1997 1996
-------- ------------
<S> <C> <C>
Raw materials $ 59,352 34,099
Work in process 23,557 15,721
Finished goods 2,926 2,580
-------- --------
85,835 52,400
Allowance for inventory (7,436) (5,392)
-------- --------
$ 78,399 47,008
======== ========
</TABLE>
The Company made provisions to the allowance for inventory impairment of $2,676
and $653 during the nine months ended September 28, 1997 and September 29, 1996,
respectively.
(3) PROPERTY, PLANT AND EQUIPMENT
On August 18, 1997, the Company acquired International Business Machine's
("IBMs") printed circuit board fabrication facility, and its related production
equipment, inventory and intellectual property for approximately $46,064.
<PAGE> 6
THE DII GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(4) ACQUISITIONS
During the second quarter of 1997, the Company acquired Design Solutions, Inc.
("DSI") and Process Control Technologies, Inc. ("PCT"). DSI provides custom
design and engineering services for printed circuit assemblies to original
equipment manufacturers. PCT is a manufacturer of solutions to automate the
transfer of bare printed circuit boards and assembled circuits through the
entire manufacturing process including final box-build assembly. The cash
purchase price, net of cash acquired, for these acquisitions was $7,939. The
fair value of the assets acquired and liabilities assumed from these
acquisitions were immaterial. The cost in excess of net assets acquired through
these acquisitions amounted to $6,812.
In April 1996, the Company acquired Chemtech Limited, a quick-turn manufacturer
of surface mount printed circuit board solder cream stencils located in the
United Kingdom. The cash purchase price, net of cash acquired, was $2,056. The
fair value of the assets acquired and liabilities assumed were immaterial. The
cost in excess of net assets acquired amounted to $3,658.
These acquisitions were accounted for as purchases with the results of
operations from the acquired businesses included in the Company's results of
operations from the acquisition dates forward. Pro forma results of operations
would not be materially different from the historical results reported. The
costs of these acquisitions have been allocated on the basis of the estimated
fair value of the assets acquired and the liabilities assumed.
(5) SENIOR SUBORDINATED NOTES
In September 1997, the Company issued $150,000 of 8.50% senior subordinated
notes. Interest is payable on March 15 and September 15 of each year and the
notes mature on September 15, 2007. The Company may redeem the notes on or after
September 15, 2002. The indenture contains certain covenants that, among other
things, limit the ability of the Company and certain of its subsidiaries to (i)
incur additional debt, (ii) issue or sell capital stock of certain subsidiaries,
(iii) engage in asset sales, (iv) incur layered debt, (v) create liens on its
properties and assets, and (vi) make distributions or pay dividends. The
covenants are subject to a number of significant exceptions and qualifications.
(6) COMMITMENTS AND CONTINGENCIES
The Company is involved in certain litigation and environmental matters
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1996. The ultimate outcome of these matters cannot, at this time,
be predicted in light of the uncertainties inherent in these matters. Based upon
the facts and circumstances currently known, management cannot estimate the most
likely loss or the maximum loss for these matters. The Company has accrued the
minimum estimated costs associated with these matters in the accompanying
condensed consolidated financial statements. The total amounts accrued for these
matters are immaterial.
<PAGE> 7
THE DII GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(6) COMMITMENTS AND CONTINGENCIES, CONTINUED
The Company determines the amount of its accruals for environmental matters by
analyzing and estimating the range of possible costs in light of information
currently available. The imposition of more stringent standards or requirements
under environmental laws or regulations, the results of future testing and
analysis undertaken by the Company at its operating facilities, or a
determination that the Company is potentially responsible for the release of
hazardous substances at other sites, could result in expenditures in excess of
amounts currently estimated to be required for such matters. No assurance can be
given that actual costs will not exceed amounts accrued or that costs will not
be incurred with respect to sites as to which no problem is currently known.
Further, there can be no assurance that additional environmental matters will
not arise in the future.
The Company has approximately $8,900 of capital commitments as of September 28,
1997.
The Company has a senior secured revolving line-of-credit which was amended in
August 1997 to increase the maximum borrowing capability to $80,000 and extend
the expiration date to June 2002. This credit facility is secured by
substantially all of the Company's assets and requires compliance with certain
financial covenants and contains certain restrictions on the Company's ability
to (i) incur certain debt, (ii) create certain liens on its properties and
assets, (iii) make certain investments in businesses outside the Company's
industry, (iv) merge or consolidate with other certain entities, (v) pay certain
dividends or make distributions, (vi) repurchase or redeem certain common stock,
and (vii) dispose of certain assets. As of September 28, 1997, there were no
borrowings outstanding under the line-of-credit, and the Company was in
compliance with all financial covenants.
(7) COMMON STOCK SPLIT
On July 29, 1997, the Company's Board of Directors declared a two-for-one stock
split of the Company's common stock effected in the form of a stock dividend
which was distributed to shareholders on September 2, 1997 to shareholders of
record as of August 15, 1997. This increased the number of shares outstanding to
approximately 25.2 million from 12.6 million. The Company transferred $126 from
additional paid-in capital to the common stock par account to reflect the stock
split. All share and per share data included in this report have been
retroactively restated to reflect the split.
<PAGE> 8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
CERTAIN FORWARD-LOOKING INFORMATION:
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements include, but are not limited
to, statements regarding contingencies, litigation, environmental matters,
liquidity and capital expenditures herein under "Part I Financial Information
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations." Actual results could differ materially from those projected in
the forward-looking statements as a result of the risk factors set forth below.
A. OVERVIEW
The Company is a leading provider of electronics design and manufacturing
services which operates through a global network of independent business units.
These business units are uniquely linked to provide the following related
products and services to OEM customers: custom microelectronics design and
manufacturing; design and manufacturing of printed circuit boards; assembly of
printed circuit boards; process tooling; machine tools; in-circuit and
functional test hardware and software; and final system configuration. By
offering comprehensive and integrated design and manufacturing services, the
Company believes it is better able to develop long-term relationships with its
customers, expand into new markets and enhance its profitability.
The Company provides the following related products and services to the global
electronics manufacturing industry:
Custom Microelectronics--Through Orbit Semiconductor ("Orbit"), the
Company provides semiconductor design, manufacturing and engineering
support services to its OEM customers. Orbit provides cost-effective
gate array conversion services, mixed-signal design and production
capabilities as well as high-reliability manufacturing and quick-turn
and low-volume manufacturing services, utilizing a combination of its
internal fabrication capabilities and its external foundry suppliers,
thereby using a "fab/fabless" manufacturing approach.
Interconnect Technologies--The Company provides design and engineering
services for printed circuit assemblies through Design Solutions, Inc.
("DSI") and manufactures high density, complex multilayer printed
circuit boards on a quick-turn and high-volume production basis through
Multilayer Technology ("Multek").
Systems Assembly--The Company assembles complex electronic circuits and
final system configuration (contract electronics manufacturing or
"CEM") on a high and low volume contract basis through Dovatron
International ("Dovatron").
Process Technologies--The Company manufactures surface mount printed
circuit board solder cream stencils on a quick-turn basis through IRI
International ("IRI") and Chemtech Limited ("Chemtech"); designs and
manufactures in-circuit and functional test software and hardware on a
quick-turn basis through TTI Testron; manufactures depaneling systems
that route individual printed circuit boards from an assembled master
panel in the final step of the electronics assembly process through
Cencorp; and manufactures automation solutions for the transfer of bare
printed circuit boards and assembled circuits through the entire
manufacturing process including final box-build assembly, through
Process Control Technologies, Inc. ("PCT").
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
A. OVERVIEW, CONTINUED
The Company has the ability to provide customers with a total design and
manufacturing outsourcing solution. The Company's ability to offer fully
integrated solutions with value-added front- and back-end product and process
development capabilities coupled with global volume assembly capabilities
provides customers with significant speed-to-market and product cost
improvements.
Operating results may be affected by a number of factors including the economic
conditions in the markets the Company serves; price and product competition; the
level of volume and the timing of orders; product mix; the amount of automation
existing on specific manufacturing projects; efficiencies achieved by inventory
management; fixed asset utilization; the level of experience in manufacturing a
particular product; customer product delivery requirements; shortages of
components or experienced labor; the integration of acquired businesses;
start-up costs associated with adding new geographical locations; expenditures
required for research and development; and failure to introduce, or lack of
market acceptance of, new processes, services, technologies and products on a
timely basis. In addition, the level of sales can greatly shift based on whether
certain projects are contracted on a turnkey basis where the Company purchases
materials, versus a consignment basis where the customer provides materials.
A majority of the Company's sales are to customers in the electronics industry,
which is subject to rapid technological change, product obsolescence and price
competition. In addition, the electronics industry, and especially the
semiconductor sector, has historically been cyclical and subject to significant
economic downturns at various times, characterized by diminished product demand,
accelerated erosion of average selling prices and overcapacity. These factors,
which may affect the electronics industry in general, or any of the Company's
major customers, in particular, could have a material adverse affect on the
Company's operating results. There can be no assurance that the Company will be
able to successfully integrate newly-acquired businesses including Orbit's
transition from its 4-inch, 1.2 micron fabrication facility to its 6-inch, 0.6
micron fabrication facility, or Multek's acquisition of the Austin high-volume
printed circuit board fabrication facility. Such failure could have a material
adverse effect on the Company's business, financial condition and results of
operations. The future success of the Company's businesses will depend largely
upon its ability to enhance its existing products and services or to acquire new
products and manufacturing processes in order to keep pace with changing
technology and industry standards and meet the changing needs of customers.
There can be no assurance that the Company will be able to keep pace with the
rapidly changing technology trends. The introduction by competitors of new
technologies or the emergence of new industry standards and customer
requirements could render the Company's existing products and processes
obsolete, unmarketable or no longer competitive.
The Company seeks a well-balanced customer profile across most sectors of the
electronics industry in order to reduce exposure due to a downturn in any
particular sector. The primary sectors within the electronics industry served by
the Company are data communications, office automation, computer and
peripherals, telecommunications, industrial, instrumentation, and medical.
Although management believes the Company serves a diverse range of customers and
markets, the Company's contracts generally do not provide the Company with firm
long-term volume purchase commitments. In addition, from time to time, some of
the Company's customers have terminated their manufacturing arrangements with
the Company, and other customers have significantly reduced or delayed the
volume of design, engineering and manufacturing services from the Company. Any
such termination of a manufacturing relationship or change, reduction or delay
in orders could have a material adverse affect on the Company's operating
results.
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
A. OVERVIEW, CONTINUED
At any given time, certain customers may account for significant portions of the
Company's business. Hewlett Packard Company accounted for 16% of net sales
during the nine months ending September 28, 1997. No other customer accounted
for more than 10% of net sales during the nine months ended September 28, 1997.
No customer accounted for more than 10% of net sales during the nine months
ended September 29, 1996. The Company's top ten customers accounted for 49% and
43% of net sales for the nine months ended September 28, 1997 and September 29,
1996, respectively. The percentage of the Company's sales to its major customers
may fluctuate from period to period. Significant reductions in sales to any of
these customers could have a material adverse effect on the Company's operating
results.
The Company has actively pursued acquisitions in furtherance of its strategy to
be the fastest and most comprehensive provider of custom electronics design and
manufacturing services, ranging from microelectronics fabrication through the
final assembly of finished products for OEM customers. The Company's
acquisitions have enabled the Company to provide more integrated outsourcing
technology solutions with time-to-market and lower cost advantages. Acquisitions
have also played an important part in expanding the Company's presence in the
global electronics marketplace. By enhancing the Company's capability to provide
a wide range of related electronics design and manufacturing services to a
global market that is increasingly dependent on outsourcing providers, these
acquisitions have enabled the Company to enhance its competitive position as a
leading provider of comprehensive outsourcing technology solutions.
Acquisitions involve numerous risks including difficulties in assimilating the
operations, technologies, and products and services of the acquired companies,
the diversion of management's attention from other business concerns, risks of
entering markets in which the DII Group has no or limited direct prior
experience and where competitors in such markets have stronger market positions,
and the potential loss of key employees of the acquired company. There can be no
assurance that the Company will be able to successfully integrate newly acquired
businesses. Such failures could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company also
continues to experience rapid internal growth and expansion, and with continued
expansion, it may become more difficult for the Company's management to manage
geographically dispersed operations. The Company's failure to effectively manage
growth could have a material adverse effect on the Company's results of
operations.
B. RESULTS OF OPERATIONS
Total net sales for the three months ended September 28, 1997 increased $104,663
(97%) to $212,864 from $108,201 for the comparable period in 1996. Total net
sales for the nine months ended September 28, 1997 increased $197,800 (59%) to
$534,041 from $336,241 for the comparable period in 1996.
Contract electronics manufacturing net sales for the three months ended
September 28, 1997 increased $79,255 (127%) to $141,503 from $62,248 for the
corresponding period in 1996. Contract electronics manufacturing net sales for
the nine months ended September 28, 1997 increased $145,818 (72%) to $349,089
from $203,271 for the comparable period in 1996. These increases are primarily
attributable to increased orders from existing customers and an expanding
customer base, such as the high volume, multi-site production order for
Hewlett-Packard, which began ramping earlier this year.
Net sales for the Company's other products and services for the three months
ended September 28, 1997 increased $25,408 (55%) to $71,361 from $45,953 for the
comparable period in 1996. Net sales for the
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
B. RESULTS OF OPERATIONS, CONTINUED
Company's other products and services for the nine months ended September 28,
1997 increased $51,982 (39%) to $184,952 from $132,970 for the comparable period
in 1996. These increases are primarily attributable to (i) increased sales to
existing customers, (ii) an expanding customer base from the continued
industry-wide acceptance of its service offerings, and (iii) the 1997
acquisitions of DSI, PCT and the IBM Austin printed circuit board fabrication
facility.
Gross profit for the three months ended September 28, 1997 increased $12,854 to
$33,302 from $20,448 for the comparable period in 1996. Gross profit for the
nine-month period ending September 28, 1997 increased $27,024 to $92,161 from
$65,137 for the comparable period in 1996. The gross margin decreased to 15.6%
for the three months ended September 28, 1997 from 18.9% for the three months
ended September 29, 1996. The gross margin decreased to 17.3% for the nine-month
period ended September 28, 1997 from 19.4% for the nine-month period ended
September 29, 1996. These decreases were the result of (i) the increase in the
contract electronics manufacturing revenues which generate lower margins than
the Company's other products and service offerings, (ii) pricing pressure as a
result of a shift in Multek's product mix to higher-volume (lower margin)
production from its quick-turn, low-volume (higher margin) production, (iii)
Orbit's under-absorption of overhead associated with its transition into its new
6-inch, 0.6 micron wafer fabrication facility and (iv) Multek's under-absorbed
overhead associated with the transition of its recently acquired printed circuit
board fabrication facility in Austin, Texas to the merchant market.
Selling, general and administrative (SG&A) expense increased $5,121 to $17,098
for the three months ended September 28, 1997 from $11,977 for the comparable
period in 1996. The percentage of SG&A expense to net sales decreased to 8.0%
for the three months ended September 28, 1997 from 11.1% for the three months
ended September 29, 1996. The increase in absolute dollars was primarily
attributable to (i) additional costs associated with the start-up of Orbit's
newly acquired wafer fabrication facility while winding down its old wafer
fabrication facility, (ii) the continued expansion of the Company's sales and
marketing, finance, and other general and administrative infrastructure
necessary to support the Company's sales growth, (iii) the start-up of Multek's
recently acquired high volume printed circuit board fabrication facility in
Austin, Texas, (iv) increased incentive-based stock compensation, the
recognition of which is based upon expected achievement of certain earnings per
share targets established by the Compensation Committee of the Board of
Directors, and (v) increased SG&A expenses associated with the 97% increase in
net sales in the three months ended September 29, 1997 versus the comparable
period in 1996. The percentage of SG&A expense to net sales decreased during the
three months ended September 28, 1997 versus September 29, 1996 due to the
significant increase in revenues.
SG&A expense increased $16,205 to $51,424 for the nine-month period ended
September 28, 1997 from $35,219 for the comparable period in 1996. The
percentage of SG&A expense to net sales decreased to 9.6% for the nine months
ended September 28, 1997 from 10.5% for the nine months ended September 29,
1996. The increase in absolute dollars was primarily attributable to (i)
additional costs associated with the start-up of Orbit's newly acquired wafer
fabrication facility while winding down its old wafer fabrication facility, (ii)
the continued expansion of the Company's sales and marketing, finance, and other
general and administrative infrastructure necessary to support the Company's
sales growth, (iii) increased incentive-based stock compensation, (iv) the
start-up of Multek's recently acquired high volume printed circuit board
fabrication facility in Austin, Texas, and (v) increased SG&A expenses
associated with the 59% increase in net sales in the nine months ended September
28, 1997 versus the comparable period in 1996. The percentage of SG&A expense to
net sales decreased during the nine months ended September 28, 1997 versus
September 29, 1996 due to the significant increase in revenues.
<PAGE> 12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
B. RESULTS OF OPERATIONS, CONTINUED
Interest income decreased $123 to $256 for the three months ended September 28,
1997 from $379 for the comparable period in 1996. Interest income decreased $708
to $654 for the nine months ended September 28, 1997 from $1,362 for the
comparable period in 1996. These decreases are attributable to the earnings
generated on the lower average balances of invested cash and cash equivalents.
Interest expense increased $957 to $2,504 for the three months ended September
28, 1997 from $1,547 for the comparable period in 1996. Interest expense
increased $1,305 to $5,924 for the nine months ended September 28, 1997 from
$4,619 for the comparable period in 1996. These increases are primarily
associated with increased line-of-credit advances, which included interim
funding for the acquisition of the IBM Austin printed circuit board fabrication
facility in August 1997, coupled with increased long-term financing obligations
in connection with equipment additions related to Orbit's transition to its new
6-inch, 0.6 micron process facility. Additionally, the Company incurred
approximately $455 of interest expense associated with its issuance of $150,000
of 8.50% senior subordinated notes in September 1997. The Company used part of
the proceeds to repay the Company's outstanding advances against its
line-of-credit. The line-of-credit advances were used for working capital
purposes and to fund the Company's $46,064 acquisition of the IBM Austin printed
circuit board fabrication facility in August 1997.
Amortization of intangibles increased $201 to $1,033 for the three months ended
September 28, 1997 from $832 for the comparable period in 1996. Amortization of
intangibles increased $407 to $2,762 for the nine months ended September 28,
1997 from $2,355 for the comparable period in 1996. These increases are
attributable to the amortization of goodwill associated with the Chemtech, DSI
and PCT acquisitions. Other expenses (net) increased $710 for the three months
ended September 28, 1997 from the comparable period of 1996, due primarily to
increased provisions for doubtful accounts. Other expenses (net) increased
$1,535 for the nine months ended September 28, 1997 from the corresponding
period in 1996. This increase was due to increased provisions for doubtful
accounts during the nine months ended September 28, 1997, partially offset by a
$320 gain on the early extinguishment of long-term financing obligations during
the nine months ended September 29, 1996.
The Company's estimated effective income tax rate differs from the U.S.
statutory rate due to domestic income tax credits and lower effective income tax
rates on foreign earnings considered permanently invested abroad. The effective
tax rate for a particular year will vary depending on the mix of foreign and
domestic earnings, income tax credits and changes in previously established
valuation allowances for deferred tax assets based upon management's current
analysis of the realizability of these deferred tax assets. As foreign earnings
considered permanently invested abroad increase as a percentage of consolidated
earnings, the overall consolidated effective income tax rate will usually
decrease because the foreign earnings are generally taxed at a lower rate than
domestic earnings. The mix of foreign and domestic income from operations before
income taxes, the recognition of income tax loss and tax credit carryforwards
and management's current assessment of the required valuation allowance resulted
in an estimated effective income tax rate of 29% for the nine months ended
September 28, 1997. The Company's effective income tax rate was 35.1% for the
nine months ended September 29, 1996. This resulted from the mix of foreign and
domestic earnings, income tax credits, changes in previously established
valuation allowances for deferred tax assets and certain Orbit merger costs not
being deductible for income tax purposes.
On July 29, 1997, the Company's Board of Directors declared a two-for-one stock
split of the Company's common stock effected in the form of a stock dividend
which was distributed to shareholders on September 2, 1997 to shareholders of
record as of August 15, 1997. This increased the number of shares outstanding to
approximately 25.2 million from 12.6 million. The Company transferred $126 from
additional paid-in
<PAGE> 13
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
B. RESULTS OF OPERATIONS, CONTINUED
capital to the common stock par account to reflect the stock split. All share
and per share data included in this report have been retroactively restated to
reflect the split.
C. ACQUISITIONS
During the second quarter of 1997, the Company acquired DSI and PCT. DSI
provides custom design and engineering services for printed circuit assemblies
to original equipment manufacturers. PCT is a manufacturer of solutions to
automate the transfer of bare printed circuit boards and assembled circuits
through the entire manufacturing process including final box-build assembly. The
cash purchase price, net of cash acquired, for these acquisitions was $7,939.
The fair value of the assets acquired and liabilities assumed from these
acquisitions were immaterial. The cost in excess of net assets acquired through
these acquisitions amounted to $6,812.
In April 1996, the Company acquired Chemtech, a quick-turn manufacturer of
surface mount printed circuit board solder cream stencils located in the United
Kingdom. The cash purchase price, net of cash acquired, was $2,056. The fair
value of the assets acquired and liabilities assumed were immaterial. The cost
in excess of net assets acquired amounted to $3,658.
These acquisitions were accounted for as purchases with the results of
operations from the acquired businesses included in the Company's results of
operations from the acquisition dates forward. Pro forma results of operations
would not be materially different from the historical results reported. The
costs of these acquisitions have been allocated on the basis of the estimated
fair value of the assets acquired and the liabilities assumed.
D. LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS
At September 28, 1997 the Company had working capital of $157,525 and a current
ratio of 2.0x compared to working capital of $86,707 and a current ratio of 2.2x
at December 29, 1996. Cash and cash equivalents at September 28, 1997 were
$94,441, an increase of $69,431 from $25,010 at December 29, 1996. This increase
resulted from cash provided by operating and financing activities of $41,660 and
$139,331, respectively, offset by cash used by investing activities of $111,464.
The Company's net cash flows used by investing activities amounted to $111,464
and $21,901 for the nine months ended September 28, 1997 and September 29, 1996,
respectively. Capital expenditures amounted to $106,103 and $20,026 for the nine
months ended September 28, 1997 and September 29, 1996, respectively. This
increase is mainly attributable to the $46,064 acquisition of the IBM Austin
printed circuit board fabrication facility combined with the Company's continued
investment in state-of-the-art, high-technology equipment for its Multek and
Dovatron operating companies which enables the Company to accept increasingly
complex and higher-volume orders. In addition, this increase includes
approximately $30,622 used in connection with additional capital equipment
acquired for Orbit's 6-inch, 0.6 micron process facility. The Company sold
$2,578 and $181 of equipment during the nine months ended September 28, 1997 and
September 29, 1996, respectively, to allow for the potential replacement of
older equipment with state-of-the-art, high-technology equipment.
As described above in Section C, Acquisitions, the Company acquired DSI and PCT
during the second quarter of 1997. The cash purchase price, net of cash acquired
for these acquisitions, was $7,939. In April 1996, the Company acquired Chemtech
for a cash purchase price, net of cash acquired, of $2,056.
<PAGE> 14
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
D. LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS, CONTINUED
The Company's net cash flows provided by financing activities amounted to
$139,331 for the nine months ended September 28, 1997. The Company's net cash
flows used by financing activities amounted to $17,545 for the nine months ended
September 29, 1996. The Company repaid $10,973 and $4,039 in long-term financing
obligations in the nine months ended September 28, 1997 and September 29, 1996,
respectively. For the nine months ended September 28, 1997 and September 29,
1996, the Company repaid $826 and $16,836, respectively, of notes payable to
sellers of various businesses acquired. The Company received $6,064 and $1,384
in proceeds from stock issued under its stock plans in the nine months ended
September 28, 1997 and September 29, 1996, respectively. During September, the
Company issued $150,000 of 8.50% senior subordinated notes. The proceeds from
the issuance of the senior subordinated notes were used to repay the Company's
outstanding advances against its line-of-credit. The line-of-credit advances
were used for working capital purposes and to fund the Company's $46,064
acquisition of the IBM Austin printed circuit board fabrication facility in
August 1997.
Debt issue costs associated with the issuance of the senior subordinated notes
and the Company's line-of-credit amounted to $4,934 and $314 for the nine-month
periods ended September 28, 1997 and September 29, 1996, respectively.
Management believes that cash generated from operations, existing cash reserves,
leasing capabilities, and the line-of-credit availability will be adequate to
fund the Company's current capital commitments.
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to the use, storage, discharge and disposal of
hazardous chemicals used during its manufacturing processes. The Company
believes that it is currently operating in compliance with applicable
regulations and does not believe that costs of compliance with these laws and
regulations will have a material effect upon its capital expenditures, earnings
or competitive position.
The Company determines the amount of its accruals for environmental matters by
analyzing and estimating the range of possible costs in light of information
currently available. The imposition of more stringent standards or requirements
under environmental laws or regulations, the results of future testing and
analysis undertaken by the Company at its operating facilities, or a
determination that the Company is potentially responsible for the release of
hazardous substances at other sites, could result in expenditures in excess of
amounts currently estimated to be required for such matters. No assurance can be
given that actual costs will not exceed amounts accrued or that costs will not
be incurred with respect to sites as to which no problem is currently known.
Further, there can be no assurance that additional environmental matters will
not arise in the future.
See Note 6 to the condensed consolidated financial statements for a description
of commitments, contingencies and environmental matters.
E. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
No. 128"). The current presentation of primary earnings per share and fully
diluted earnings per share pursuant to Accounting Principles Board Opinion No.
15 is replaced with a presentation of basic earnings per share and diluted
earnings per share pursuant to SFAS No. 128. Basic earnings per share excludes
dilution and is computed by dividing earnings available to common shareholders
by the weighted-average number of common shares outstanding for the period.
DII's basic earnings per share is expected to be slightly higher than the
currently presented
<PAGE> 15
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Dollars in thousands)
E. NEW ACCOUNTING STANDARDS, CONTINUED
primary earnings per share as the effect of dilutive stock options will not be
considered in computing basic earnings per share. Similar to fully diluted
earnings per share, diluted earnings per share reflects the potential dilution
of securities that could share in the earnings. DII's diluted earnings per share
is expected to be comparable to the currently presented fully diluted earnings
per share. The Company plans to adopt SFAS No. 128 in its fourth quarter ending
December 28, 1997 and all historical earnings per share data presented will be
restated to conform to the provisions of SFAS No. 128.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997. This
Statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This Statement further requires that an entity display an
amount representing total comprehensive income for the period in that financial
statement. This Statement also requires that an entity classify items of other
comprehensive income by their nature in a financial statement. For example,
other comprehensive income may include foreign currency items and unrealized
gains and losses on certain investments in debt and equity securities.
Reclassification of financial statements for earlier periods, provided for
comparative purposes, is required. The Company will provide disclosures
(including restated comparative information) of comprehensive income in its
annual consolidated financial statements for its fiscal year ending December 27,
1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which will be effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 redefines how operating segments
are determined and requires disclosure of certain financial and descriptive
information about a company's operating segments. This Statement establishes
standards for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. This Statement requires reporting segment profit or loss,
certain specific revenue and expense items and segment assets. It also requires
reconciliations of total segment revenues, reported in consolidated financial
statements. Restatement of comparative information for earlier periods presented
is required in the initial year of application. Interim information is not
required until the second year of application, at which time comparative
information is required. The Company has not determined the impact that the
adoption of this new accounting standard will have on its consolidated financial
statement disclosures. The Company will provide disclosures (including restated
comparative information) of certain financial and descriptive information about
its operating segments in its annual consolidated financial statements for its
fiscal year ending December 27, 1998.
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In June 1997, a complaint was filed in the District Court of Boulder, Colorado
against the Company and three of its officers and directors. An amended
complaint was filed on September 5, 1997. The lawsuit purports to be brought on
behalf of a class of persons who purchased the Company's common stock during the
period from April 1, 1996 through September 8, 1996 and claims violations of
Colorado law based on allegedly false and misleading statements made in
connection with the offer, sale or purchase of the Company's common stock at
allegedly artificially inflated prices, including statements made prior to the
Company's acquisition of Orbit. The complaint seeks compensatory and other
damages as well as equitable relief. On October 15, 1997, the Company filed a
motion to dismiss the amended complaint. On September 8, 1997, a similar
complaint, alleging violations of Federal securities laws based on the same
allegedly false and misleading statements, purportedly on behalf of the same
class of persons, was filed in the U.S. District Court for the District of
Colorado against the Company and the same officers and directors. On November
10, 1997, the Company filed a motion to dismiss the Federal action. Both actions
were brought by the same plaintiffs' law firm as the Orbit action discussed
below. The Company believes that the claims asserted in both actions are without
merit and intends to defend against such claims vigorously. There has been no
discovery from the Company in either action and neither court has yet set a
trial date.
A class action complaint for violations of federal securities law was filed
against Orbit and three of its officers in 1995, in the U.S. District Court for
the Northern District of California. An amended complaint was filed on March 25,
1996. The amended complaint was dismissed on November 12, 1996, with leave to
amend only as to certain specified claims relating to the statements made by
securities analysts. On January 21, 1997, a second amended complaint was filed.
The second amended complaint alleges that Orbit and three of its officers are
responsible for actions of securities analysts that allegedly misled the market
for Orbit's then existing public common stock. The second amended complaint
seeks relief under Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5
promulgated thereunder. The second amended complaint seeks compensatory and
other damages as well as equitable relief. On September 2, 1997, Orbit filed its
answer to the second amended complaint denying responsibility for the actions of
securities analysts and further denying that it misled the securities market.
The court has not yet set a trial date, but third party discovery is ongoing.
In addition to the above matters, the Company is involved in certain other
litigation arising in the ordinary course of business. Although management is of
the opinion that none of these matters will have a material adverse effect on
the consolidated financial position or results of operations of the Company, the
ultimate outcome of these matters cannot, at this time, be predicted in light of
the uncertainties inherent in litigation. See Note 10 of the 1996 Consolidated
Financial Statements included in Part II, Item 8 of the Company's Form 10-K
Annual Report for the fiscal year ended December 29, 1996 for contingencies and
environmental matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE> 17
ITEM 6(a). EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
*2.1 Purchase Agreement, dated as of August 5, 1997, by and among
International Business Machines Corporation, a New York
corporation ("Seller"), Multilayer Tek, L.P., a Texas Limited
partnership ("Buyer") and The DII Group, Inc., a Delaware
corporation ("Guarantor") (incorporated by reference to
Exhibit 2.1 of the Registrant's Report on Form 8-K dated
August 29, 1997).
2.2 Exhibit A to Purchase Agreement - Assignment and Assumption
Agreement (incorporated by reference to Exhibit 2.2 of the
Registrant's Report on Form 8-K dated August 29, 1997).
*2.3 Exhibit C to Purchase Agreement - Lease (incorporated by
reference to Exhibit 2.3 of the Registrant's Report on Form
8-K dated August 29, 1997).
*2.4 Exhibit E to Purchase Agreement - Project Operations Agreement
(incorporated by reference to Exhibit 2.4 of the Registrant's
Report on Form 8-K dated August 29, 1997).
+2.5 Exhibit F to Purchase Agreement - Supply Agreement
(incorporated by reference to Exhibit 2.5 of the Registrant's
Report on Form 8-K dated August 29, 1997).
2.6 Exhibit G to Purchase Agreement - Bill of Sale (incorporated
by reference to Exhibit 2.6 of the Registrant's Report on Form
8-K dated August 29, 1997).
2.7 Exhibit H to Purchase Agreement - Special Warranty Deed
(incorporated by reference to Exhibit 2.7 of the Registrant's
Report on Form 8-K dated August 29, 1997).
4.1 Indenture - 8.50% Senior Subordinated Notes Due 2007 dated
September 19, 1997 between the Registrant and The Chase Trust
Company of California, as trustee.
4.2 Purchase Agreement - 8.50% Senior Subordinated Notes Due 2007
dated September 16, 1997 between the Registrant and Salomon
Brothers Inc, Donaldson, Lufkin & Jenrette Securities
Corporation, and BT Alex. Brown Incorporated, as the initial
purchasers.
4.3 Registration Agreement, dated September 16, 1997 between the
Registrant and Salomon Brothers Inc, Donaldson, Lufkin &
Jenrette Securities Corporation, and BT Alex. Brown
Incorporated, as the initial purchasers.
10.1 Second Amendment to the $80,000,000 Revolving Line of Credit
dated August 1, 1997 between The DII Group, Inc. and Norwest
Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris
Trust and Savings Bank, and NBD Bank.
10.2 Third Amendment to the $80,000,000 Revolving Line of Credit
dated September 15, 1997 between The DII Group, Inc. and
Norwest Bank Colorado, N.A., The Chase Manhattan Bank, N.A.,
Harris Trust and Savings Bank, and NBD Bank.
10.3 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Budacz.
10.4 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl R. Vertuca, Jr.
</TABLE>
<PAGE> 18
ITEM 6(a). EXHIBITS, CONTINUED
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.5 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Snyder.
10.6 Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Carl A. Plichta.
10.7 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl A. Plichta.
11.1 Statement regarding computation of per share earnings.
27 Financial Data Schedule.
</TABLE>
- ----------------
* Schedules were not included but will be furnished supplementally to the
Commission upon request.
+ Confidential treatment has been granted as to portions of this exhibit.
ITEM 6(b). REPORTS ON FORM 8-K
The Company filed three Current Reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended September 28, 1997.
The following item was reported in the Form 8-K dated August 18, 1997:
Item 2. Acquisition or Disposition of Assets - The Company completed its
acquisition of IBM's high volume printed circuit board fabrication
facility located in Austin, Texas pursuant to a Purchase Agreement
dated as of August 5, 1997. No financial statements were filed as part
of such report.
The following item was reported in the Form 8-K dated September 4, 1997:
Item 4. Changes in Registrant's Certifying Accountant - The Company
terminated the appointment of KPMG Peat Marwick LLP as principal
accountants for the Company and engaged Deloitte & Touche LLP as
principal accountants. This decision to change accountants was approved
by the Audit Committee of the Board of Directors. No financial
statements were filed as part of such report.
The following item was reported in the Form 8-K dated September 16, 1997:
Item 5. Other Events - The Company completed a $150 million private
placement of its 8.50% senior subordinated notes due 2007 to certain
qualified investors and overseas persons, which notes are not
registered or required to be registered under the Securities Act of
1993, as amended. No financial statements were filed as part of such
report.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE DII GROUP, INC.
Date: November 10, 1997 By: /s/ Carl R. Vertuca, Jr.
------------------ --------------------------
Carl R. Vertuca, Jr.
Executive Vice President - Finance,
Administration and Corporate Development
Date: November 10, 1997 By: /s/ Thomas J. Smach
------------------ --------------------------
Thomas J. Smach
Chief Financial Officer
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT LOCATION OF EXHIBIT IN
NUMBER DESCRIPTION SEQUENTIAL NUMBERING SYSTEM
- ------- ----------- ---------------------------
<S> <C> <C>
*2.1 Purchase Agreement, dated as of August 5, 1997, by and among
International Business Machines Corporation, a New York
corporation ("Seller"), Multilayer Tek, L.P., a Texas Limited
partnership ("Buyer") and The DII Group, Inc., a Delaware
corporation ("Guarantor") (incorporated by reference to
Exhibit 2.1 of the Registrant's Report on Form 8-K dated
August 29, 1997).
2.2 Exhibit A to Purchase Agreement - Assignment and Assumption
Agreement (incorporated by reference to Exhibit 2.2 of the
Registrant's Report on Form 8-K dated August 29, 1997).
*2.3 Exhibit C to Purchase Agreement - Lease (incorporated by
reference to Exhibit 2.3 of the Registrant's Report on Form
8-K dated August 29, 1997).
*2.4 Exhibit E to Purchase Agreement - Project Operations Agreement
(incorporated by reference to Exhibit 2.4 of the Registrant's
Report on Form 8-K dated August 29, 1997).
+2.5 Exhibit F to Purchase Agreement - Supply Agreement
(incorporated by reference to Exhibit 2.5 of the Registrant's
Report on Form 8-K dated August 29, 1997).
2.6 Exhibit G to Purchase Agreement - Bill of Sale (incorporated
by reference to Exhibit 2.6 of the Registrant's Report on Form
8-K dated August 29, 1997).
2.7 Exhibit H to Purchase Agreement - Special Warranty Deed
(incorporated by reference to Exhibit 2.7 of the Registrant's
Report on Form 8-K dated August 29, 1997).
4.1 Indenture - 8.50% Senior Subordinated Notes Due 2007 dated
September 19, 1997 between the Registrant and The Chase Trust
Company of California, as trustee.
4.2 Purchase Agreement - 8.50% Senior Subordinated Notes Due 2007
dated September 16, 1997 between the Registrant and Salomon
Brothers Inc, Donaldson, Lufkin & Jenrette Securities
Corporation, and BT Alex. Brown Incorporated, as the initial
purchasers.
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C>
4.3 Registration Agreement, dated September 16, 1997 between the
Registrant and Salomon Brothers Inc, Donaldson, Lufkin &
Jenrette Securities Corporation, and BT Alex.
Brown Incorporated, as the initial purchasers.
10.1 Second Amendment to the $80,000,000 Revolving Line of Credit
dated August 1, 1997 between The DII Group, Inc. and Norwest
Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris
Trust and Savings Bank, and NBD Bank.
10.2 Third Amendment to the $80,000,000 Revolving Line of Credit
dated September 15, 1997 between The DII Group, Inc. and
Norwest Bank Colorado, N.A., The Chase Manhattan Bank, N.A.,
Harris Trust and Savings Bank, and NBD Bank.
10.3 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Budacz.
10.4 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl R. Vertuca, Jr.
10.5 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Snyder.
10.6 Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Carl A. Plichta.
10.7 First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl A. Plichta.
11.1 Statement regarding computation of per share earnings.
27 Financial Data Schedule.
</TABLE>
- ----------------
* Schedules were not included but will be furnished supplementally to the
Commission upon request.
+ Confidential treatment has been granted as to portions of this exhibit.
<PAGE> 1
EXHIBIT 4.1
================================================================================
THE DII GROUP, INC.
8.50% Senior Subordinated Notes due 2007
__________________________________________
INDENTURE
Dated as of September 19, 1997
__________________________________________
CHASE TRUST COMPANY OF CALIFORNIA
Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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ARTICLE I
Definitions and Incorporation by Reference
<S> <C> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . 28
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . 28
ARTICLE II
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series . . . . . . . . . . 29
SECTION 2.02. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.03. Execution and Authentication . . . . . . . . . . . . . . . . 31
SECTION 2.04. Registrar and Paying Agent . . . . . . . . . . . . . . . . . 32
SECTION 2.05. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . 32
SECTION 2.06. Securityholder Lists . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . . . 33
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . . 33
SECTION 2.09. Temporary Securities . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.10. Cancelation . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . . . . . 35
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . 36
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . 37
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . . . 37
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.03. Limitation Debt . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . 39
SECTION 4.05. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.06. Limitation on Issuance or Sale of Capital Stock of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.07. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . 42
SECTION 4.08. Limitation on Restrictions on Distributions from Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.09. Limitation on Transactions with Affiliates . . . . . . . . . 47
SECTION 4.10. Limitation on Layered Debt . . . . . . . . . . . . . . . . . 49
SECTION 4.11. Designation of Restricted and Unrestricted Subsidiaries . . . 49
SECTION 4.12. Change of Control . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.13. Compliance Certificate . . . . . . . . . . . . . . . . . . . 51
SECTION 4.14. Further Instruments and Acts . . . . . . . . . . . . . . . . 52
ARTICLE V
Successor Company . . . . . . . . . 52
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
ARTICLE VI
Defaults and Remedies
<S> <C> <C>
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 56
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . 57
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . 58
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . 58
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 59
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . 62
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . 62
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . 62
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . 63
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . 64
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . 65
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . 65
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance . . . . . . 65
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . . 67
SECTION 8.03. Application to Trust Money . . . . . . . . . . . . . . . . . 68
SECTION 8.04. Repayment to Company . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.05. Indemnity for Government Obligations . . . . . . . . . . . . 68
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . 69
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . 70
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . 71
SECTION 9.04. Revocation and Effect of Consents and Waivers . . . . . . . . 72
SECTION 9.05. Notation on or Exchange of Securities . . . . . . . . . . . . 72
SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . 72
SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE X
Subordination
SECTION 10.01. Agreement To Subordinate . . . . . . . . . . . . . . . . . . 73
SECTION 10.02. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . 73
SECTION 10.03. Default on Senior Debt . . . . . . . . . . . . . . . . . . . 74
SECTION 10.04. Acceleration of Payment of Securities . . . . . . . . . . . . 75
SECTION 10.05. When Distribution Must Be Paid Over . . . . . . . . . . . . . 75
SECTION 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.07. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.08. Subordination May Not Be Impaired by Company . . . . . . . . 75
SECTION 10.09. Rights of Trustee and Paying Agent . . . . . . . . . . . . . 76
SECTION 10.10. Distribution or Notice to Representative . . . . . . . . . . 76
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To 76
Accelerate . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . 76
SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . . 77
SECTION 10.14. Trustee To Effectuate Subordination . . . . . . . . . . . . . 77
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt . . . . . . 77
SECTION 10.16. Reliance by Holders of Senior Debt on Subordination Provisions 78
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . 78
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.03. Communication by Holders with Other Holders . . . . . . . . . 79
SECTION 11.04. Certificate and Opinion as to Conditions Precedent . . . . . 79
SECTION 11.05. Statements Required in Certificate or Opinion . . . . . . . . 79
SECTION 11.06. When Securities Disregarded . . . . . . . . . . . . . . . . . 80
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar . . . . . . . . 80
SECTION 11.08. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.10. No Recourse Against Others . . . . . . . . . . . . . . . . . 81
SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . . . . . . 81
Appendix A Provisions Relating to Initial
Securities and Exchange Securities
Exhibit 1 to
Appendix A Form of Initial Security
Exhibit A Form of Exchange Security
</TABLE>
<PAGE> 7
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08;
7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02;
4.11;
11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05;
11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)
(last
sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.06
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
N.A. Means Not Applicable.
Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.
<PAGE> 9
INDENTURE dated as of September 19,
1997, between THE DII GROUP, INC., a
Delaware corporation (the "Company"), and
CHASE TRUST COMPANY OF CALIFORNIA, as Trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
8.50% Senior Subordinated Notes due 2007, to be issued, from time to time, in
one or more series as in this Indenture provided (the "Initial Securities")
and, if and when issued pursuant to a registered or private exchange for the
Initial Securities, the Company's 8.50% Senior Subordinated Notes due 2007 (the
"Exchange Securities" and, together with the Initial Securities, the
"Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Debt" means Debt of a Person existing at the time
such Person became a Restricted Subsidiary or assumed in connection with the
acquisition of Property and not incurred in connection with or in anticipation
of the transaction or series of related transactions pursuant to which such
Person became a Restricted Subsidiary or such Property was acquired.
"Additional Assets" means (a) any Property (other than cash,
cash equivalents and securities) to be owned by the Company or any Restricted
Subsidiary and used in a Related Business; or (b) Capital Stock of a Person
that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary from any Person
other than an Affiliate of the Company; provided, however, that, in the case of
clause (b), such Restricted Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means (a) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person who
is a
<PAGE> 10
2
director or officer of (i) such specified Person, (ii) any Subsidiary of such
specified Person or (iii) any Person described in clause (a) above. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of Sections 4.07 and 4.09 and the
definition of the term "Additional Assets" only, "Affiliate" shall also mean
any beneficial owner of shares representing 5% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of
rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Sale" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of (a) any
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held by a Person
other than the Company or any Restricted Subsidiary), (b) all or substantially
all the assets of any division or line of business of the Company or any
Restricted Subsidiary or (c) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or such
Restricted Subsidiary (other than, in the case of (a), (b) and (c) above, (i)
any disposition by a Restricted Subsidiary to the Company or by the Company or
a Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) for purposes of
Section 4.07 only, any disposition that constitutes a Restricted Payment
permitted by Section 4.07, (iii) any disposition effected in compliance with
Section 5.01 and (iv) any disposition of Property having, together with other
Property disposed of pursuant to the same transaction or any related
transactions, an aggregate Fair Market Value of less than $5,000,000).
"Attributable Debt" in respect of any Sale and Leaseback
Transaction means, at any date of determination, (a) if such Sale and Leaseback
Transaction is a Capital Lease Obligation, the amount of Debt represented
thereby according to the definition of the term "Capital Lease
<PAGE> 11
3
Obligation" and (b) in all other instances, the present value (discounted at
the interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of any date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing (a)
the sum of the product of the numbers of years (rounded to the nearest
one-twelfth of one year) from the date of determination to the dates of each
successive scheduled principal payment of such Debt or redemption or similar
payment with respect to such Preferred Stock multiplied by the amount of such
payment by (b) the sum of all such payments.
"Board of Directors" means the Board of Directors of the
Company (or, in the case of Section 4.09(iii), the applicable Restricted
Subsidiary) or any committee thereof duly authorized to act on behalf of such
Board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification.
"Business Day" means each day which is not a Legal Holiday.
"Capital Expenditure Debt" means Debt Incurred by any Person
to finance a capital expenditure so long as (a) such capital expenditure is or
should be included as an addition to "Property, plant and equipment" in
accordance with GAAP and (b) such Debt is Incurred within 180 days of the date
such capital expenditure is made.
"Capital Lease Obligations" means any obligation under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of Debt represented by such obligation
shall be the capitalized amount of such obligations determined in accordance
with GAAP; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty. For purposes of Section 4.05, a Capital Lease
<PAGE> 12
4
Obligation shall be deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of corporate stock,
partnership interests or any other participation, right, warrant, option or
other interest in the nature of an equity interest in such Person, including
Preferred Stock, but excluding any debt security convertible or exchangeable
into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate Net Cash
Proceeds received by the Company from the issue or sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any of its Subsidiaries for the benefit of their
employees) by the Company of any class of its Capital Stock (other than
Disqualified Stock) after the Issue Date.
"Change of Control" means the occurrence of any of the
following events:
(a) if any "Person" or "group" (as such terms are used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act, except that a Person
will be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly
or indirectly, of 35% or more of the total voting power of all classes
of the Voting Stock of the Company; or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the
assets of the Company and its Restricted Subsidiaries, considered as a
whole (other than a disposition of such assets as an entirety or
virtually as an entirety to a Wholly Owned Subsidiary) shall have
occurred, or the Company merges, consolidates or amalgamates with or
into any other Person or any other Person merges, consolidates or
amalgamates with or into the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is
reclassified into or exchanged for cash, securities or other Property,
other than any such transaction where (i) the outstanding Voting Stock
of the Company is reclassified into or
<PAGE> 13
5
exchanged for Voting Stock of the surviving corporation and (ii) the
holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of
the Voting Stock of the surviving corporation immediately after such
transaction and in substantially the same proportion as before the
transaction; or
(c) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
(together with any new directors whose election or appointment by such
Board or whose nomination for election by the stockholders of the
Company was approved by a vote of 66-2/3% of the directors then still
in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of such Board of
Directors then in office; or
(d) the stockholders of the Company shall have approved any
plan of liquidation or dissolution of the Company.
"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 the applicable provisions hereof and,
thereafter, means the successor and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the indenture securities.
"Consolidated Interest Coverage Ratio" means, as of any date
of determination, the ratio of (a) the aggregate amount of EBITDA for the
period of the most recent four consecutive fiscal quarters ending at least 30
days prior to such determination date to (b) Consolidated Interest Expense for
such four fiscal quarters; provided, however, that (i) if the Company or any
Restricted Subsidiary has Incurred any Debt since the beginning of such period
that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio is an Incurrence of Debt, or
both, Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Debt as if such Debt had been
Incurred on the first day of such period and the discharge
<PAGE> 14
6
of any other Debt repaid, repurchased, legally defeased or otherwise discharged
with the proceeds of such new Debt as if such discharge had occurred on the
first day of such period, (ii) if since the beginning of such period the
Company or any Restricted Subsidiary shall have repaid, repurchased, legally
defeased or otherwise discharged any Debt with Capital Stock Sale Proceeds,
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such discharge as if such discharge had occurred
on the first day of such period, (iii) if since the beginning of such period
the Company or any Restricted Subsidiary shall have made any Asset Sale or if
the transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio is an Asset Sale, or both, EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the Property which is the subject of such Asset Sale for such period, or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such period, in either case as if such Asset Sale had occurred on
the first day of such period and Consolidated Interest Expense for such period
shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Debt of the Company or any Restricted Subsidiary
repaid, repurchased, legally defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such
Asset Sale for such period, as if such Asset Sale had occurred on the first day
of such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
by an amount equal to the Consolidated Interest Expense for such period
directly attributable to the Debt of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable for
such Debt after such sale), (iv) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of Property, including any acquisition
of Property occurring in connection with a transaction causing a calculation to
be made hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Debt) as if such Investment or acquisition occurred on the
first day of such period and (v) if since the beginning of such period any
Person (that subsequently became a Restricted Subsidiary or was merged with or
into the Company or any Restricted Subsidiary since the beginning of such
<PAGE> 15
7
period) shall have made any Asset Sale, Investment or acquisition of Property
that would have required an adjustment pursuant to clause (iii) or (iv) above
if made by the Company or a Restricted Subsidiary during such period, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Sale, Investment or
acquisition of Property occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of Property, the amount of income or earnings relating thereto and the amount
of Consolidated Interest Expense associated with any Debt incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer and as further
contemplated by the definition of the term "pro forma". If any Debt bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Debt shall be calculated as if the rate in effect on the date
of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Debt if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent Incurred by the Company or its Restricted Subsidiaries, (a)
interest expense attributable to capital leases, (b) amortization of debt
discount and debt issuance cost (other than debt issuance costs incurred in
connection with the offering of the Original Securities, the Registered
Exchange Offer for the Original Securities or the filing of the Shelf
Registration Statement for the Original Securities), (c) capitalized interest,
(d) noncash interest expenses, (e) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (f) net costs associated with Hedging Obligations (including
amortization of fees), (g) Redeemable Dividends, (h) Preferred Stock dividends
in respect of all Preferred Stock of Restricted Subsidiaries held by Persons
other than the Company or a Wholly Owned Subsidiary, (i) interest incurred in
connection with Investments in discontinued operations, (j) interest actually
paid on any Debt of any other Person that is Guaranteed by the Company or any
Restricted Subsidiary and (k) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to
<PAGE> 16
8
pay interest or fees to any Person (other than the Company) in connection with
Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated Subsidiaries; provided,
however, that there shall not be included in such Consolidated Net Income (a)
any net income (loss) of any Person (other than the Company) if such Person is
not a Restricted Subsidiary, except that (i) subject to the exclusion contained
in clause (d) below, the Company's equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (c) below) and (ii) the
Company's equity in a net loss of any such Person other than an Unrestricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income, (b) for the purposes of Section 4.04 only, any net income (loss) of
any Person acquired by the Company or any of its consolidated Subsidiaries in a
pooling of interests transaction for any period prior to the date of such
acquisition, (c) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions, directly or
indirectly, to the Company, except that (i) subject to the exclusion contained
in clause (d) below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash that could have been distributed
by such Restricted Subsidiary consistent with such restriction during such
period to the Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in this clause) and
(ii) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income, (d)
any gain (or loss) realized upon the sale or other disposition of any Property
of the Company or any of its consolidated Subsidiaries (including pursuant to
any Sale and Leaseback Transaction) which is not sold or otherwise disposed of
in the ordinary course of business and any gain (or loss) realized upon the
sale or other disposition of any Capital Stock of any Person,
<PAGE> 17
9
(e) any extraordinary gain or loss, (f) the cumulative effect of a change in
accounting principles and (g) any noncash compensation expense realized for
grants of performance shares, stock options or other stock awards to officers,
directors and employees of the Company or any Restricted Subsidiary.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under Section 4.04 pursuant to clause (c)(iv) thereof.
"Consolidated Net Worth" means the total of the amounts shown
on the consolidated balance sheet of the Company and its Restricted
Subsidiaries as of the end of the most recent fiscal quarter of the Company
ending at least 30 days prior to the taking of any action for the purpose of
which the determination is being made, as (a) the par or stated value of all
outstanding Capital Stock of the Company plus (b) paid-in capital or capital
surplus relating to such Capital Stock plus (c) any retained earnings or earned
surplus less (i) any accumulated deficit and (ii) any amounts attributable to
Disqualified Stock.
"Convertible Subordinated Notes" means the Company's 6%
Convertible Subordinated Notes due 2002, issued on October 11, 1995, in an
aggregate principal amount of $86,250,000.
"Credit Facility" means, with respect to the Company or any
Restricted Subsidiary, one or more debt or commercial paper facilities with
banks or other institutional lenders (including the Senior Credit Agreement)
providing for revolving credit loans, terms loans, receivables or inventory
financing (including through the sale of receivables or inventory to such
lenders or to special purpose, bankruptcy remote entities formed to borrow from
such lenders against such receivables or inventory) or trade letters of credit.
"Currency Exchange Protection Agreement" means, in respect of
a Person, any foreign exchange contract, currency swap agreement, currency
option or other similar agreement or arrangement designed to protect such
Person against fluctuations in currency exchange rates.
<PAGE> 18
10
"Debt" means, with respect to any Person on any date of
determination (without duplication), (a) the principal of and premium (if any)
in respect of (i) debt of such Person for money borrowed and (ii) debt
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (b) all Capital Lease
Obligations of such Person and all Attributable Debt in respect of Sale and
Leaseback Transactions entered into by such Person; (c) all obligations of such
Person issued or assumed as the deferred purchase price of Property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (d) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect
to letters of credit securing obligations (other than obligations described in
(a) through (c) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to
the extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit); (e) the amount of all obligations
of such Person with respect to the redemption, repayment or other repurchase of
any Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (f) all
obligations of the type referred to in clauses (a) through (e) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; (g) all
obligations of the type referred to in clauses (a) through (f) of other Persons
secured by any Lien on any Property of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such Property or the amount of the
obligation so secured; and (h) to the extent not otherwise included in this
definition, Hedging Obligations of such Person. The amount of Debt of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date.
<PAGE> 19
11
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Debt" means any Senior Debt which has, at
the time of determination, an aggregate principal amount outstanding of at
least $25,000,000 (including the amount of all undrawn commitments and matured
and contingent reimbursement obligations pursuant to letters of credit
thereunder) that is specifically designated in the instrument evidencing such
Senior Debt and is designated in a notice delivered by the Company to the
holders or a Representative of the holders of such Senior Debt and in an
Officers' Certificate delivered to the Trustee as "Designated Senior Debt" of
the Company for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person,
Redeemable Stock of such Person as to which (i) the maturity, (ii) mandatory
redemption or (iii) redemption, conversion or exchange at the option of the
holder thereof, occurs, or may occur, on or prior to the first anniversary of
the Stated Maturity of the Securities; provided, however, that Redeemable Stock
in such Person that would not otherwise be characterized as Disqualified Stock
under this definition shall not constitute Disqualified Stock if such
Redeemable Stock is convertible or exchangeable into Debt solely at the option
of the issuer thereof; provided further, however, that any Capital Stock that
would not constitute Disqualified Stock but for the provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an Asset Sale or Change of Control
occurring prior to the Stated Maturity of the Securities shall not constitute
Disqualified Stock if the Asset Sale or Change of Control provisions applicable
to such Capital Stock are no more favorable to the holders of such Capital
Stock than pursuant to Sections 4.07 and 4.12 and such Capital Stock
specifically provides that (a) such Person shall not repurchase or redeem any
such Capital Stock pursuant to such provisions prior to such Person having
repurchased all the Securities that are required to be repurchased pursuant to
such Sections and (b) no default, event of default or similar occurrence under
the terms of such Capital Stock shall result from such Person not so
repurchasing or redeeming any such Capital Stock because of the prohibition
described in the preceding clause (a).
<PAGE> 20
12
"EBITDA" means, for any period, an amount equal to, for the
Company and its consolidated Restricted Subsidiaries, (a) the sum of
Consolidated Net Income for such period plus the following to the extent
reducing Consolidated Net Income for such period: (i) the provision for taxes
based on income or profits or utilized in computing net loss, (ii) Consolidated
Interest Expense, (iii) depreciation expense, (iv) amortization of intangibles
and (v) any other noncash items reducing Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is,
or is required by GAAP to be, made), minus (b) all noncash items increasing
Consolidated Net Income for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Restricted Subsidiary shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any Property, the
price which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
"GAAP" means United States generally accepted accounting
principles as in effect on the Issue Date, including those set forth (a) in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (b) in the statements and
pronouncements of the Financial Accounting Standards Board, (c) in such other
statements by such other entity as approved by a significant segment of the
accounting profession and (d) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the
<PAGE> 21
13
Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America or any state thereof (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America or such state is pledged and which are not
callable or redeemable at the issuer's option, provided that, in the case of
any such state, (a) the long-term debt of such state is rated "A-3" or "A-" or
higher according to Moody's or S&P (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)) and (b) such obligations mature within
365 days of the date of acquisition thereof.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Debt of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (a)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include (a) endorsements
for collection or deposit in the ordinary course of business or (b) a
contractual commitment by one Person to invest in another Person for so long as
such Investment is reasonably expected to constitute a Permitted Investment
under clause (b) of the definition of "Permitted Investments". The term
"Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligation" of any Person means any obligation of
such Person pursuant to any Interest Rate Agreement, Currency Exchange
Protection Agreement or any other similar agreement or arrangement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Security Register.
<PAGE> 22
14
"Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by merger, conversion, exchange or
otherwise), extend, assume, Guarantee or become liable in respect of such Debt
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Debt or obligation on the balance sheet of such Person
(and "Incurrence" and "Incurred" shall have meanings correlative to the
foregoing); provided, however, that a change in GAAP that results in an
obligation of such Person that exists at such time, and is not theretofore
classified as Debt, becoming Debt shall not be deemed an Incurrence of such
Debt; provided further, however, that solely for purposes of determining
compliance with Section 4.03, amortization of debt discount shall not be deemed
to be the Incurrence of Debt, provided that in the case of Debt sold at a
discount, the amount of such Debt Incurred shall at all times be the aggregate
principal amount at Stated Maturity.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Independent Appraiser" means an investment banking firm of
national standing or any third party appraiser of national standing, provided
that such firm or appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect against fluctuations
in interest rates.
"Investment" by any Person means any direct or indirect loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person), advance
or other extension of credit or capital contribution (by means of transfers of
cash or other Property (other than, for purposes of the definition of
"Restricted Payment" only, Capital Stock of the Company which is not
Disqualified Stock) to others or payments for Property or services for the
account or use of others, or otherwise) to, or Incurrence of a Guarantee of any
obligation of, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Debt issued by, any other Person.
For purposes of Section 4.11, the definition of "Restricted Payment" and
Section 4.04, "Investment" shall include the portion of the Fair Market Value
of the net
<PAGE> 23
15
assets of any Subsidiary of the Company that is proportionate to the Company's
equity interest in such Subsidiary at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (a) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (b) the
portion of the Fair Market Value of the net assets of such Subsidiary that is
proportionate to the Company's equity interest in such Subsidiary at the time
of such redesignation. In determining the amount of any Investment made by
transfer of any Property other than cash, such Property shall be valued at its
Fair Market Value at the time of such Investment.
"Issue Date" means the date on which the Original Securities
are initially issued.
"Lien" means, with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including any Capital
Lease Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"Moody's" means Moody's Investors Service, Inc. and the
successor to the rating agency business thereof.
"Net Available Cash" from any Asset Sale means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received
in the form of assumption by the acquiring Person of Debt or other obligations
relating to such Properties or received in any other noncash form), in each
case net of (a) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Sale, (b) all payments made on any Debt which is
secured by any Property subject to such Asset
<PAGE> 24
16
Sale, in accordance with the terms of any Lien upon or other security agreement
of any kind with respect to such Property, or which must by its terms, or in
order to obtain a necessary consent to such Asset Sale, or by applicable law,
be repaid out of the proceeds from such Asset Sale, (c) all distributions and
other payments required to be made to minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Sale and (d) the deduction of
appropriate amounts provided by the seller as a reserve, in accordance with
GAAP, against any liabilities associated with the Property disposed in such
Asset Sale and retained by the Company or any Restricted Subsidiary after such
Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or
sale of Capital Stock, the cash proceeds of such issuance or sale, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chief Executive Officer, the President,
the Chief Financial Officer or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two
Officers of the Company, at least one of whom shall be the principal executive
officer, principal financial officer or principal accounting officer of the
Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
<PAGE> 25
17
"Permitted Debt" means:
(a) Debt under the Credit Facility, provided that the
aggregate principal amount of all such Debt under the Credit Facility,
together with all Debt Incurred pursuant to clause (k) of this
paragraph in respect of Debt previously Incurred pursuant to this
clause (a), at any one time outstanding does not exceed the greater of
(i) $80,000,000, which amount shall be permanently reduced by the
amount of Net Available Cash used to repay Debt under the Credit
Facility, and not subsequently reinvested in Additional Assets or used
to purchase Securities, pursuant to Section 4.07, and (ii) the sum of
(A) 75% of the book value of the inventory of the Company and its
Restricted Subsidiaries and (B) 85% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries, in each
case as of the end of the most recent fiscal quarter (ending at least
30 days prior to the date of determination) for which financial
statements of the Company have been provided to the holders of
Securities pursuant to Section 4.02;
(b) Capital Expenditure Debt, provided that (i) the aggregate
principal amount of such Debt does not exceed the Fair Market Value
(on the date of the Incurrence thereof) of the Property acquired,
constructed or leased and (ii) after giving pro forma effect to the
Incurrence of such Debt, the Company would have been able to Incur
$1.00 of additional Debt pursuant to Section 4.03(a)(i);
(c) Debt of the Company owing to and held by any Wholly Owned
Subsidiary or Debt of any Restricted Subsidiary issued to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that
any subsequent issue or transfer of Capital Stock or other event that
results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Debt (except
to the Company or a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Debt by the issuer thereof;
(d) Debt under Interest Rate Agreements entered into by the
Company or any Restricted Subsidiary for the purpose of limiting
interest rate risk in the ordinary course of the financial management
of the Company or such Restricted Subsidiary and not for speculative
purposes, provided that the obligations
<PAGE> 26
18
under such agreements are directly related to payment obligations on
Debt otherwise permitted by the terms of Section 4.03;
(e) Debt under Currency Exchange Protection Agreements
entered into by the Company or any Restricted Subsidiary for the
purpose of limiting currency exchange rate risks directly related to
transactions entered into by the Company or such Restricted Subsidiary
in the ordinary course of business and not for speculative purposes;
(f) Acquired Debt, provided that after giving pro forma
effect to the Incurrence of such Debt, the Company would have been
able to Incur $1.00 of additional Debt pursuant to Section 4.03(a)(i);
(g) Debt in connection with one or more standby letters of
credit or performance, surety or appeal bonds issued in the ordinary
course of business or pursuant to self-insurance obligations and not
in connection with the borrowing of money or the obtaining of advances
or credit;
(h) Debt outstanding on the Issue Date not otherwise
described in clauses (a) through (g) above;
(i) Debt in an aggregate principal amount, together with all
other Permitted Debt of Restricted Subsidiaries (other than under
clause (j) below), at any one time outstanding not to exceed the
product of 2.0 times the aggregate amount of EBITDA for the period of
the most recent four consecutive fiscal quarters ending at least 30
days prior to the date such Debt is Incurred, provided that, after
giving pro forma effect to the Incurrence of such Debt, the Company
would have been able to incur $1.00 of additional Debt pursuant to
Section 4.03(a)(i);
(j) Debt in an aggregate principal amount at any one time
outstanding not to exceed $50,000,000;
(k) Permitted Refinancing Debt Incurred in respect of Debt
Incurred pursuant to Section 4.03(a)(i) or (ii) or clause (a), (b),
(f) or (h) above, subject, in the case of clause (a) above, to the
limitation set forth in the proviso thereto; and
<PAGE> 27
19
(l) Debt consisting of obligations in respect of purchase
price adjustments, indemnities or Guarantees of the same or similar
matters in connection with the acquisition or disposition of Property.
"Permitted Investment" means any Investment by the Company or
a Restricted Subsidiary in (a) any Restricted Subsidiary or any Person that
will, upon the making of such Investment, become a Restricted Subsidiary,
provided that the primary business of such Restricted Subsidiary is a Related
Business; (b) any Person if as a result of such Investment such Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its Property to, the Company or a Restricted Subsidiary,
provided that such Person's primary business is a Related Business; (c)
Temporary Cash Investments; (d) receivables owing to the Company or a
Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as the Company or such Restricted Subsidiary deems reasonable under the
circumstances; (e) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(f) loans and advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary, as
the case may be, provided that such loans and advances do not exceed $5,000,000
at any one time outstanding; (g) stock, obligations or other securities
received in settlement of debts created in the ordinary course of business and
owing to the Company or a Restricted Subsidiary or in satisfaction of
judgments; (h) any Person to the extent such Investment represents the noncash
portion of the consideration received in connection with an Asset Sale
consummated in compliance with Section 4.07 and (i) other Investments made for
Fair Market Value that do not exceed $10,000,000 outstanding at any one time in
the aggregate.
"Permitted Liens" means:
(a) Liens securing Senior Debt;
(b) Liens to secure Permitted Debt permitted to be Incurred
under clause (a) of the definition thereof;
<PAGE> 28
20
(c) Liens to secure Permitted Debt permitted to be Incurred
under clause (b) of the definition thereof, provided that any such
Lien may not extend to any Property of the Company or any Restricted
Subsidiary, other than the Property acquired, constructed or leased
with the proceeds of such Permitted Debt and any improvements or
accessions to such Property;
(d) Liens for taxes, assessments or governmental charges or
levies on the Property of the Company or any Restricted Subsidiary if
the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings, provided that any reserve or other
appropriate provision that shall be required in conformity with GAAP
shall have been made therefor;
(e) Liens imposed by law, such as carriers', warehousemen's
and mechanics' Liens and other similar Liens on the Property of the
Company or any Restricted Subsidiary arising in the ordinary course of
business and securing payment of obligations which are not more than
60 days past due after notice thereof or are being contested in good
faith and by appropriate proceedings;
(f) Liens on the Property of the Company or any Restricted
Subsidiary Incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or
other obligations of a like nature and Incurred in a manner consistent
with industry practice, in each case which are not Incurred in
connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of Property and
which do not in the aggregate impair in any material respect the use
of Property in the operation of the business of the Company and its
Restricted Subsidiaries taken as a whole;
(g) Liens securing Acquired Debt; provided, however, that any
such Lien may not extend to any Property of the Company or any
Restricted Subsidiary, other than the Property secured at the time
such Acquired Debt was Incurred by the Company or a Restricted
Subsidiary and other than Property of any Restricted Subsidiary which
is a direct Subsidiary of the Restricted Subsidiary, if any, which
Incurred such Acquired Debt; provided further, however, that any such
Lien shall not have
<PAGE> 29
21
been Incurred in anticipation of or in connection with the transaction
or series of transactions pursuant to which such Acquired Debt was so
Incurred;
(h) pledges or deposits by the Company or any Restricted
Subsidiary under workmen's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Debt) or
leases to which the Company or any Restricted Subsidiary is party, or
deposits to secure public or statutory obligations of the Company, or
deposits for the payment of rent, in each case Incurred in the
ordinary course of business;
(i) easements, building restrictions and such other
encumbrances or charges against real Property as are of a nature
generally existing with respect to properties of a similar character;
(j) Liens incurred to secure appeal bonds and judgment and
attachment Liens, in each case in connection with litigation or legal
proceedings that are being contested in good faith by appropriate
proceedings so long as reserves have been established to the extent
required by GAAP as in effect at such time and so long as such Liens
do not encumber assets by an aggregate amount (together with the
amount of any unstayed judgments against the Company or any Restricted
Subsidiary) in excess of $10,000,000;
(k) Liens existing on the Issue Date not otherwise described
in clauses (a) through (j) above;
(l) Liens not otherwise described in clauses (a) through (k)
above on the Property of any Restricted Subsidiary to secure any Debt
permitted to be Incurred by such Restricted Subsidiary pursuant to
Section 4.03; and
(m) Liens on the Property of the Company or any Restricted
Subsidiary to secure any Refinancing, in whole or in part, of any Debt
secured by Liens referred to in clause (a), (b), (c), (g), (k) or (l);
provided, however, that any such Lien shall be limited to all or part
of the same Property that secured the original Lien (together with
improvements and accessions to such Property) and the aggregate
principal amount of Debt that is secured by such Lien shall not be
increased to
<PAGE> 30
22
an amount greater than the sum of (i) the outstanding principal
amount, or, if greater, the committed amount, of the Debt secured by
Liens described under clause (a), (b), (c), (g), (k) or (l) at the
time the original Lien became a Permitted Lien under this Indenture
and (ii) an amount necessary to pay any premiums, fees and other
expenses incurred by the Company or any Restricted Subsidiary in
connection with such Refinancing.
"Permitted Refinancing Debt" means any Debt that Refinances
any other Debt, including any successive Refinancings, so long as (a) such Debt
is in an aggregate principal amount (or if Incurred with original issue
discount, an aggregate issue price) not in excess of the sum of (i) the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding of the Debt being Refinanced and
(ii) an amount necessary to pay any fees and expenses, including premiums and
defeasance costs, related to such Refinancing, (b) the Average Life of such
Debt is equal to or greater than the Average Life of the Debt being Refinanced,
(c) the Stated Maturity of such Debt is no earlier than the Stated Maturity of
the Debt being Refinanced and (d) such Debt is subordinated in right of payment
to Senior Debt or the Securities to at least the same extent, if any, as the
Debt being Refinanced; provided, however, that Permitted Refinancing Debt shall
not include (A) Debt of a Subsidiary that Refinances Debt of the Company or (B)
Debt of the Company or a Restricted Subsidiary that Refinances Debt of an
Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including
any limited liability company), partnership, joint venture, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of any other class of Capital Stock issued by such Person.
"principal" of any Indebtedness (including the Securities)
means the principal amount of such Indebtedness plus the premium, if any, on
such Indebtedness.
<PAGE> 31
23
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms hereof, a calculation performed in
accordance with Article 11 of Regulation S-X promulgated under the Securities
Act, as interpreted by the Company after consultation with the independent
certified public accountants of the Company.
"Property" means, with respect to any Person, any interest of
such Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, including Capital Stock in, and other securities of,
any other Person.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Redeemable Dividend" means, for any dividend in respect of
Redeemable Stock, the quotient of such dividend divided by the difference
between one and the maximum statutory Federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, 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) or otherwise (a) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b)
is or may become redeemable or repurchaseable at the option of the holder
thereof, in whole or in part, or (c) is convertible or exchangeable for Debt or
Disqualified Stock.
"Refinance" means, in respect of any Debt, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Debt, in exchange or replacement for, such indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Related Business" means any business, related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Representative" means the trustee, agent or representative
expressly authorized to act in such capacity, if any, for an issue of Senior
Debt.
<PAGE> 32
24
"Restricted Payment" means (a) any dividend or distribution
(whether made in cash, securities or other Property) declared or paid on or
with respect to any shares of Capital Stock of the Company or any Restricted
Subsidiary (including any payment in connection with any merger or
consolidation with or into the Company or any Restricted Subsidiary), except
for any dividend or distribution which is made solely to the Company or a
Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned
Subsidiary, to the other shareholders of such Restricted Subsidiary on a pro
rata basis or on a basis that results in the receipt by the Company or a
Restricted Subsidiary of dividends or distributions of greater value than it
would receive on a pro rata basis) or any dividend or distribution payable
solely in shares of Capital Stock (other than Redeemable Stock) of the Company;
(b) the purchase, repurchase, redemption, acquisition or retirement for value
of any Capital Stock of the Company or any Affiliate of the Company (other than
a Restricted Subsidiary) or any securities exchangeable for or convertible into
any such Capital Stock, including the exercise of any option to exchange any
Capital Stock (other than for or into Capital Stock of the Company that is not
Disqualified Stock); (c) the purchase, redemption, repurchase, defeasance,
acquisition or retirement for value, prior to any scheduled maturity, scheduled
sinking fund or mandatory redemption payment, of any Subordinated Obligation
(other than the purchase, repurchase or other acquisition of any Subordinated
Obligation purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of acquisition); or (d) any Investment (other than Permitted
Investments) in any Person.
"Restricted Subsidiary" means (a) any Subsidiary of the
Company in existence on or after the Issue Date unless such Subsidiary shall
have been designated an Unrestricted Subsidiary as permitted or required
pursuant Section 4.11 and (b) an Unrestricted Subsidiary which is redesignated
as a Restricted Subsidiary as permitted pursuant to Section 4.11.
"S&P" means Standard & Poor's Ratings Service or the successor
to the rating agency business thereof.
"Sale and Leaseback Transaction" means any arrangement
relating to Property now owned or hereafter acquired whereby the Company or a
Restricted Subsidiary
<PAGE> 33
25
transfers such Property to another Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Senior Credit Agreement" means the loan agreement dated as of
April 4, 1996, as amended through the Issue Date, among the Company, The Chase
Manhattan Bank, Harris Trust and Savings Bank, NBD Bank and Norwest Bank of
Colorado, National Association, as agent.
"Senior Debt" means (a) all obligations consisting of the
principal, premium, if any, and accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company to the extent postfiling interest is
allowed in such proceeding) in respect of (i) Debt of the Company for borrowed
money and (ii) Debt of the Company evidenced by notes, debentures, bonds or
other similar instruments permitted under this Indenture for the payment of
which the Company is responsible or liable; (b) all Capital Lease Obligations
of the Company; (c) all obligations of the Company (i) for the reimbursement of
any obligor on any letter of credit, bankers' acceptance or similar credit
transaction, (ii) under Hedging Obligations or (iii) issued or assumed as the
deferred purchase price of Property and all conditional sale obligations of the
Company and all obligations under any title retention agreement permitted under
this Indenture; and (d) all obligations of other Persons of the type referred
to in clauses (a) and (b) for the payment of which the Company is responsible
or liable as Guarantor; provided, however, that Senior Debt does not include
(A) Debt of the Company that is by its terms subordinate or pari passu in right
of payment to the Securities, including any Senior Subordinated Debt or any
Subordinated Obligations; (B) any Debt Incurred in violation of the provisions
of this Indenture; (C) accounts payable or any other obligations of the Company
to trade creditors created or assumed by the Company in the ordinary course of
business in connection with the obtaining of materials or services (including
Guarantees thereof or instruments evidencing such liabilities); (D) any
liability for Federal, state, local or other taxes owed or owing by the
Company; (E) any obligation of the Company to any Subsidiary; or (F) any
obligations with respect to any Capital Stock.
<PAGE> 34
26
"Senior Subordinated Debt" means the Securities and any other
subordinated Debt of the Company that specifically provides that such Debt is
to rank pari passu with the Securities and is not subordinated by its terms to
any other subordinated Debt or other obligation of the Company which is not
Senior Debt.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC, substituting 20% for 10% each
place it appears therein.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Debt of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (a) in the case of a corporation,
of which at least 50% of the total voting power of the Voting Stock is held by
such first-named Person or any of its Subsidiaries and such first-named Person
or any of its Subsidiaries has the power to direct the management, policies and
affairs thereof; or (b) in the case of a partnership, joint venture,
association, or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes.
"Temporary Cash Investments" means any of the following: (a)
Investments in Government Obligations, (b) Investments in time deposit
accounts, certificates of
<PAGE> 35
27
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America or any state thereof or any foreign
country recognized by the United States of America, which bank or trust company
has capital, surplus and undivided profits aggregating in excess of
$500,000,000 or its foreign currency equivalent and a long-term debt rating
"A-3" or "A-" or higher according to Moody's or S&P (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)), (c) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clause (a) entered into with a bank meeting the qualifications
described in clause (b) above, (d) Investments in commercial paper, maturing
not more than 90 days after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in existence under the
laws of the United States of America with a rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule 436
under the Securities Act)) and (e) Investments in money market funds all of
whose assets are comprised of securities of the types described in clauses (a)
through (d) above.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the President or any other officer or
assistant officer of the Trustee assigned by the Trustee to administer the
corporate trust matters hereunder.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (a) any Subsidiary of the
Company in existence on the Issue Date that is not a Restricted Subsidiary; (b)
any Subsidiary of an Unrestricted Subsidiary; and (c) any Subsidiary of the
Company that is designated after the Issue Date as an Unrestricted Subsidiary
as permitted pursuant to Section 4.11 and not
<PAGE> 36
28
thereafter redesignated as a Restricted Subsidiary as permitted pursuant
thereto.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted
Subsidiary all the Voting Stock of which (except directors' qualifying shares)
is at such time owned, directly or indirectly, by the Company and its other
Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12
"Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . 4.12
"Change of Control Purchase Price" . . . . . . . . . . . . . . . . . . . . . 4.12
"covenant defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . 8.01
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Exchange Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
"Global Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
"legal defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.08
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"OID" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"Original Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"pay the Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
"Payment Blockage Period" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
"Prepayment Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
</TABLE>
<PAGE> 37
29
<TABLE>
<S> <C>
"Prepayment Offer Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Registered Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
"Shelf Registration statement . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
"Surviving Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
<PAGE> 38
30
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Debt shall not be deemed to be subordinate or
junior to secured Debt merely by virtue of its nature as unsecured
Debt;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be the
greater of (i) the maximum liquidation value of such Preferred Stock
or (ii) the maximum mandatory redemption or mandatory repurchase price
with respect to such Preferred Stock.
ARTICLE II
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is $200,000,000. All Securities shall be
identical in all respects other than issue prices and issuance dates. The
Securities may be issued in one or more series; provided, however, that any
Securities issued with original issue discount ("OID") for Federal income tax
purposes shall not be issued as part of the same series as any Securities that
are issued with a different amount of OID or are not issued with OID. All
Securities of any one series shall be substantially identical except as to
denomination.
Subject to Section 2.03, the Trustee shall authenticate
Securities for original issue on the Issue Date in the aggregate principal
amount of $150,000,000 (the "Original Securities"). With respect to any
Securities issued after the Issue Date (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
Original Securities pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix
A), there shall be established in or pursuant to a resolution of the Board of
Directors, and subject to Section 2.03, set forth, or determined in the manner
provided in an Officers' Certificate, or established in one or more indentures
<PAGE> 39
31
supplemental hereto, prior to the issuance of such Securities:
(1) whether such Securities shall be issued as part of a new
or existing series of Securities and the title of such Securities
(which shall distinguish the Securities of the series from Securities
of any other series);
(2) the aggregate principal amount of such Securities which
may be authenticated and delivered under this Indenture, which shall
be in aggregate principal amounts of not less than $10,000,000 per
issuance and not to exceed $50,000,000 in the aggregate (except for
Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of the same
series pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A and
except for Securities which, pursuant to Section 2.03, are deemed
never to have been authenticated and delivered hereunder);
(3) the issue price and issuance date of such Securities,
including the date from which interest on such Securities shall
accrue;
(4) if applicable, that such Securities shall be issuable in
whole or in part in the form of one or more Global Securities and, in
such case, the respective depositories for such Global Securities, the
form of any legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in Exhibit 1 to
Appendix A and any circumstances in addition to or in lieu of those
set forth in Section 2.3 of Appendix A in which any such Global
Security may be exchanged in whole or in part for Securities
registered, and any transfer of such Global Security in whole or in
part may be registered, in the name or names of Persons other than the
depository for such Global Security or a nominee thereof; and
(5) if applicable, that such Securities shall not be issued in
the form of Initial Securities subject to Appendix A, but shall be
issued in the form of Exchange Securities as set forth in Exhibit A.
If any of the terms of any series are established by action
taken pursuant to a resolution of the Board of Directors, a copy of an
appropriate record of such action
<PAGE> 40
32
shall be certified by the Secretary or any Assistant Secretary of the Company
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate or the trust indenture supplementary thereto setting forth the
terms of the series.
SECTION 2.02. Form and Dating. Provisions relating to the
Initial Securities of each series and the Exchange Securities are set forth in
Appendix A, which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities of each series and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit 1 to Appendix A
which is hereby incorporated in and expressly made a part of this Indenture.
The Exchange Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities of each series may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage, provided that any
such notation, legend or endorsement is in a form reasonably acceptable to the
Company. Each Security shall be dated the date of its authentication. The
terms of the Securities of each series set forth in Exhibit 1 to Appendix A and
Exhibit A are part of the terms of this Indenture.
SECTION 2.03. Execution and Authentication. Two Officers
shall sign the Securities for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
written order of the Company in the form of an Officers' Certificate for the
authentication and delivery of such Securities, and the Trustee in accordance
with such written order of the Company shall authenticate and deliver such
Securities.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of
<PAGE> 41
33
authentication on the Security. The signature shall be conclusive evidence
that the Security has been authenticated under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or
agent for service of notices and demands.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may have one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to Section
7.07. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of
<PAGE> 42
34
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the
Company or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.06. Securityholder 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 Securityholders. If the Trustee
is not the Registrar, the Company shall furnish to the Trustee, in writing at
least five 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
Securityholders.
SECTION 2.07. Replacement Securities. If a mutilated
Security is surrendered to the Registrar or if the Holder of a Security claims
that such Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee. If required
by the Trustee or the Company, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from
any loss which any of them may suffer if a Security is replaced. The Company
and the Trustee may charge the Holder for their expenses in replacing a
Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancelation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
<PAGE> 43
35
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities and deliver them in exchange for temporary
Securities.
SECTION 2.10. Cancelation. The Company at any time may
deliver Securities to the Trustee for cancelation. The Registrar and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of transfer,
exchange, payment or cancelation and deliver a certificate of such destruction
to the Company unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancelation.
SECTION 2.11. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, the Company shall pay defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the
<PAGE> 44
36
persons who are Securityholders on a subsequent special record date. The
Company shall fix or cause to be fixed any such special record date and payment
date to the reasonable satisfaction of the Trustee and shall promptly mail to
each Securityholder a notice that states the special record date, the payment
date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities 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, however, that neither the Company nor the Trustee shall have
any responsibility for any defect in the "CUSIP" number that appears on any
Security, check, advice of payment or redemption notice, and any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify
the Trustee in writing of the redemption date, the principal amount of
Securities to be redeemed and that such redemption is being made pursuant to
paragraph 5 of the Securities.
The Company shall give each notice to the Trustee provided for
in this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If
fewer than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate
<PAGE> 45
37
and in accordance with methods generally used at the time of selection by
fiduciaries in similar circumstances. The Trustee shall make the selection
from outstanding Securities not previously called for redemption. The Trustee
may select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption. The Trustee shall
notify the Company promptly of the Securities or portions of Securities to be
redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on
Securities (or portion thereof) called for redemption ceases to accrue
on and after the redemption date; and
(7) 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 Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at
<PAGE> 46
38
the Company's expense. In such event, the Company shall provide the Trustee
with the information required by this Section at least 45 days before the
redemption date.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date that is on or prior
to the date of redemption). Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest (subject to the right of Holders of record on the relevant record date
to receive interest due on the related interest payment date that is on or
prior to the date of redemption) on all Securities to be redeemed on that date
other than Securities or portions of Securities called for redemption which
have been delivered by the Company to the Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
<PAGE> 47
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ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient to
pay all principal and interest then due and the Trustee or the Paying Agent, as
the case may be, is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company
may not be required to remain subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company shall file with the SEC and
provide the Trustee and Securityholders with the annual reports and the
information, documents and other reports which are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and reports to be so filed and provided
at the times specified for the filing of such information, documents and
reports under such Sections; provided, however, that the Company shall not be
so obligated to file such information, documents and reports with the SEC if
the SEC does not permit such filings. The Company also shall comply with the
other provisions of TIA Section 314(a).
SECTION 4.03. Limitation on Debt. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Debt, unless after giving pro forma effect to the application
of the proceeds thereof, no Default or Event of Default would occur as a
consequence of such Incurrence or be continuing following such Incurrence and
either such Debt is (i) Debt of the Company, provided that, after giving pro
forma effect to the Incurrence of such Debt and the application of the proceeds
thereof, the Consolidated Interest Coverage Ratio would be greater than 2.00 to
1.00, (ii) Debt of the Company
<PAGE> 48
40
evidenced by the Original Securities or any Exchange Securities issued in
respect thereof or (iii) Permitted Debt of the Company or any Restricted
Subsidiary.
(b) Notwithstanding the foregoing, (i) the Company shall not
Incur any Permitted Debt if the proceeds thereof are used, directly or
indirectly, to Refinance (A) any Subordinated Obligations unless such Permitted
Debt shall be subordinated to the Securities to at least the same extent as
such Subordinated Obligations or (B) any Senior Subordinated Debt unless such
Permitted Debt shall be Senior Subordinated Debt or shall be subordinated to
the Securities and (ii) the Company shall not permit any Restricted Subsidiary
to Incur any Permitted Debt if the proceeds are used, directly or indirectly,
to Refinance any Subordinated Obligations or any Senior Subordinated Debt.
(c) For purposes of determining compliance with this Section
4.03, in the event that an item of Debt meets the criteria of more than one of
the categories described in clauses (a) through (l) of the definition of
"Permitted Debt" or is entitled to be Incurred pursuant to Section 4.03(a)(i)
or (ii), the Company shall, in its sole discretion, classify such item of Debt
in any manner that complies with this Section 4.03 and such item of Debt will
be treated as having been Incurred pursuant to only one such clause or Section.
SECTION 4.04. Limitation on Restricted Payments. The Company
shall not make, and shall not permit any Restricted Subsidiary to make,
directly or indirectly, any Restricted Payment if at the time of, and after
giving pro forma effect to, such proposed Restricted Payment:
(a) a Default or Event of Default shall have occurred and be
continuing;
(b) the Company could not Incur at least $1.00 of additional
Debt pursuant to Section 4.03(a)(i); or
<PAGE> 49
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(c) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made since the Issue Date (the
amount of any Restricted Payment, if made other than in cash, to be
based upon Fair Market Value) would exceed an amount equal to the sum
of:
(i) 50% of the aggregate amount of Consolidated Net
Income accrued during the period (treated as one accounting
period) from and after the first day of the fiscal quarter
following the end of the most recent fiscal quarter ended
immediately prior to the Issue Date to the end of the most
recent fiscal quarter ending at least 30 days prior to the
date of such Restricted Payment (or if the aggregate amount of
Consolidated Net Income for such period shall be a deficit,
minus 100% of such deficit),
(ii) Capital Stock Sale Proceeds,
(iii) the amount by which Debt (including the
Convertible Subordinated Notes but excluding all other
Subordinated Obligations) of the Company or any Restricted
Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date of any Debt of the
Company or any Restricted Subsidiary convertible or
exchangeable for Capital Stock (other than Disqualified Stock)
of the Company (less the amount of any cash or other Property
distributed by the Company or any Restricted Subsidiary upon
such conversion or exchange),
(iv) an amount equal to the sum of (i) the net
reduction in Investments in any Person other than the Company
or a Restricted Subsidiary resulting from dividends,
repayments of loans or advances or other transfers of
Property, in each case to the Company or any Restricted
Subsidiary from such Person, and (ii) the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any Person, the amount of Investments previously made
<PAGE> 50
42
(and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person, and
(v) $15,000,000.
Notwithstanding the foregoing limitation, the Company may:
(a) pay dividends on its Capital Stock within 60 days of the
declaration thereof if, on said declaration date, such dividends could
have been paid in compliance with this Indenture; provided, however,
that at the time of such payment of such dividend, no other Default or
Event of Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(b) purchase, repurchase, redeem, legally defease, acquire or
retire for value Capital Stock of the Company or Subordinated
Obligations in exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to
a Subsidiary of the Company or an employee stock ownership plan or
trust established by the Company or any of its Subsidiaries for the
benefit of their employees); provided, however, that (i) such
purchase, repurchase, redemption, legal defeasance, acquisition or
retirement shall be excluded in the calculation of the amount of
Restricted Payments and (ii) the Net Cash Proceeds from such sale
shall be excluded from the calculation of the amount of Capital Stock
Sale Proceeds; and
(c) purchase, repurchase, redeem, legally defease, acquire or
retire for value any Subordinated Obligations in exchange for, or out
of the proceeds of the substantially concurrent sale of, Permitted
Refinancing Debt; provided, however, that such purchase, repurchase,
redemption, legal defeasance, acquisition or retirement for value
shall be excluded in the calculation of the amount of Restricted
Payments;
(d) repurchase shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from employees,
former employees,
<PAGE> 51
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directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or
sell, shares of such common stock; provided, however, that (i) the
aggregate amount of such repurchases shall not exceed $2,000,000 in
any calendar year and (ii) at the time of such repurchase, no other
Default or Event of Default shall have occurred and be continuing (or
result therefrom); provided further, however, that such repurchases
shall be included in the calculation of the amount of Restricted
Payments; and
(e) upon the occurrence of a Change of Control and within 60
days after the completion of the offer to purchase the Securities
pursuant to Section 4.12 (including the purchase of all Securities
tendered), any purchase or redemption of Subordinated Obligations
required pursuant to the terms thereof as a result of such Change of
Control; provided, however, that at the time of, and after giving pro
forma effect to, such purchase or redemption, (i) no other Default or
Event of Default shall have occurred and be continuing (or result
therefrom) and (ii) the Company could Incur at least $1.00 of
additional Debt pursuant to Section 4.03(a)(i); provided further,
however, that such purchases or redemptions shall be included in the
calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Liens. The Company shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly,
Incur or suffer to exist, any Lien (other than Permitted Liens) upon any of its
Property (including Capital Stock of a Restricted Subsidiary), whether owned at
the Issue Date or thereafter acquired, or any interest therein or any income or
profits therefrom, unless (a) if such Lien secures Senior Subordinated Debt,
the Securities are secured on an equal and ratable basis with such Debt or (b)
if such Lien secures Subordinated Obligations, such Lien shall be subordinated
to a Lien securing the Securities in the same Property as that securing such
Lien to the same extent as such Subordinated Obligations are subordinated to
the Securities.
SECTION 4.06. Limitation on Issuance or Sale of Capital Stock
of Restricted Subsidiaries. The Company shall
<PAGE> 52
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not (a) sell, pledge, hypothecate or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary or (b) permit any Restricted Subsidiary to,
directly or indirectly, issue or sell or otherwise dispose of any shares of its
Capital Stock other than (i) directors' qualifying shares, (ii) to the Company
or a Wholly Owned Subsidiary, (iii) a disposition of shares of Capital Stock of
a Restricted Subsidiary (which shares, in the case of a Significant Subsidiary,
shall represent 100% of the outstanding shares of such Capital Stock) that
complies with Section 4.07 or (iv) a pledge of shares of Capital Stock of a
Restricted Subsidiary to the extent constituting a Permitted Lien and any
subsequent disposition of such shares pursuant to the exercise of rights
granted to the pledgee in connection with such pledge.
SECTION 4.07. Limitation on Asset Sales. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Sale unless (a) the Company or such 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 Property subject to
such Asset Sale; (b) at least 75% of the consideration paid to the Company or
such Restricted Subsidiary in connection with such Asset Sale is in the form of
cash or cash equivalents or the assumption by the purchaser of liabilities of
the Company (other than liabilities of the Company that are by their terms
subordinated to the Securities) or of any Restricted Subsidiary (including
liabilities of a Restricted Subsidiary whose stock is acquired by such
purchaser) as a result of which the Company and the Restricted Subsidiaries are
no longer liable for such liabilities; and (c) the Company delivers an
Officers' Certificate to the Trustee certifying that such Asset Sale complies
with clauses (a) and (b).
(b) The Net Available Cash (or any portion thereof) from
Asset Sales may be applied by the Company or a Restricted Subsidiary, to the
extent the Company or such Restricted Subsidiary elects (or is required by the
terms of any Debt), (a) to prepay, repay, legally defease or purchase Senior
Debt of the Company or Debt of any Restricted Subsidiary (excluding in each
such case Debt owed to the Company or an Affiliate of the Company); or (b) to
reinvest in Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash received
by the Company or another Restricted Subsidiary); provided, however, that in
connection with any prepayment, repayment, legal defeasance or purchase of Debt
<PAGE> 53
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pursuant to clause (a) above, the Company or such Restricted Subsidiary shall
retire such Debt and shall cause the related loan commitment (if any) to be
permanently reduced by an amount equal to the principal amount so prepaid,
repaid, legally defeased or purchased.
(c) Any Net Available Cash from an Asset Sale not applied in
accordance with the preceding paragraph within twelve months from the date of
the receipt of such Net Available Cash shall constitute "Excess Proceeds".
When the aggregate amount of Excess Proceeds exceeds $5,000,000 (taking into
account income earned on such Excess Proceeds, if any), the Company will be
required to make an offer to purchase (the "Prepayment Offer") the Securities
which offer shall be in the amount of the Excess Proceeds, on a pro rata basis
according to principal amount, at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the Purchase Date, subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date, in
accordance with the procedures (including prorating in the event of
oversubscription) set forth herein. To the extent that any portion of the
amount of Net Available Cash remains after compliance with the preceding
sentence and provided that all holders of Securities have been given the
opportunity to tender their Securities for purchase in accordance with Section
4.07(d), the Company or such Restricted Subsidiary may use such remaining
amount for any purpose permitted by this Indenture and the amount of Excess
Proceeds will be reset to zero.
(d)(1) Within five Business Days after the Company is
obligated to make a Prepayment Offer as described in Section 4.07(c), the
Company shall send a written notice, by first class mail, to the Trustee and
the holders of Securities (the "Prepayment Offer Notice"), accompanied by such
information regarding the Company and its Subsidiaries as the Company in good
faith believes will enable such holders to make an informed decision with
respect to such Prepayment Offer (which at a minimum shall include (i) the most
recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) of the Company, the most recent subsequently filed
Quarterly Report on Form 10-Q of the Company and any Current Report on Form 8-K
of the Company filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Sales otherwise described in the offering materials,
or corresponding successor reports (or, during any time that the Company is not
subject to the reporting requirements of Section 13 or
<PAGE> 54
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15(d) of the Exchange Act, corresponding reports prepared pursuant to Section
4.02), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such reports and (iii) if material,
appropriate pro forma financial information). The Prepayment Offer Notice
shall state, among other things, (a) that a Prepayment Offer is being made
pursuant to this Section 4.07 and that all Securities timely tendered will be
accepted for payment (subject to proration), (b) that any Security (or any
portion thereof) accepted for payment (and duly paid on the Purchase Date)
pursuant to the Prepayment Offer shall cease to accrue interest after the
Purchase Date, (c) the purchase price and purchase date, which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date the
Prepayment Offer Notice is mailed (the "Purchase Date"), (d) the aggregate
principal amount of Securities (or portions thereof) to be purchased, (e) that
any Securities (or portions thereof) not tendered will continue to accrue
interest and (f) the procedures that holders of Securities must follow in order
to tender their Securities (or portions thereof) for payment and the procedures
that holders of Securities must follow in order to withdraw an election to
tender Securities (or portions thereof) for payment.
(2) Not later than the date upon which written notice of a
Prepayment Offer is delivered to the Trustee as provided above, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Prepayment Offer (the "Offer Amount"), (ii) the allocation of the Net
Available Cash from the Asset Sales pursuant to which such Prepayment Offer is
being made and (iii) the compliance of such allocation with the provisions of
Section 4.07(b). On such date, the Company shall also irrevocably deposit with
the Trustee or with the Paying Agent (or, if the Company or a Wholly Owned
Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary
Cash Investments (other than in those enumerated in clause (b) of the
definition of Temporary Cash Investments), maturing on the last day prior to
the Purchase Date or on the Purchase Date if funds are immediately available by
open of business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Prepayment Offer remains open (the "Offer Period"), the
Company shall deliver to the Trustee for cancelation the Securities or portions
thereof which have been properly tendered to and are to be accepted by the
Company. The Trustee or the Paying Agent shall, on the Purchase Date, mail or
deliver payment to each
<PAGE> 55
47
tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Offer Amount, the Trustee or the Paying Agent shall
deliver the excess to the Company immediately after the expiration of the Offer
Period for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company or its agent at the address specified in the notice at least three
Business Days prior to the Purchase Date. Holders shall be entitled to
withdraw their election if the Trustee or the Company receives not later than
one Business Day prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part shall be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
(4) At the time the Company delivers Securities to the
Trustee which are to be accepted for purchase, the Company shall also deliver
an Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee or the Paying Agent mails or delivers payment therefor to the
surrendering Holder.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
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have breached its obligations under this Section by virtue thereof.
SECTION 4.08. Limitation on Restrictions on Distributions
from Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective, or enter into any agreement with any
Person that would cause to become effective, any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends,
in cash or otherwise, or make any other distributions on or in respect of its
Capital Stock, or pay any Debt or other obligation owed, to the Company or any
other Restricted Subsidiary, (b) make any loans or advances to the Company or
any other Restricted Subsidiary or (c) transfer any of its Property to the
Company or any other Restricted Subsidiary. The foregoing limitations will not
apply (i) with respect to clauses (a), (b) and (c), to encumbrances and
restrictions (A) in existence under or by reason of any agreements in effect on
the Issue Date, (B) relating to Debt of a Restricted Subsidiary and existing at
such Restricted Subsidiary at the time it became a Restricted Subsidiary if
such encumbrance or restriction was not created in connection with or in
anticipation of the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was acquired
by the Company, (C) relating to Debt of a Restricted Subsidiary so long as such
encumbrance or restriction is no less favorable to the holders of the
Securities than those under the Credit Facility as in effect on the Issue Date,
(D) relating to Debt of a Restricted Subsidiary which has fully and
unconditionally guaranteed, by supplemental indenture in form satisfactory to
the Trustee, executed and delivered to the Trustee by such Restricted
Subsidiary, the due and punctual performance and observance of all the
obligations (financial or otherwise) of the Company under this Indenture and
the Securities, provided that such guarantee may be subordinated to senior Debt
of such Restricted Subsidiary to the same extent and on the same terms as the
Securities are subordinated to Senior Debt of the Company and may provide for
the release of such Guarantee upon the discharge of such Debt, (E) relating to
borrowings under a foreign currency credit facility established for the benefit
of a Restricted Subsidiary organized outside the laws of the United states of
America or any State thereof or the District of Columbia, provided that such
encumbrances and restrictions apply only with respect to such Restricted
Subsidiary and only if an event
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49
of default has occurred and is continuing under such credit facility and are
otherwise customary for similar foreign currency credit facilities, (F)
relating to any special purpose, bankruptcy remote Wholly Owned Subsidiary
formed for the purpose of borrowing against receivables or inventory of the
Company and its Subsidiaries pursuant to a Credit Facility or (G) which result
from the Refinancing of Debt Incurred pursuant to an agreement referred to in
the immediately preceding clauses (i)(A) and (B) above or in clauses (ii)(A)
and (B) below, provided such encumbrance or restriction is no less favorable to
the holders of Securities than those under the agreement evidencing the Debt so
Refinanced, and (ii) with respect to clause (c) only, to encumbrances and
restrictions (A) that limit the right of the debtor to transfer or dispose of
the Property securing such Debt, provided that such Debt is permitted to be
Incurred and secured pursuant to Sections 4.03 and 4.05, (B) in connection with
an acquisition of Property, so long as such encumbrance or restriction relates
solely to the Property so acquired and was not created in connection with or in
anticipation of such acquisition, (C) resulting from customary provisions
restricting subletting or assignment of leases or customary provisions in other
agreements that restrict assignment of such agreements or rights thereunder or
(D) customary restrictions contained in asset sale agreements limiting the
transfer of such Property pending the closing of such sale.
SECTION 4.09. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, conduct any business or enter into or suffer to exist
any transaction or series of transactions (including the purchase, sale,
transfer, assignment, lease, conveyance or exchange of any Property or the
rendering of any service) with, or for the benefit of, any Affiliate of the
Company (an "Affiliate Transaction"), unless (a) the terms of such Affiliate
Transaction are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained in a comparable
arm's-length transaction with a Person that is not an Affiliate of the Company
or such Restricted Subsidiary, (b) with respect to an Affiliate Transaction
involving aggregate payments or value in excess of $1,000,000, the terms of
such Affiliate Transaction are set forth in writing, (c) with respect to an
Affiliate Transaction involving aggregate payments or value in excess of
$2,000,000, the Board of Directors (including a majority of the disinterested
members of such Board of Directors) approves such Affiliate Transaction and, in
its good faith
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judgment, determines that such Affiliate Transaction complies with clauses (a)
and (b) of this paragraph as evidenced by a Board Resolution promptly delivered
to the Trustee and (d) with respect to an Affiliate Transaction involving
aggregate payments or value in excess of $10,000,000, the Company obtains a
written opinion from an Independent Appraiser to the effect that such Affiliate
Transaction is fair, from a financial point of view, to the Company or such
Restricted Subsidiary, as the case may be.
Notwithstanding the foregoing limitation, Affiliate
Transactions shall not include:
(i) any transaction or series of transactions between the
Company and one or more of its Restricted Subsidiaries or between two
or more of its Restricted Subsidiaries, provided that no more than 5%
of the total voting power of the Voting Stock (on a fully diluted
basis) in any of such Restricted Subsidiaries is beneficially owned by
an Affiliate of the Company (other than a Restricted Subsidiary);
(ii) any Restricted Payment permitted to be made pursuant to
Section 4.04;
(iii) the payment of compensation (including amounts paid
pursuant to employee benefit plans) for the personal services of
executive officers and directors of the Company or any of the
Restricted Subsidiaries, so long as the Board of Directors in good
faith shall have approved the terms thereof and deemed the services
theretofore or thereafter to be performed for such compensation to be
fair consideration therefor (it being understood that such approval
and determination shall not require a written opinion from an
Independent Appraiser); and
(iv) the payment of reasonable fees to directors of the
Company or such Restricted Subsidiary who are not employees of the
Company or any Restricted Subsidiary.
SECTION 4.10. Limitation on Layered Debt. The Company shall
not Incur, directly or indirectly, any Debt which is subordinate or junior in
right of payment to any Senior Debt unless such Debt is Senior Subordinated
Debt or is expressly subordinated in right of payment to Senior Subordinated
Debt.
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SECTION 4.11. Designation of Restricted and Unrestricted
Subsidiaries. The Board of Directors may designate any Subsidiary of the
Company or any Restricted Subsidiary to be an Unrestricted Subsidiary if (a)
the Subsidiary to be so designated does not own any Capital Stock or Debt of,
or own or hold any Lien on any Property of, the Company or any other Restricted
Subsidiary, (b) the Subsidiary to be so designated is not obligated under any
Debt, Lien or other obligation that, if in default, would result (with the
passage of time or notice or otherwise) in a default on any Debt of the Company
or of any Restricted Subsidiary and (c) either (i) the Subsidiary to be so
designated has total assets of $1,000 or less or (ii) such designation is
effective immediately upon such entity becoming a Subsidiary of the Company or
any Restricted Subsidiary. Unless so designated as an Unrestricted Subsidiary,
any Person that becomes a Subsidiary of the Company or of any Restricted
Subsidiary will be classified as a Restricted Subsidiary; provided, however,
that such Subsidiary shall not be designated a Restricted Subsidiary and shall
be automatically classified as an Unrestricted Subsidiary if (A) such
Subsidiary is a Subsidiary of a Restricted Subsidiary (other than a Wholly
Owned Subsidiary) or (B) either of the requirements set forth in clauses (x)
and (y) of the immediately following paragraph will not be satisfied after
giving pro forma effect to such classification. Except as provided in the
first sentence of this paragraph, no Restricted Subsidiary may be redesignated
as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma
effect to such designation, (x) the Company could Incur at least $1.00 of
additional Debt pursuant to Section 4.03(a)(i) and (y) no Default or Event of
Default shall have occurred and be continuing or would result therefrom.
Any such designation or redesignation by the Board of
Directors will be evidenced to the Trustee by filing with the Trustee a Board
Resolution giving effect to such designation or redesignation and an Officers'
Certificate (a) certifying that such designation or redesignation complies with
the foregoing provisions and (b) giving the effective date of such designation
or redesignation, such filing with the Trustee to occur within 45 days after
the end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal
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quarter of the Company's fiscal year, within 90 days after the end of such
fiscal year).
SECTION 4.12. Change of Control. (a) Upon the occurrence of
a Change of Control, each holder of Securities shall have the right to require
the Company to repurchase all or any part of such holder's Securities pursuant
to the offer described below (the "Change of Control Offer") at a purchase
price (the "Change of Control Purchase Price") equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
purchase date (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date).
(b) Within 30 days following any Change of Control, the
Company shall (a) cause a notice of the Change of Control Offer to be sent at
least once to the Dow Jones News Service or similar business news service in
the United States and (b) send, by first-class mail, with a copy to the
Trustee, to each holder of Securities, at such holder's address appearing in
the Security Register, a notice stating: (i) that a Change of Control has
occurred and a Change of Control Offer is being made pursuant to this Section
4.12 and that all Securities timely tendered will be accepted for payment; (ii)
the Change of Control Purchase Price and the purchase date, which shall be,
subject to any contrary requirements of applicable law, a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed
(the "Change of Control Payment Date"); (iii) that any Security (or portion
thereof) accepted for payment (and duly paid on the Change of Control Payment
Date) pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (iv) that any Security (or portions
thereof) not tendered will continue to accrue interest; (v) the circumstances
and relevant facts regarding such Change of Control (including information with
respect to pro forma historical income, cash flow and capitalization after
giving effect to the Change of Control); and (vi) the procedures that Holders
must follow in order to tender their Securities (or portions thereof) for
payment and the procedures that Holders must follow in order to withdraw an
election to tender Securities (or portions thereof) for payment.
(c) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company or its agent at the address specified in the notice at least three
Business Days prior to the Change of Control Payment Date. Holders
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shall be entitled to withdraw their election if the Trustee or the Company
receives not later than one Business Day prior to the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On or prior to the Change of Control Payment Date, the
Company shall irrevocably deposit with the Trustee or with the Paying Agent
(or, if the Company or any of its Wholly Owned Subsidiaries is acting as the
Paying Agent, segregate and hold in trust) in cash an amount equal to the
Change of Control Purchase Price payable to the Holders entitled thereto, to be
held for payment in accordance wit the provisions of this Section. On the
Change of Control Payment Date, the Company shall deliver to the Trustee the
Securities or portions thereof which have been properly tendered to and are to
be accepted by the Company for payment. The Trustee or the Paying Agent shall,
on the Change of Control Payment Date, mail or deliver payment to each
tendering Holder of the Change of Control Purchase Price. In the event that
the aggregate Change of Control Purchase Price is less than the amount
delivered by the Company to the Trustee or the Paying Agent, the Trustee or the
Paying Agent, as the case may be, shall deliver the excess to the Company
immediately after the Change of Control Payment Date.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the purchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.13. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers they would normally have knowledge
of any Default and whether or not the signers know of any Default that occurred
during such period. If they do, the certificate shall describe the Default,
its
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status and what action the Company is taking or proposes to take with respect
thereto. The Company also shall comply with TIA Section 314(a)(4).
SECTION 4.14. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE V
Successor Company
The Company shall not merge, consolidate or amalgamate with or
into any other Person (other than a merger of a Wholly Owned Subsidiary into
the Company) or sell, transfer, assign, lease, convey or otherwise dispose of
all or substantially all its Property in any one transaction or series of
transactions unless: (a) the Company shall be the surviving Person (the
"Surviving Person") or the Surviving Person (if other than the Company) formed
by such merger, consolidation or amalgamation or to which such sale, transfer,
assignment, lease, conveyance or disposition is made shall be a corporation
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia; (b) the Surviving Person (if other
than the Company) expressly assumes, by supplemental indenture in form
satisfactory to the Trustee, executed and delivered to the Trustee by such
Surviving Person, the due and punctual payment of the principal of and interest
on all the Securities, according to their tenor, and the due and punctual
performance and observance of all the covenants and conditions of this
Indenture to be performed by the Company; (c) in the case of a sale, transfer,
assignment, lease, conveyance or other disposition of all or substantially all
the Company's Property, such Property shall have been transferred as an
entirety or virtually as an entirety to one Person; (d) immediately before and
after giving effect to such transaction or series of transactions on a pro
forma basis (and treating, for purposes of this clause (d) and clauses (e) and
(f) below, any Debt which becomes, or is anticipated to become, an obligation
of the Surviving Person or any Restricted Subsidiary as a result of such
transaction or series of transactions as having been Incurred by the Surviving
Person or such Restricted Subsidiary at the time of such transaction or series
of transactions), no Default or Event of Default shall have occurred and be
continuing;
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(e) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company or the Surviving Person, as the
case may be, would be able to Incur at least $1.00 of additional Debt under
Section 4.03(a)(i); (f) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Surviving Person shall have a
Consolidated Net Worth in an amount which is not less than the Consolidated Net
Worth of the Company immediately prior to such transaction or series of
transactions; and (g) the Company shall deliver, or cause to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction and the supplemental indenture, if any, in respect thereto comply
with this Article V and that all conditions precedent herein provided for
relating to such transaction have been satisfied.
The Surviving Person shall succeed to, and be substituted for,
and may exercise every right and power of the Company under this Indenture, and
the predecessor Company in the case of a sale, transfer, assignment, lease,
conveyance or other disposition shall not be released from the obligation to
pay the principal of and interest on the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. The following events shall
be "Events of Default":
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article X, and such default continues
for a period of 30 days;
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated
Maturity, upon acceleration, redemption, optional redemption, required
repurchase or otherwise, whether or not such payment shall be
prohibited by Article X;
(3) the Company fails to comply with Article V;
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(4) the Company fails to comply with any covenant or agreement
in the Securities or in this Indenture (other than a failure which is
the subject of the foregoing clause (1), (2) or (3)) and such failure
continues for 30 days after notice is given to the Company as
specified below;
(5) a default by the Company or any Restricted Subsidiary
under any Debt of the Company or any Restricted Subsidiary which
results in acceleration of the maturity of such Debt, or the failure
to pay any such Debt at maturity, in an aggregate amount in excess of
$10,000,000 or its foreign currency equivalent at the time;
(6) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Restricted Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of its
property;
(C) orders the winding up or liquidation of the
Company or any Restricted Subsidiary; or
(D) grants any similar relief under any foreign laws;
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and in each such case the order or decree remains unstayed and in
effect for 30 days; or
(8) any judgment or judgments for the payment of money in an
unsecured aggregate amount in excess of $10,000,000 or its foreign
currency equivalent at the time is entered against the Company or any
Restricted Subsidiary and shall not be waived, satisfied or discharged
for any of 30 consecutive days during which a stay of enforcement
shall not be in effect.
The foregoing will constitute Events of Default whatever the
reason 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.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4) is not an Event of Default until
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities notify the Company of the Default and the Company (and in the case
of such notice by Holders, the Trustee) does not cure such Default within the
time specified after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default and any event which with the giving of notice or the
lapse of time would become an Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.01(6) or (7)) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least
25% in aggregate principal amount of the Securities by notice to the Company
and the Trustee, may declare the
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principal of and accrued and unpaid interest to the date of acceleration on all
the Securities to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of Default
specified in Section 6.01(6) or (7) occurs, the principal of and accrued and
unpaid interest to the date of acceleration on all the Securities shall,
automatically and without any action by the Trustee or any Holder, become
immediately due and payable. The Holders of a majority in aggregate principal
amount of the outstanding Securities by notice to the Trustee and the Company
may rescind any declaration of acceleration if the rescission would not
conflict with any judgment or decree, and 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. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
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 of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in aggregate principal amount of the Securities by notice to the
Trustee may waive an existing Default and its consequences except (i) a Default
in the payment of the principal of or interest on a Security or (ii) a Default
in respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in aggregate principal amount of the Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
of exercising any trust or power conferred on the
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Trustee with respect to the Securities. However, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture or, subject to
Section 7.01, that the Trustee determines is unduly prejudicial to the rights
of other Securityholders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to reasonable indemnification
against all losses and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount
of the Securities then outstanding shall have made a written request,
and such Holder of or Holders shall have offered reasonable indemnity,
to the Trustee to pursue such proceeding as trustee; and
(3) the Trustee has failed to institute such proceeding and
has not received from the Holders of at least a majority in aggregate
principal amount of the Securities outstanding a direction
inconsistent with such request, within 60 days after such notice,
request and offer.
The foregoing limitations on the pursuit of remedies by a
Securityholder shall not apply to a suit instituted by a Holder of Securities
for the enforcement of payment of the principal of or interest on such Security
on or after the applicable due date specified in such Security. A
Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in this Securities, or
to bring suit for the enforcement of any such
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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(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make 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 it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. Priorities. If the Trustee collects any money
or property pursuant to this Article VI, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Debt to the extent required by
Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section.
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At least 15 days before such record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record date, the
payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
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(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) 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.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise
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incur financial liability in the performance of any of its duties hereunder or
in the exercise of any of its rights or powers.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA and
the provisions of this Article VII shall apply to the Trustee in its role as
Registrar, Paying Agent and Security Custodian.
(i) The Trustee shall not be deemed to have notice of a
Default or an Event of Default unless (a) the Trustee has received written
notice thereof from the Company or any Holder or (b) a Trust Officer shall have
actual knowledge thereof.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely
on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any fact or
matter stated in the document. The Trustee may, however, in its discretion
make such further inquiry or investigation into such facts or matters as it may
see fit and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in
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respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty unless so
specified herein.
SECTION 7.03. Individual Rights of Trustee. The Trustee in
its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar
or co-registrar may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity, priority or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or in any
document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default or Event of
Default occurs and is continuing and if it is known to the Trustee, the Trustee
shall mail to each Securityholder notice of the Default or Event of Default
within 90 days after it is known to a Trust Officer or written notice of it is
received by the Trustee. Except in the case of a Default or Event of Default
in payment of principal of or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with May 15, 1998, and in any event
prior to July 15 in each year, the Trustee shall mail to each Securityholder a
brief report dated as of May 15 each year as and if required by TIA Section
313(a) if and to the extent required by such subsection. The Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each
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stock exchange (if any) on which the Securities are listed. The Company agrees
to notify promptly the Trustee whenever the Securities become listed on any
stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Company shall indemnify the Trustee against any
and all loss, liability or expense (including attorneys' fees) incurred by it
in connection with the acceptance and administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Company
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 may have
separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith. The Company need not pay for any
settlement made by the Trustee without the Company's consent, such consent not
to be unreasonably withheld. All indemnifications and releases from liability
granted hereunder to the Trustee shall extend to its officers, directors,
employees, agents, successors and assigns.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.01(6) or (7)
with respect to the Company, the expenses are intended to constitute expenses
of administration under the Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in
aggregate principal amount of the Securities may remove the Trustee by so
notifying the Trustee and may appoint a successor Trustee. The Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in aggregate principal amount of the Securities and such
Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy
exists in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
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 Securityholders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in aggregate principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder who has been a bona fide Holder of a Security for at least six
months may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
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Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any such successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The
Trustee shall have (or, in the case of a corporation included in a bank holding
company system, the related bank holding company shall have) a combined capital
and surplus of at least $50,000,000 as set forth in its (or its related bank
holding company's) most recent published annual report of condition. The
Trustee shall comply with TIA Section 310(b), subject to the penultimate
paragraph thereof; provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA
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Section 311(b). A Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancelation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article III and the Company irrevocably deposits with the Trustee
funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either
case the Company pays all other sums payable hereunder by the Company, then
this Indenture shall, subject to Section 8.01(c), cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12, the
operation of Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the case
of Sections 6.01(6) and (7), with respect only to Restricted Subsidiaries) and
the limitations contained in clauses (e) and (f) of Article V ("covenant
defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If
the Company exercises its covenant defeasance option, payment of the Securities
may not be accelerated because of an Event of Default specified in Sections
6.01(4) (with respect to the covenants of Article IV identified in the
immediately preceding paragraph), 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (with
respect only to Restricted Subsidiaries in the case of
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Sections 6.01(6) and 6.01(7)) or because of the failure of the Company to
comply with the limitations contained in clauses (e) and (f) of Article V.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.07 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of
and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and
interest when due on all the Securities to maturity or redemption, as
the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(6) or (7) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article X;
(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a
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regulated investment company under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) 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 Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of
such 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 defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Securityholders 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; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
as contemplated by this Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article VIII. It shall apply the deposited money and the money from
U.S. Government Obligations through the Paying Agent and in accordance with
this Indenture to the payment of principal of and interest on the Securities.
Money and securities so held in trust are not subject to Article X.
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SECTION 8.04. Repayment to Company. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article VIII by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
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ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Company and
the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes
of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the
Code;
(4) to make any change in Article X that would limit or
terminate the benefits available to any holder of Senior Debt (or
Representatives therefor) under Article X or to comply with any
requirement of the SEC in connection with the qualification of this
Indenture under the TIA;
(5) to add Guarantees with respect to the Securities or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or
(8) to make any change that does not adversely affect the
rights of any Securityholder.
Notwithstanding the foregoing, no amendment may be made to
Article X that adversely affects the rights of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or their Representative)
consent to such change.
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After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.02. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Securities). However, without the consent of each Securityholder affected
thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) impair the right of any Holder to receive payment of
principal of and interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities;
(5) reduce the amount payable upon the redemption or
repurchase of any Security under Article III or Section 4.07 or 4.12,
change the time at which any Security may be redeemed in accordance
with Article III, or, at any time after a Change in Control or Asset
Sale has occurred, change the time at which any Change of Control
Offer or Prepayment Offer must be made or at which the Securities must
be repurchased pursuant to such Change of Control Offer or Prepayment
Offer;
(6) make any Security payable in money other than that stated
in the Security;
(7) make any change in Article X that would adversely affect
the Securityholders;
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(8) release any security interest that may have been granted
in favor of the Holders; or
(9) make any change in Section 6.04 or 6.07 or the second
sentence of this Section.
Notwithstanding the foregoing, no amendment may be made to
Article X that adversely affects the rights of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or their Representative)
consent to such change.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective upon the execution of such amendment
or waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding
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paragraph, those Persons who were Securityholders at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to give
such consent or to revoke any consent previously given or to take any such
action, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company nor
any Affiliate of the Company shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid to all Holders that so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement.
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ARTICLE X
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Debt evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article X, to the payment when due of all Senior Debt
and that the subordination is for the benefit of and enforceable by the holders
of Senior Debt. The Securities shall in all respects rank pari passu with any
future Senior Subordinated Debt and senior to all existing and future junior
subordinated Debt of the Company, and only Senior Debt shall rank senior to the
Securities in accordance with the provisions set forth herein. All provisions
of this Article X shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon
any payment or distribution of the assets of the Company to creditors upon a
total or partial liquidation or a total or partial dissolution of the Company
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive
payment in full before Securityholders shall be entitled to receive
any payment of principal of or interest on the Securities; and
(2) until the Senior Debt is paid in full, any distribution
made by or on behalf of the Company to which Securityholders would be
entitled but for this Article X shall be made to holders of the Senior
Debt as their interests may appear, except that all Securityholders
may receive and retain shares of stock and any debt securities that
are subordinated to Senior Debt to at least the same extent as the
Securities.
SECTION 10.03. Default on Senior Debt. The Company may not
pay the principal of or interest on the Securities or make any deposit pursuant
to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any principal, interest
or other amounts due in respect of any Senior Debt is not paid within any
applicable grace period (including at maturity) or (ii) any other default on
Senior Debt occurs and the maturity of such Senior Debt is
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accelerated in accordance with its terms unless, in either case, (x) the
default has been cured or waived and any such acceleration has been rescinded
or (y) such Senior Debt has been paid in full; provided, however, that the
Company may pay the Securities without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment from the
Representative of such Senior Debt. During the continuance of any default
(other than a default described in clause (i) or (ii) of the preceding
sentence) with respect to any Designated Senior Debt pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration), or after the
expiration of any applicable grace periods, the Company may not pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice of such default from
the Representative of the holders of any Designated Senior Debt specifying an
election to effect a Payment Blockage Period (a "Payment Blockage Notice") and
ending 179 days after receipt of such notice by the Company and the Trustee
unless earlier terminated (i) by written notice to the Trustee and the Company
from the Representative who gave such Payment Blockage Notice, (ii) because
such Designated Senior Debt has been repaid in full or (iii) because the
default giving rise to such Payment Blockage Notice is no longer continuing.
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Debt or the Representative of such
holders shall have accelerated the maturity of such Designated Senior Debt and
not rescinded such acceleration, the Company may (unless otherwise prohibited
as described in the first sentence of this paragraph) resume payments on the
Securities after such Payment Blockage Period. Not more than one Payment
Blockage Notice with respect to all issues of Designated Senior Debt may be
given in any consecutive 360-day period regardless of the number of defaults
with respect to one or more issues of Designated Senior Debt during such
Period.
SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Debt (or their Representatives) of the acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article X should
not have been made to them,
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the Securityholders who receive the distribution shall hold it in trust for
holders of Senior Debt and pay it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Debt is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Debt to receive distributions
applicable to Senior Debt. A distribution made under this Article X to holders
of Senior Debt which otherwise would have been made to Securityholders is not,
as between the Company and Securityholders, a payment by the Company on such
Senior Debt.
SECTION 10.07. Relative Rights. This Article X defines the
relative rights of Securityholders and holders of Senior Debt. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default or an Event of Default, subject
to the rights of holders of Senior Debt to receive distributions
otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt of the Company to enforce the
subordination of the Debt evidenced by the Securities shall be impaired by any
act or failure to act by the Company or by its failure to comply with this
Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer receives notice satisfactory to it that payments may not be made under
this Article X. The Company, the Registrar or co-registrar, the Paying Agent,
a Representative or a holder of Senior Debt may give the notice; provided,
however, that, if an issue of Senior
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Debt has a Representative, only the Representative may give the notice.
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. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Debt which may at any time be held by it,
to the same extent as any other holder of such Senior Debt; and nothing in
Article VII shall deprive the Trustee of any of its rights as such holder.
Nothing in this Article X shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 7.07.
SECTION 10.10. 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
(if any).
SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article X shall not be construed
as preventing the occurrence of a Default. Nothing in this Article X shall
have any effect on the right of the Securityholders or the Trustee to
accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from money
or the proceeds of U.S. Government Obligations held in trust under Article VIII
by the Trustee for the payment of principal of and interest on the Securities
shall not be subordinated to the prior payment of any Senior Debt or subject to
the restrictions set forth in this Article X, and none of the Securityholders
shall be obligated to pay over any such amount to the Company or any holder of
Senior Debt or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Securityholders
<PAGE> 88
80
or (iii) upon the Representatives for the holders of Senior Debt for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Debt and other Debt 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 X. In the
event that the Trustee determines, in good faith, that evidence is required
with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article X, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article X, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 7.01 and
7.02 shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Debt as provided in this Article X and appoints the Trustee
as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Debt. 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 it shall
mistakenly pay over or distribute to Securityholders 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 X or otherwise.
SECTION 10.16. Reliance by Holders of Senior Debt on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the issuance of the Securities, to acquire and continue to hold, or to continue
to hold, such Senior
<PAGE> 89
81
Debt and such holder of such Senior Debt shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Debt.
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Indenture by the TIA, the
required provision shall control.
SECTION 11.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first class mail or sent by
facsimile (with a hard copy delivered in person or by mail promptly thereafter)
and addressed as follows:
if to the Company:
The DII Group, Inc.
6273 Monarch Park Place, Suite 200
Niwot, CO 80503
Facsimile: 303-652-0416
Attention: Chief Financial Officer
if to the Trustee:
Chase Trust Company of California
101 California Street, Suite 2725
San Francisco, CA 94111
Facsimile: 415-693-8850
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears
on the registration books of the Registrar and shall be sufficiently given if
so mailed within the time prescribed.
<PAGE> 90
82
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express
<PAGE> 91
83
an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities 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 disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at
the time shall be considered in any such determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent or co-registrar may make
reasonable rules for their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to
be open in the State of New York or in San Francisco, California. If a payment
date is a Legal Holiday, payment shall be made on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening
period. If a regular record date is a Legal Holiday, the record date shall not
be affected.
SECTION 11.09. Governing Law. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK 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.
SECTION 11.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability.
<PAGE> 92
84
The waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 11.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple 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. One signed copy is enough
to prove this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE> 93
85
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
THE DII GROUP, INC.,
by
-----------------------------------------
Name:
Title:
CHASE TRUST COMPANY OF CALIFORNIA, as Trustee,
by
-----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
THE DII GROUP, INC.
$150,000,000
8.50% Senior Subordinated Notes Due 2007
PURCHASE AGREEMENT
New York, New York
September 16, 1997
To: SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Ladies and Gentlemen:
The DII Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Purchasers") $150,000,000 principal
amount of its 8.50% Senior Subordinated Notes due 2007 (the "Securities"), to
be issued under an indenture (the "Indenture") to be dated as of September 19,
1997, between the Company and Chase Trust Company of California, as trustee
(the "Trustee").
The sale of the Securities to you will be made without
registration of the Securities under the Securities Act of 1933, as amended
(the "Act"), in reliance upon the exemption from the registration requirements
of the Act provided by Section 4(2) thereof. You have advised the Company that
you will make an offering of the Securities purchased by you hereunder in
accordance with Section 4 hereof on the terms set forth in the Final Memorandum
(as defined below), as soon as you deem advisable after this Agreement has been
executed and delivered.
<PAGE> 2
2
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated September 3, 1997 (the
"Preliminary Memorandum"), and a final offering memorandum, dated September 16,
1997 (the "Final Memorandum"). Each of the Preliminary Memorandum and the
Final Memorandum sets forth certain information concerning the Company and the
Securities. The Company hereby confirms that it has authorized the use of the
Preliminary Memorandum and the Final Memorandum in connection with the offering
and resale by the Purchasers of the Securities. Any references herein to the
Preliminary Memorandum or the Final Memorandum, and any amendment or supplement
thereto, shall be deemed to include all exhibits thereto and all documents
incorporated by reference therein that were filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), on or before the date and time
that this Agreement is executed and delivered by the parties hereto (the
"Execution Time"); and any reference herein to the terms "amend", "amendment"
or "supplement" with respect to the Final Memorandum shall be deemed to refer
to and include the filing of any document under the Exchange Act after the
Execution Time that is incorporated by reference therein.
The holders of the Securities will be entitled to the benefits
of the Registration Rights Agreement dated September 16, 1997, between the
Company and the Purchasers (the "Registration Agreement").
1. Representations and Warranties. The Company represents
and warrants to, and agrees with, the Purchasers as set forth below in this
Section 1.
(a) Each of the Preliminary Memorandum and the Final
Memorandum as of its respective date did not, and the Final Memorandum
(as the same may have been amended or supplemented) as of the Closing
Date will not, contain 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; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Preliminary Memorandum or the Final Memorandum in
reliance upon and in conformity with information furnished in writing
to the Company by or
<PAGE> 3
3
on behalf of the Purchasers specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum (or any amendment or
supplement thereof or thereto). All documents incorporated by
reference in the Preliminary Memorandum or the Final Memorandum that
were filed under the Exchange Act on or before the Execution Time
complied, and all such documents that are filed under the Exchange Act
after the Execution Time and on or before the Closing Date will
comply, in all material respects with the applicable requirements of
the Exchange Act and the rules thereunder.
(b) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange
Act in connection with the offering of the Securities.
(c) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Act ("Regulation D")) of the Company
has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) the offer or sale of which is
currently or will be considered integrated with the sale of the
Securities in a manner that would require the registration of the
Securities under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with the offering of the Securities.
(d) It is not necessary in connection with the offer, sale
and delivery of the Securities in the manner contemplated by this
Agreement and the Final Memorandum to register the Securities under
the Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
(e) None of the Company, its affiliates or any person acting
on its or their behalf has engaged in any directed selling efforts (as
that term is defined in Regulation S under the Act ("Regulation S"))
with
<PAGE> 4
4
respect to the Securities, and the Company and its affiliates and any
person acting on its or their behalf have complied with the offering
restrictions requirement of Regulation S. Terms used in this
paragraph have the meanings given to them by Regulation S.
(f) The Company is subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act.
(g) The Securities satisfy the eligibility requirements set
forth in Rule 144A(d)(3) under the Act.
(h) The Company has agreed to permit the Securities to be
designated PORTAL eligible securities, will pay the requisite fees
related thereto and has provided all necessary information to the
National Association of Securities Dealers, Inc., in order to ensure
that the Securities are designated PORTAL eligible securities.
(i) The Company is not required to register as an "investment
company" under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without taking account of any exemption
arising out of the number of holders of the Company's securities.
(j) The Company has not paid or agreed to pay to any person
any compensation for soliciting another to purchase any Securities of
the Company (except as contemplated by this Agreement).
(k) The information provided by the Company pursuant to
Section 5(h) hereof will not, at the date thereof, contain 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.
<PAGE> 5
5
2. Purchase and Sale. (a) Subject to the terms and
conditions and in reliance upon the representations and warranties herein set
forth, the Company agrees to sell to the Purchasers, and the Purchasers agree
to purchase from the Company, severally and not jointly, at a purchase price of
97.267% of the principal amount thereof, plus accrued interest, if any, from
September 19, 1997, to the Closing Date, the principal amount of the Securities
set forth opposite each Purchaser's name in Schedule I hereto.
(b) The Purchasers shall notify the Company of the completion
of the sale of the Securities by the Purchasers.
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 AM, New York City time, on September 19,
1997, or such later date as the Purchasers and the Company shall agree (such
date and time of delivery and payment for the Securities being herein called
the "Closing Date"). Delivery of the Securities shall be made to the
Purchasers against payment by the Purchasers of the purchase price thereof to
or upon the order of the Company by wire transfer in Federal (same day) funds
to an account previously designated by the Company and agreed to by the
Purchasers not less than two business days prior to the Closing Date. Delivery
of the Securities shall be made at the office of Cravath, Swaine & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, New York. Certificates for the
Securities shall be registered in such names and in such denominations as the
Purchasers may request not less than two full business days in advance of the
Closing Date.
The Company agrees to have the Securities available for
inspection, checking and packaging by the Purchasers in New York, New York, not
later than 1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities. Each Purchaser (i) acknowledges
that the Securities have not been registered under the Act and may not be
offered or sold except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Act or
<PAGE> 6
6
pursuant to an effective registration statement under the Act and (ii)
represents and warrants to and agrees with the Company that:
(a) It has not offered or sold, and will not offer or sell,
any Securities except (i) to those it reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under the
Securities Act) and that, in connection with each such sale, it has
taken or will take reasonable steps to ensure that the purchaser of
such Securities is aware that such sale is being made in reliance on
Rule 144A or (ii) in accordance with the restrictions set forth in
Exhibit A hereto.
(b) Neither it nor any person acting on its behalf has made
or will make offers or sales of the Securities in the United States by
means of any form of general solicitation or general advertising
(within the meaning of Regulation D) in the United States, except
pursuant to a registered public offering, whether an exchange offer or
shelf registration, as provided in the Registration Agreement.
(c) (i) It has not offered or sold, and will not offer or
sell, any 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 as 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 (the "Regulations"), (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act
1986 and the Regulations with respect to anything done by it in
relation to the 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 to any person in the United Kingdom any document received
by it in connection with the issue of the Securities if that person is
of a kind
<PAGE> 7
7
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.
5. Agreements. The Company agrees with the Purchasers that:
(a) The Company will furnish to the Purchasers, without
charge, during the period mentioned in paragraph (c) below, as many
copies of the Final Memorandum and any supplements and amendments
thereof or thereto as the Purchasers may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering.
(b) The Company will not amend or supplement the Final
Memorandum, other than by filing documents under the Exchange Act that
are incorporated by reference therein, without prior consent (which
shall not be unreasonably withheld) of the Purchasers. Prior to the
completion of the sale of the Securities by the Purchasers, the
Company will not file any document under the Exchange Act that is
incorporated by reference in the Final Memorandum unless the Company
has furnished you a copy for your review prior to filing and will not
file any such document to which you reasonably and timely object.
(c) The Company will promptly advise the Purchasers when,
prior to the completion of the sale of the Securities by the
Purchasers, any document filed under the Exchange Act which is
incorporated by reference in the Final Memorandum shall have been
filed with the Securities and Exchange Commission (the "Commission").
(d) If at any time prior to the completion of the sale of the
Securities by the Purchasers, any event occurs as a result of which it
is necessary to amend or supplement the Final Memorandum in order to
make the statements therein in the light of the circumstances
<PAGE> 8
8
under which they were made not misleading, or if it shall be necessary
to amend or supplement the Final Memorandum (including any document
incorporated by reference therein which was filed under the Exchange
Act) to comply with the Exchange Act or the rules thereunder or other
applicable law, the Company promptly will notify the Purchasers of the
same and, subject to paragraph (b) of this Section 5, will prepare and
provide to the Purchasers pursuant to paragraph (a) of this Section 5
an amendment or supplement which will correct such statement or
omission or effect such compliance and, in the case of such an
amendment or supplement which is to be filed under the Exchange Act
and which is incorporated by reference in the Final Memorandum, will
file such amendment or supplement with the Commission.
(e) The Company will cooperate with you and your counsel in
endeavoring to obtain for the qualification of the Securities for sale
under the laws of such jurisdictions as the Purchasers may reasonably
designate and will maintain such qualifications in effect so long as
reasonably required for the sale of the Securities; provided, however,
that the Company shall not be required to file any general consent to
service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
The Company will promptly advise the Purchasers of the receipt by the
Company of any notification with respect to (i) the suspension of the
qualification of the Securities for sale in any jurisdiction or (ii)
the initiation or threatening of any proceeding for such purpose.
(f) None of the Company, affiliates or any person acting on
its or their behalf will solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
<PAGE> 9
9
any offer or sale of the Securities in the United States, except
pursuant to a registered public offering, whether an exchange offer or
shelf registration, as provided in the Registration Agreement.
(g) None of the Company, its affiliates or any person acting
on its or their behalf will engage in any directed selling efforts
with respect to the Securities within the meaning of Regulation S,
except pursuant to a registered public offering as provided in the
Registration Agreement, and the Company, its affiliates and each such
person acting on its or their behalf will comply with the offering
restrictions requirement of Regulation S. Terms used in this
paragraph have the meanings given to them by Regulation S.
(h) The Company shall, during any period in the two years
after the Closing Date in which the Company is not subject to Section
13 or 15(d) of the Exchange Act, make available, upon request, to any
holder of the Securities in connection with any sale thereof and any
prospective purchaser of Securities from such holder the information
specified in Rule 144A(d)(4) under the Act. This covenant is intended
to be for the benefit of the holders, and the prospective purchasers
designated by such holders from time to time of the Securities.
(i) The Company will not, and will not permit any of its
affiliates to, resell any Securities which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them.
(j) Neither the Company nor any affiliate will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as defined in the Act) the offering of which security
will be considered integrated with the sale of the Securities in a
manner that would require the registration of the Securities under the
Act.
<PAGE> 10
10
(k) The Company shall use its best efforts in cooperation
with the Purchasers to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company.
(l) The Company will not, for a period of 180 days following
the Execution Time without the prior written consent of Salomon
Brothers Inc (which consent shall not be unreasonably withheld),
offer, sell or contract to sell, grant any other option to purchase or
otherwise dispose of, directly or indirectly, or announce the offering
of, or file a registration statement for, any debt securities issued
or guaranteed by the Company, or enter into an agreement to do any of
the foregoing (other than the Offering or pursuant to the Registration
Agreement). The Company will not at any time offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, any securities
under circumstances where such offer, sale, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities
Act or the safe harbor of Regulation S thereunder to cease to be
applicable to the offer and sale of the Securities as contemplated by
this Agreement and the Final Memorandum.
(m) The Company will apply the net proceeds from the sale of
the Securities in the manner set forth in the Final Memorandum under
the caption "Use of Proceeds".
6. Conditions to the Obligations of the Purchasers. The
obligations of the Purchasers to purchase the Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time and the Closing Date, to the accuracy
of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) The Company shall have furnished to the
<PAGE> 11
11
Purchasers the opinion of Curtis, Mallet-Prevost, Colt & Mosle,
special counsel for the Company, dated the Closing Date, to the effect
that:
(i) the Company and each of its Significant
Subsidiaries (as defined in the Indenture) organized under the
laws of the United States of America or any State thereof or
the District of Columbia (individually a "U.S. Significant
Subsidiary" and collectively the "U.S. Significant
Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized, with
full corporate power and authority to own its properties and
conduct its business as described in the Final Memorandum, and
is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction which
requires such qualification wherein it owns or leases material
properties or conducts material business, except where failure
to be so qualified or to be in good standing would not have a
material adverse effect on the Company and its subsidiaries
taken as a whole;
(ii) all the outstanding shares of capital stock of
each U.S. Significant Subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable,
and, except as otherwise set forth in the Final Memorandum,
all outstanding shares of capital stock of the U.S.
Significant Subsidiaries are owned of record by the Company
either directly or through wholly owned subsidiaries free and
clear of any perfected security interest other than pursuant
to those certain pledge agreements dated as of April 4, 1996,
as amended, from the Company to and for the benefit of Norwest
Bank Colorado, National Association ("Norwest"), acting as
agent for itself and the other Secured Parties named therein,
entered into in connection with the loan
<PAGE> 12
12
agreement dated as of April 4, 1996, between the Company,
Norwest, The Chase Manhattan Bank, Harris Trust and Savings
Bank and NBD Bank (as amended, the "Loan Agreement"), and, to
the knowledge of such counsel, based solely upon a certificate
of a responsible officer of the Company, any other security
interests, claims, liens or encumbrances;
(iii) the Securities conform as to legal matters in
all material respects to the descriptions thereof contained in
the Final Memorandum;
(iv) the Indenture has been duly authorized, executed
and delivered by the Company, and, assuming due authorization,
execution and delivery by the Trustee, constitutes a legal,
valid and binding instrument enforceable against the Company
in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect and general
principles of equity, whether enforcement is considered in a
proceeding in equity or at law and the discretion of the court
before which any proceeding therefor may be brought); and the
Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the
Purchasers pursuant to this Agreement, will constitute legal,
valid and binding obligations of the Company entitled to the
benefits of the Indenture (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect and general
principles of equity, whether enforcement is considered in a
proceeding in equity or at law and the discretion of the court
before which any proceeding therefor may be brought);
<PAGE> 13
13
(v) this Agreement and the Registration Agreement
have been duly authorized, executed and delivered by the
Company;
(vi) to such counsel's knowledge, no consent,
approval, authorization or order of any court or governmental
agency or body is required for the performance by the Company
of its obligations hereunder or under the Indenture, the
Registration Agreement or the Securities, except such as may
be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the
Securities by the Purchasers (as to which such counsel need
express no opinion) and such other approvals (specified in
such opinion) as have been obtained and except such as may be
required under the Securities Act with respect to the
registration of the New Securities (or Registrable Securities
in the case of a Shelf Registration Statement, each as defined
in the Registration Agreement) pursuant to the Registration
Agreement and the transactions contemplated by the
Registration Agreement and except as may be required by the
securities or blue sky laws of the various states in
connection with the offer and sale of the New Securities (or
the Registrable Securities in the case of a Shelf Registration
Statement), and except for the qualification of the Indenture
relating to the New Securities (or Registrable Securities in
the case of a Shelf Registration) pursuant to the Trust
Indenture Act;
(vii) neither the issue and sale of the Securities,
the execution, delivery and performance by the Company of this
Agreement, the Indenture, the Registration Agreement or the
Securities, nor the fulfillment of the terms hereof or thereof
will conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by-laws
of the
<PAGE> 14
14
Company or the terms of any indenture or other agreement or
instrument to which the Company or any of its subsidiaries is
a party or by which it is bound which is listed as an exhibit
to the Company's most recent Form 10-K (except that such
counsel need not express an opinion as to any covenant,
restriction or provision of any such agreement with respect to
financial covenants, ratios or tests relating to the financial
condition or results of operations of the Company or any of
its subsidiaries) or any judgment, order or decree known to
such counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries;
(viii) based on the representations, warranties and
agreements of the Company in Sections 1 and 5 of this
Agreement, and the Purchasers in Section 4 of this Agreement,
it is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by this
Agreement to register the Securities under the Act, it being
understood that no opinion is expressed as to any subsequent
reoffer or resale of any Security; and
(ix) the Indenture conforms as to form in all
material respects with the requirements of the Trust Indenture
Act, and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
Such counsel shall also state that, in the course of
preparation by the Company of the Final Memorandum, such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of the independent public accountants for
the Company, representatives of the Purchasers and representatives of
counsel for the Purchasers, at which
<PAGE> 15
15
conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the
Final Memorandum and related matters and, although such counsel has
not independently verified and is not passing upon and does not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (other than the
statements set forth under "Description of Notes"), and noting that
they have relied as to materiality to a large extent upon statements
of directors, officers and other representatives of the Company, no
facts have come to the attention of such counsel which would lead such
counsel to believe that the Final Memorandum (other than the financial
or statistical information contained therein or omitted therefrom as
to which such counsel need not express any statement), as of its date
or on the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In rendering such opinion, such counsel may, without
independent investigation, rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of New
York, in the State of Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable and
who are satisfactory to counsel for the Purchasers and (B) as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials, in each case
subject to the assumptions, qualifications, or limitations therein.
References to the Final Memorandum in this paragraph (a) include any
amendments or supplements thereof or thereto at the Closing Date.
Such counsel need express no opinion as to the enforcement of
any provision of the Registration
<PAGE> 16
16
Agreement or the Purchase Agreement providing for indemnification by
one party of any other party thereto.
For purposes of such opinion, such counsel may state that the
phrase "to our knowledge" means the actual conscious awareness of
information about either fact or law (depending on the context).
(b) The Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Purchasers, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Securities,
the Indenture, the Final Memorandum (together with any amendment or
supplement thereof or thereto) and other related matters as the
Purchasers may reasonably 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.
(c) The Company shall have furnished to the Purchasers a
certificate of the Company, signed by the Chairman of the Board and
the Chief Executive Officer and the Executive Vice President-Finance,
dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Final Memorandum, any
amendment or supplement to the Final Memorandum and this Agreement and
that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Company has complied in
all material respects with all the agreements and satisfied
all the conditions on its part to be performed or satisfied
pursuant to this Agreement at or prior to the Closing Date;
and
(ii) since the date of the most recent financial
statements included or incorporated by
<PAGE> 17
17
reference in the Final Memorandum (exclusive of any amendment
or supplement thereof or thereto), there has been no material
adverse change in the condition (financial or other),
earnings, business or properties of the Company and its
subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated in the Final Memorandum (exclusive of
any amendment or supplement thereof or thereto).
(d) At the Execution Time and at the Closing Date, KPMG
Peat Marwick LLP shall have furnished to the Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Purchasers,
confirming that they are independent accountants within the meaning of
the Securities Act and the Exchange Act and the applicable rules and
regulations thereunder and Rule 101 of the Code of Professional
Conduct of the American Institute of Certified Public Accountants (the
"AICPA") and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included or incorporated by
reference in the Final Memorandum and reported on by them
comply in form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations that would apply to the Final
Memorandum if the Final Memorandum were a prospectus included
in a registration statement on Form S-1 under the Securities
Act;
<PAGE> 18
18
(ii) based upon the procedures detailed in such
letter with respect to the period subsequent to the date of
the latest audited financial statements included in the Final
Memorandum, including the reading of the minutes and inquiries
of certain officials of the Company who have responsibility
for the financial and accounting matters and certain other
limited procedures requested by the Purchasers and described
in detail in such letter, nothing has come to their attention
that causes them to believe that:
(A) any unaudited financial statements of the
Company included or incorporated by reference in the
Final Memorandum do not comply in form in all
material respects with applicable accounting
requirements of the Securities Act that would apply
to the Final Memorandum if the Final Memorandum were
a prospectus included in a registration statement on
Form S-1 under the Securities Act and with the
published rules and regulations of the Commission
with respect to financial statements included or
incorporated in quarterly reports on Form 10-Q under
the Exchange Act; or that such unaudited financial
statements are not, in all material respects, in
conformity with generally accepted accounting
principles applied on a basis substantially
consistent with that of the audited financial
statements of the Company included or incorporated by
reference in the Final Memorandum; or
(B) with respect to the period subsequent to
June 29, 1997, there were any increases, at a
specified date not more than five business days prior
to the date of the letter, in the total debt or other
non-current liabilities of the Company and its
subsidiaries or decreases in the stockholders' equity
of the Company or
<PAGE> 19
19
decreases in working capital of the Company and its
subsidiaries, as compared with the amounts shown on
the June 29, 1997 consolidated balance sheet included
in the Final Memorandum, or for the period from June
30, 1997, to such specified date there were any
decreases, as compared with the corresponding period
in the immediately preceding fiscal quarter in net
sales, gross profit-income before income taxes and
extraordinary items, net income or EBITDA, as defined
in the Indenture, except in all instances for changes
or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by
the Company as to the significance thereof unless
said explanation is not deemed necessary by the
Purchasers; or
(C) the information included under the
headings "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" is not in
conformity with the disclosure requirements of
Regulation S-K that would apply to the Final
Memorandum if the Final Memorandum were a prospectus
included in a registration statement on Form S-1
under the Securities; and
(iii) they have performed certain other specified
procedures, at the request of the Purchasers, as a result of
which they determined that certain information of an
accounting, financial or statistical nature (which is limited
to accounting, financial or statistical information derived
from the general accounting records of the Company and its
subsidiaries) set forth or incorporated by reference in the
Final Memorandum agrees with the accounting records of the
Company and its subsidiaries, excluding any questions of legal
interpretation.
<PAGE> 20
20
All references in this Section 6(d) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
date of the letter.
(e) The Company shall have furnished to the Purchasers the
opinion of Leoff Claeys Verbeke, special Netherlands counsel to the
Company, dated the Closing Date, to the effect that:
(i) DOVatron Ireland B.V. ("DOVatron Ireland") is a
company duly incorporated for an unlimited time and is validly
existing as a legal entity in the form of a private company
with limited liability and has the corporate power to conduct
its business within the limits of the objects clause in its
Articles of Association; and
(ii) all the issued shares of DOVatron Ireland have
been duly and validly authorized and issued and are fully
paid, and, except as otherwise set forth in the Final
Memorandum, all issued shares of DOVatron Ireland are
registered in the name of NortaVOD Corporation (except for one
ordinary share, which is held in trust for NortaVOD
Corporation) free and clear of any perfected security interest
and, to the knowledge of such counsel, based solely on
officer's certificates and searches attached to the opinion,
any other security interests, claims, liens or encumbrances.
(f) The Company shall have furnished to the Purchasers the
opinion of Curtis, Mallet-Prevost, Colt & Mosle, S.C., special Mexican
counsel for the Company, dated the Closing Date, to the effect that:
(i) DOVatron de Mexico, S.A. de C.V. has been duly
incorporated and is validly existing as a corporation under
the laws of Mexico, with full corporate power and authority to
own its properties and conduct its business as described
<PAGE> 21
21
in the Final Memorandum, and is duly qualified to do business
as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification
wherein it owns or leases material properties or conducts
material business, except where failure to be so qualified or
to be in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole;
and
(ii) all the outstanding shares of capital stock of
DOVatron de Mexico, S.A. de C.V. have been duly and validly
authorized and issued and are fully paid and nonassessable,
and, except as otherwise set forth in the Final Memorandum,
all outstanding shares of capital stock of DOVatron de Mexico,
S.A. de C.V. are owned of record by the Company either
directly or through wholly owned subsidiaries free and clear
of any perfected security interest, other than pursuant to
those certain pledge agreements, dated as of April 4, 1996, as
amended, from The DII Group, Inc. to and for the benefit of
Norwest Bank Colorado, National Association ("Norwest"),
acting as agent for itself and the other Secured Parties named
therein, entered into in connection with the loan agreement
dated as of April 4, 1996, as amended, between the Company,
Norwest, The Chase Manhattan Bank, Harris Trust and Savings
Bank and NBD Bank, and, to the knowledge of such counsel,
based solely upon a certificate of a responsible officer of
DOVatron de Mexico, S.A. de C.V., any other security
interests, claims, liens or encumbrances.
(g) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Final Memorandum
(exclusive of any amendment or supplement thereof or thereto), there
shall not have been (i) any change or decrease specified in the letter
or letters referred to in paragraph (d) of this Section 6 or (ii) any
change, or any development
<PAGE> 22
22
involving a prospective change, in or affecting the business or
properties of the Company and its subsidiaries the effect of which, in
any case referred to in clause (i) or (ii) above, is, in the
reasonable judgment of the Purchasers, so material and adverse as to
make it impractical or inadvisable to market the Securities as
contemplated by the Final Memorandum (exclusive of any amendment or
supplement thereof or thereto).
(h) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt
securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the
Securities Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.
(i) Prior to the Closing Date, the Company shall have
furnished to the Purchasers such further information, certificates and
documents as the Purchasers may reasonably request.
(j) At the Closing Date, the Company will have obtained all
waivers, amendments or consents in connection with the Loan Agreement
that are necessary for the Company to consummate the Offering.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Purchasers and counsel for the
Purchasers, this Agreement and all obligations of the Purchasers hereunder may
be canceled at, or at any time prior to, the Closing Date by the Purchasers.
Notice of such cancelation shall be given to the Company in writing or by
telephone or telefax confirmed in writing.
<PAGE> 23
23
The documents required to be delivered by this Section 6 shall
be delivered at the office of Cravath, Swaine & Moore, counsel for the
Purchasers, at Worldwide Plaza, 825 Eighth Avenue, New York, New York, on the
Closing Date.
7. Reimbursement of Purchasers' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Purchasers, the Company will reimburse the Purchasers upon
demand for all reasonable and duly documented out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless each Purchaser, the directors, officers,
employees and agents of each Purchaser and each person who controls any
Purchaser within the meaning of either the Act or the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law 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 a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any information provided by the Company to any holder or
prospective purchaser of Securities pursuant to Section 5(h), or in any
amendment thereof or supplement thereto, 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
agrees to
<PAGE> 24
24
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
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 any such
untrue statement or alleged untrue statement or omission or alleged omission
made in the Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchasers
specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Purchaser severally and not jointly agrees to
indemnify and hold harmless the Company, its directors, officers, employees and
agents and each person who controls the Company within the meaning of either
the Act or the Exchange Act, to the same extent as the foregoing indemnity from
the Company to the Purchasers, but only with reference to written information
furnished to the Company by or on behalf of each Purchaser specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum, or in any
amendment thereof or supplement thereto. This indemnity agreement will be in
addition to any liability which any Purchaser may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page and under the heading "Plan of Distribution" in the Preliminary Memorandum
and the Final Memorandum (or any amendment or supplement thereto) constitute
the only information furnished in writing by or on behalf of the several
Purchasers for inclusion in the Preliminary Memorandum or the Final Memorandum
(or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in
<PAGE> 25
25
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a)
or (b) above unless and to the extent it did not otherwise learn of such action
and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel, if (i)
the use of counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of interest, (ii)
the actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying
party. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for (i) the fees and expenses of more than one
<PAGE> 26
26
separate firm (in addition to any local counsel) for the Purchasers, their
directors, officers, employees and agents, and all persons, if any, who control
the Purchasers within the meaning of the Act or the Exchange Act, and (ii) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the Company, its directors, officers, employees and agents and
each person, if any, who controls the Company within the meaning of the Act or
the Exchange Act. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Purchasers agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and the Purchasers
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company and by the Purchasers from the offering of the
Securities; provided, however, that in no case shall the Purchasers be
responsible for any amount in excess of the purchase discount or commission
applicable to the Securities purchased by the Purchasers hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for
any reason, the Company and the Purchasers shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of the Company and of the Purchasers in connection with the
statements or omissions that resulted in such Losses as well as any other
relevant equitable
<PAGE> 27
27
considerations. Benefits received by the Company shall be deemed to be equal
to the total net proceeds from the offering of the Securities (before deducting
expenses), and benefits received by the Purchasers shall be deemed to be equal
to the total purchase discounts and commissions, in each case as set forth on
the cover page of the Final Memorandum. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Company or the Purchasers. The Company and the
Purchasers agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls a Purchaser within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of a Purchaser shall have the
same rights to contribution as such Purchaser, and each person who controls the
Company within the meaning of either the Act or the Exchange Act and each
officer and director of the Company shall have the same rights to contribution
as the Company, subject in each case to the applicable terms and conditions of
this paragraph (d).
9. Default by a Purchaser. If any one or more Purchasers
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Agreement,
the remaining Purchasers shall be obligated severally to take up and pay for
(in the respective proportions which the principal amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate
principal amount of Securities set forth opposite the names of all the
remaining Purchaser(s)) the Securities that the defaulting Purchaser or
Purchasers agreed but failed to purchase; provided, however, that in the event
<PAGE> 28
28
that the aggregate principal amount of Securities that the defaulting Purchaser
or Purchasers agreed but failed to purchase shall exceed 10% of the aggregate
principal amount of Securities set forth in Schedule I hereto, the remaining
Purchasers shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Securities, and if such non-defaulting
Purchasers do not purchase all the Securities, this Agreement will terminate
without liability to any non-defaulting Purchaser or the Company. In the event
of a default by any Purchaser as set forth in this Section 9, the Closing Date
shall be postponed for such period, not exceeding seven days, as the Purchasers
shall determine in order that the required changes in the Final Memorandum or
in any other documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting Purchaser of its liability, if any,
to the Company or any non-defaulting Purchaser for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Purchasers, by notice given to
the Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in the Company's Common Stock shall have been suspended
by the Commission or the National Association of Securities Dealers Automated
Quotation National Market System, (ii) trading in securities generally on the
New York Stock Exchange or the National Association of Securities Dealers
Automated Quotation National Market System shall have been suspended or limited
or minimum prices shall have been established on either of such Exchange or
Market System, (iii) a banking moratorium shall have been declared either by
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the reasonable judgment of the
Purchasers, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Memorandum (exclusive
of any amendment or supplement thereof or thereto).
<PAGE> 29
29
11. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers and of the Purchasers set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Purchasers or the
Company or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment for the Securities.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancelation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Purchasers, will be mailed,
delivered or telecopied and confirmed to them in writing, care of Salomon
Brothers Inc, at Seven World Trade Center, New York, New York, 10048,
telecopier no.: (212) 783-2274, attention of Legal Department; or, if sent to
the Company, will be mailed, delivered or telecopied and confirmed to it in
writing at 6273 Monarch Park Place, Suite 200, Niwot, Colorado, 80503,
telecopier no.: (303) 652-0416, attention of Mr. Ronald R. Budacz, with a
copy to Curtis, Mallet-Prevost, Colt & Mosle, 101 Park Avenue, New York, NY,
10178, telecopier no. (212) 697-1559, attention of Jeffrey N. Ostrager, Esq.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and, except as expressly set forth in Section 5(h) hereof, no other person will
have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York without
reference to principles of conflict of law.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute
<PAGE> 30
30
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
<PAGE> 31
31
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the several Purchasers.
Very truly yours,
THE DII GROUP, INC.
By
--------------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BT ALEX.BROWN INCORPORATED
By SALOMON BROTHERS INC
By
---------------------------------
Name:
Title:
For themselves and the other
Purchasers named in Schedule I
to the foregoing Agreement.
<PAGE> 32
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities
Purchasers to be Purchased
---------- ---------------
<S> <C>
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . $ 96,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . . . . . . . . . . . 36,000,000
BT Alex. Brown Incorporated . . . . . . . . . . . . . . . . 18,000,000
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 150,000,000
</TABLE>
<PAGE> 33
EXHIBIT A
Selling Restrictions for Offers and
Sales outside the United States
(a) The Securities have not been and will not be 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. Each Purchaser represents and agrees that,
except as otherwise permitted by Section 4(a)(i) of the Agreement to which this
is an exhibit, it has offered and sold the Securities, and will offer and sell
the Securities, (i) as part of their distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering and
the Closing Date, only in accordance with Rule 903 of Regulation S under the
Securities Act. Accordingly, each Purchaser represents and agrees that neither
it, nor any of its affiliates nor any person acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and that it and they have complied and will comply with the
offering restrictions requirement of Regulation S. Each Purchaser agrees that,
at or prior to the confirmation of sale of Securities (other than a sale of
Securities pursuant to Section 4(a)(i) of the Agreement to which this is an
exhibit), it shall have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (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 (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the offering and September 19, 1997,
<PAGE> 34
except in either case in accordance with Regulation S, Rule
144A or other available exemption from registration under the
Securities Act. Terms used above have the meanings given to
them by Regulation S."
(b) Each Purchaser also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any
distributor with respect to the distribution of the Securities, except with its
affiliates or with the prior written consent of the Company.
(c) Terms used in this Exhibit have the meanings given to
them by Regulation S.
<PAGE> 1
EXHIBIT 4.3
THE DII GROUP, INC.
$150,000,000
8.50% Senior Subordinated Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
New York, New York
September 16, 1997
To: SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
The DII Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Purchasers"), upon the terms set forth
in a purchase agreement dated the date hereof (the "Purchase Agreement"),
$150,000,000 aggregate principal amount of its 8.50% Senior Subordinated Notes
due 2007 (the "Securities") (the "Initial Placement"). As an inducement to the
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to your obligations thereunder, the Company agrees with you, (i) for
your benefit and the benefit of the other Purchasers and (ii) for the benefit
of the holders of the Securities (including you and the other Purchasers) from
time to time (each of the foregoing a "Holder" and together
<PAGE> 2
2
the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Offer Registration Period" means the period
beginning when the New Securities are first issued in the Registered Exchange
Offer, and ending 180 days after the consummation of the Registered Exchange
Offer, or such shorter period if all New Securities received by an Exchanging
Dealer have been disposed of by such Exchanging Dealer, in any case exclusive
of any period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement or of any period
pursuant to Section 2(g).
<PAGE> 3
3
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Purchasers) which is a broker-dealer, electing to exchange Securities acquired
for its own account as a result of market-making activities or other trading
activities, for New Securities.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities and
the New Securities, to be entered into by the Company and Chase Trust Company
of California, as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of securities registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an
underwritten offering.
"New Securities" means debt securities of the Company
identical in all material respects to the Securities (except that the cash
interest and interest rate step-up provisions and the transfer restrictions
will be modified or eliminated, as appropriate), to be issued under the
Indenture.
<PAGE> 4
4
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A under the Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Securities or the New Securities covered by such Registration Statement,
and all amendments and supplements to the Prospectus, including post-effective
amendments.
"Registered Exchange Offer" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like principal amount of the New Securities.
"Registrable Securities" has the meaning set forth in Section
3(a).
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities and the New Securities, as applicable, on
an
<PAGE> 5
5
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Trustee" means the trustee with respect to the Securities and
the New Securities under the Indenture.
"underwriter" means any underwriter of securities in
connection with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Company shall prepare and, not
later than 60 days after the date of the original issuance of the Securities,
shall file with the Commission the Exchange Offer Registration Statement with
respect to the Registered Exchange Offer. The Company shall use its reasonable
best efforts to cause the Exchange Offer Registration Statement to become
effective under the Act within 120 days after the date of the original issuance
of the Securities.
(b) Upon 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
electing to exchange Securities for New Securities (assuming that such Holder
is not an affiliate of the Company within the meaning of the Act, acquires the
New Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt without
any limitations or restrictions under the Act and without material restrictions
under the securities laws of a substantial proportion of the several states of
the United States.
<PAGE> 6
6
(c) In connection with the Registered Exchange Offer, the
Company shall:
(i) 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, stating, in
addition to such other disclosures as are required by applicable law,
that Holders electing to have Securities exchanged in the Registered
Exchange Offer shall be required to represent that any New Securities
to be received by them will be acquired in the ordinary course of
their business and that at the time of the commencement of the
Registered Exchange Offer they have no arrangement or understanding
with any person to participate in the distribution (within the meaning
of the Act) of the New Securities and that they are not "affiliates"
of the Company as defined in Rule 405 of the Act and that they will
comply with the registration and prospectus delivery requirements of
the Act to the extent applicable;
(ii) keep the Registered Exchange Offer open for not less than
30 days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law);
(iii) utilize the services of a depositary as an exchange
agent for the Registered Exchange Offer with an address in the Borough
of Manhattan, the City of New York; and
(iv) comply in all material respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered
<PAGE> 7
7
Exchange Offer;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Securities so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver
to each Holder of Securities New Securities equal in principal amount
to the Securities of such Holder so accepted for exchange.
(e) The Purchasers and the Company acknowledge that, pursuant
to current interpretations by the Commission's staff of Section 5 of the Act,
and in the absence of an applicable exemption therefrom, each Exchanging Dealer
is required to deliver a Prospectus in connection with a sale of any New
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Securities acquired for its own account as a
result of market-making activities or other trading activities. Accordingly,
the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange Offer, in Annex C hereto
in the underwriting or plan of distribution section of the Prospectus
forming a part of the Exchange Offer Registration Statement, and in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and
(ii) use its reasonable best efforts to keep the Exchange
Offer Registration Statement continuously effective under the Act
during the Exchange Offer Registration Period for delivery by
Exchanging Dealers in connection with sales of New Securities received
pursuant to the Registered Exchange Offer, as contemplated by Section
4(h) below.
<PAGE> 8
8
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Purchaser, the Company shall issue and deliver to such
Purchaser or the party purchasing New Securities registered under a Shelf
Registration Statement as contemplated by Section 3(iii) hereof from such
Purchaser, in exchange for such Securities, a like principal amount of New
Securities. The Company shall seek to cause the CUSIP service bureau to issue
the same CUSIP number for such New Securities as for New Securities issued
pursuant to the Registered Exchange Offer.
(g) The Company may suspend the availability and use of the
Exchange Offer Registration Statement for one period not to exceed 30 days
following the consummation of the Registered Exchange Offer for valid business
reasons (not including avoidance of the Company's obligations hereunder)
including the acquisition or divestiture of assets, public filings with the
Commission, pending corporate developments and similar events.
<PAGE> 9
9
3. Shelf Registration. If, (i) because of any change in law
or applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof, or
(ii) for any other reason the Exchange Offer Registration Statement is not
declared effective within 120 days after the Closing Date or the Registered
Exchange Offer is not consummated within 150 days after the Closing Date, or
(iii) any Purchaser so requests with respect to Securities (or any New
Securities received pursuant to Section 2(f)) not eligible to be exchanged for
New Securities in a Registered Exchange Offer or, in the case of any Purchaser
that participates in any Registered Exchange Offer, such Purchaser does not
receive freely tradable New Securities, or (iv) any Holder (other than a
Purchaser) is not eligible to participate in the Registered Exchange Offer or
(v) in the case of any such Holder that participates in the Registered Exchange
Offer, such Holder does not receive freely tradable New Securities in exchange
for tendered securities, other than by reason of such Holder being an affiliate
of the Company within the meaning of the Act (it being understood that, for
purposes of this Section 3, (x) the requirement that a Purchaser deliver a
Prospectus containing the information required by Items 507 and/or 508 of
Regulation S-K under the Act in connection with sales of New Securities
acquired in exchange for such Securities shall result in such New Securities
being not "freely tradeable" but (y) the requirement that an Exchanging Dealer
deliver a Prospectus in connection with sales of New Securities acquired in the
Registered Exchange Offer in exchange for Securities acquired as a result of
market-making activities or other trading activities shall not result in such
New Securities being not "freely tradeable"), the following provisions shall
apply:
(a) The Company shall as promptly as practicable after so
required or requested pursuant to this Section 3 file with the Commission and
thereafter shall use its reasonable best efforts to cause to be declared
effective under the Act a Shelf Registration Statement relating to the
<PAGE> 10
10
offer and sale of the Securities or the New Securities, as applicable, by the
Holders from time to time in accordance with the methods of distribution
elected by such Holders (subject to the provisions of Section 4(q)) and set
forth in such Shelf Registration Statement (such Securities or New Securities,
as applicable, to be sold by Holders under such Shelf Registration Statement
being referred to herein as "Registrable Securities"); provided, however, that,
with respect to New Securities received by a Purchaser in exchange for
Securities constituting any portion of an unsold allotment, the Company may, if
permitted by then-current interpretations by the Commission's staff, file a
post- effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of its obligations under this paragraph (a) with
respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) The Company shall use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of two
years from the date the Shelf Registration Statement is declared effective by
the Commission (or until one year after such effective date if such Shelf
Registration Statement is filed at the request of a Purchaser) or such shorter
period that will terminate when all the Securities or New Securities, as
applicable, covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement (in any such case, such period being called
the "Shelf Registration Period"). The Company shall be deemed not to have used
its reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that results or
will result in Holders of securities covered thereby not being able to offer
and sell such securities during that period, unless such action is (i) required
by applicable law or (ii) pursuant to Section 2(c), 2(g) or
<PAGE> 11
11
3(c) hereof, and, in either case, so long as the Company promptly thereafter
complies with the requirements of Section 4(k) hereof, if applicable.
(c) The Company may suspend the use of the prospectus for a
period not to exceed 30 days in any three month period or two periods not to
exceed an aggregate of 60 days in any 12-month period for valid business
reasons (not including avoidance of the Company's obligations hereunder),
including the acquisition or divestiture of assets, public filings with the
Commission, pending corporate developments and similar events.
Notwithstanding anything to the contrary in this Section 3, it
is understood that Holders who (i) are eligible to participate in the
Registered Exchange Offer and fail to duly tender their Securities for exchange
pursuant to the Registered Exchange Offer (other than Purchasers in connection
with Securities held by them constituting any portion of any unsold allotment),
or otherwise fail to comply with the requirements of the Registered Exchange
Offer, or voluntarily take any action which results in their not receiving
"freely tradeable" New Securities in the Registered Exchange Offer or (ii) fail
to furnish to the Company such information as the Company may request in
accordance with Section 4(o) in connection with a Shelf Registration Statement,
shall not retain any rights under this Section 3, including any right to have
Securities owned by them included in any Shelf Registration Statement.
4. Registration Procedures. In connection with any
Shelf Registration Statement, and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its reasonable best
<PAGE> 12
12
efforts to reflect in each such document, when so filed with the
Commission, such comments as you reasonably may propose.
(b) The Company shall cause (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto to comply in all
material respects with the Act and the rules and regulations
thereunder, (ii) any Registration Statement and any amendment thereto
not to, 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 Registration Statement, and
any amendment or supplement to such Prospectus, not to include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise you and, in the case of
a Shelf Registration Statement, the Holders of securities covered
thereby and, if requested by you or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective; and
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the Prospectus
included therein or for additional information.
(2) The Company shall advise you and, in the case of
a Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an
<PAGE> 13
13
Exchange Offer Registration Statement, any Exchanging Dealer which has
provided in writing to the Company a telephone or facsimile number and
address for notices, and, if requested by you or any such Holder or
Exchanging Dealer, confirm such advice in writing:
(i) 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;
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the securities included in any Registration
Statement for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the
making of any changes in the Registration Statement or the
Prospectus so that, as of such date, the statements therein
are not misleading and do not 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
(which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes
have been made), provided that such notice shall not be
required to specify the nature of the event giving rise to the
notice requirement hereunder.
(d) The Company shall use its reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of securities
included within the coverage of any Shelf
<PAGE> 14
14
Registration Statement, without charge, at least one copy of such
Shelf Registration Statement and any post- effective amendment
thereto, including financial statements and schedules, and, if the
Holder so requests in writing, any documents incorporated by reference
therein and all exhibits thereto (including those incorporated by
reference therein).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of
the Prospectus (including each preliminary Prospectus) included in
such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company
consents to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of securities in connection
with the offering and sale of the securities covered by the Prospectus
or any amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer which
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 the Exchanging
Dealer so requests in writing, any documents incorporated by reference
therein and all exhibits thereto (including those incorporated by
reference therein).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such
Exchanging Dealer in connection with a sale of New Securities received
by it pursuant to the Registered Exchange Offer; and the
<PAGE> 15
15
Company consents to the use of the Prospectus or any amendment or
supplement thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other
offering of securities pursuant to any Registration Statement, the
Company shall register or qualify or cooperate with the Holders of
securities included therein and their respective counsel in connection
with the registration or qualification of such securities for offer
and sale under the securities or blue sky laws of such jurisdictions
as any such Holder reasonably requests in writing and do any and all
other acts or things reasonably 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 will not
be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(j) The Company shall cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of
certificates representing Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request
prior to sales of securities pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by
paragraph (c)(2)(iii) above, the Company shall, if required pursuant
to the Act or paragraph (c)(2)(iii) above, promptly prepare a
post-effective amendment to any Registration Statement or an amendment
or supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to purchasers of the
securities included therein, the Prospectus will not include an untrue
statement of a
<PAGE> 16
16
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.
(l) Not later than the effective date of any Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Securities or New Securities, as the case may be, registered under
such Registration Statement, and provide the Trustee with printed
certificates for such Securities or New Securities, in a form, if
requested by the applicable Holder, eligible for deposit with The
Depository Trust Company.
(m) The Company shall use its reasonable best efforts to
comply with all applicable 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 shall make generally
available to its security holders as soon as practicable after the
effective date of the applicable Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Act.
(n) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner.
(o) The Company may require each Holder of Securities to be
sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
such securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement. Any Holder who
fails to provide such information promptly after receipt of a request
therefor shall not be entitled to use the Prospectus and may not
require any additional interest (as specified in Section 1(b) of the
Securities) to be paid until such time as the information is provided.
<PAGE> 17
17
(p) The Company shall, if requested, promptly incorporate in
a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(q) In the case of any Shelf Registration Statement, the
Company shall enter into such customary agreements (including an
underwriting agreement) and take all other appropriate actions in
order to expedite or facilitate the registration or the disposition of
the Securities, including not more than one underwritten offering, and
in connection therewith, if an underwriting agreement is entered into,
cause the same to contain indemnification provisions and procedures no
less favorable than those set forth in Section 6 (or such other
provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any), with respect to all parties to be
indemnified pursuant to Section 6 from Holders of Securities to the
Company.
(r) In the case of any Shelf Registration Statement, subject
to Section 4(q), the Company shall (i) make reasonably available for
inspection by the Holders of securities to be registered thereunder,
any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent
retained by the Holders or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the
Company and its subsidiaries as is customary for similar due diligence
examinations; (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by
the Holders or any such underwriter, attorney, accountant
<PAGE> 18
18
or agent in connection with such Registration Statement as is
customary for similar due diligence examinations; provided, however,
that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such
information shall be kept confidential by the Holders or any such
underwriter, attorney, accountant or agent, unless disclosure thereof
is made in connection with a court proceeding or required by law, or
such information has become available (not in violation of this
agreement) to the public generally or through a third party without an
accompanying obligation of confidentiality; (iii) if requested, make
such representations and warranties to the Holders of securities
registered thereunder and the underwriters, if any, in form, substance
and scope as are customarily made by issuers to underwriters in
primary underwritten offerings and covering matters including, but not
limited to, those set forth in the Purchase Agreement; (iv) if
requested, obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters, if any)
addressed to each selling Holder and the underwriters, if any,
covering such matters as are customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (v) if requested, obtain
"cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if
any, in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with primary
underwritten offerings; and (vi) if requested, deliver such documents
and
<PAGE> 19
19
certificates as may be reasonably requested by the Majority Holders
and the Managing Underwriters, if any, including those to evidence
compliance with Section 4(k) and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company. The foregoing actions set forth in clauses
(iii), (iv), (v) and (vi) of this Section 4(r) shall be performed at
(A) the effectiveness of such Registration Statement and each
post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement as and to the extent required
thereunder.
5. Registration Expenses. The Company shall bear all
expenses incurred in connection with the performance of its obligations under
Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration
Statement, shall reimburse the Holders for the reasonable and duly documented
fees and disbursements of one firm or counsel designated by the Majority
Holders to act as counsel for the Holders in connection therewith and in the
case of any Exchange Offer Registration Statement, shall reimburse the
Purchasers for the reasonable fees and disbursements of one firm or counsel
designated by the Majority Holders to act as counsel for the Holders in
connection therewith.
6. Indemnification and Contribution. (a) In connection with
any Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of securities covered thereby (including each Purchaser and, with
respect to any Prospectus delivery contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in
<PAGE> 20
20
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement as
originally filed or in any amendment thereof, or in any preliminary Prospectus
or Prospectus, or in any amendment thereof or supplement thereto, 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 agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the Company will not be liable
in any case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
Holder or underwriter or Managing Underwriter specifically for inclusion
therein, (ii) the Company shall not be liable to any indemnified party under
this indemnity agreement with respect to any Registration Statement or
Prospectus to the extent that any such loss, claim, damage or liability of such
indemnified party results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, the Registration
Statement or Prospectus which untrue statement or omission was corrected in an
amended or supplemented Registration Statement or Prospectus, if the person
alleging such loss, claim, damage or liability was not sent or given, at or
prior to the written confirmation of such sale, a copy of the amended or
supplemented Registration Statement or Prospectus if the Company had previously
furnished copies thereof to such indemnified party and if such delivery of a
prospectus is finally judicially determined to be required by the Act and was
not so made and (iii) the Company will not be liable to any indemnified party
under this indemnity agreement with respect to any Registration Statement or
Prospectus to the extent that any such loss, claim, damage or liability of such
indemnified party results (a) from the use of a
<PAGE> 21
21
Registration Statement during a period when a stop order has been issued in
respect thereof or any proceedings for that purpose have been initiated or (b)
from the use of the Prospectus during a period when the use of the Prospectus
has been suspended in accordance with Section 2(g), 3(c) or 4(c) hereof,
provided that Holders received prior notice of such stop order or initiation of
proceedings or suspension. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses,
as provided in Section 6(d), of any underwriters of Securities registered under
a Shelf Registration Statement, their officers and directors and each person
who controls such underwriters on substantially the same basis as that of the
indemnification of the Purchasers and the selling Holders provided in this
Section 6(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration
Statement (including each Purchaser and, with respect to any Prospectus
delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer)
severally and not jointly agrees to indemnify and hold harmless the Company,
each of its directors, officers, employees, agents and each person who controls
the Company within the meaning of either the Act or the Exchange Act to the
same extent as the foregoing indemnity from the Company to each such Holder,
but only with reference to written information relating to such Holder
furnished to the Company by or on behalf of such Holder specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in
<PAGE> 22
22
respect thereof is to be made against the indemnifying party under this Section
6, notify the indemnifying party in writing of the commencement thereof; but
the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), but the indemnified party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) unless (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying
party. It is understood that the
<PAGE> 23
23
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Purchasers, their directors, officers, employees and agents, and all persons,
if any, who control the Purchasers within the meaning of the Act or the
Exchange Act, (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, officers,
employees and agents and each person, if any, who controls the Company within
the meaning of the Act or the Exchange Act and (iii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for all Holders,
their directors, officers, employees and agents and all persons, if any, who
control any Holders within the meaning of the Act or the Exchange Act, and that
all such fees and expenses shall be reimbursed as they are incurred. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, from
<PAGE> 24
24
the Initial Placement and the Registration Statement which resulted in such
Losses; provided, however, that in no case shall any Purchaser or any
subsequent Holder of any Security or New Security be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Security, or in the case of a New Security, applicable to
the Security which was exchangeable into such New Security as set forth on the
cover page of the Final Memorandum, nor shall any underwriter be responsible
for any amount in excess of the underwriting discount or commission applicable
to the securities purchased by such underwriter under the Registration
Statement which resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the sum of (x)
the total net proceeds from the Initial Placement (before deducting expenses)
as set forth on the cover page of the Final Memorandum and (y) the total amount
of additional interest which the Company was not required to pay as a result of
registering the securities covered by the Registration Statement which resulted
in such Losses. Benefits received by the Purchasers shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Final Memorandum, and benefits received by any other Holders shall
be deemed to be equal to the value of receiving Securities or New Securities,
as applicable, registered under the Act. Benefits received by any underwriter
shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement which resulted in such Losses. Relative fault shall
be determined by reference to whether any alleged untrue statement or omission
relates to
<PAGE> 25
25
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 6, each person who controls a Holder within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of such Holder shall have the same rights to contribution as such Holder,
and each person who controls the Company within the meaning of either the Act
or the Exchange Act, and each director, officer, employee and agent of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Holder or the Company or any of the officers, directors or controlling persons
referred to in Section 6 hereof, and will survive the sale by a Holder of
securities covered by a Registration Statement.
7. Miscellaneous. (a) No Inconsistent Agreements. 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.
<PAGE> 26
26
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the Holders of at least a majority of the then outstanding
aggregate principal amount of Securities (or, after the consummation of any
Exchange Offer in accordance with Section 2 hereof, of New Securities);
provided that, with respect to any matter that directly or indirectly affects
the rights of any Purchaser hereunder, the Company shall obtain the written
consent of each such Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the
foregoing (except the foregoing proviso), a waiver or consent to departure from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders, determined on the basis of
securities being sold rather than registered under such Registration Statement.
(c) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 7(c), which address initially is, with respect to each Holder,
the address of such Holder maintained by the registrar under the
Indenture, with a copy in like manner to Salomon Brothers Inc by fax
(212-783-2823) and confirmed by mail to it at Seven World Trade
Center, New York, New York, 10048;
(2) if to you, initially at the address set forth in the
Purchase Agreement; and
<PAGE> 27
27
(3) if to the Company, initially at its address set forth in
the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given when received.
Any Purchaser or the Company by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent
by the Company thereto, subsequent Holders of Securities and/or New Securities.
The Company hereby agrees to extend the benefits of this Agreement to any
Holder of Securities and/or New Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(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 INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF).
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity,
<PAGE> 28
28
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the
consent or approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates (other than
subsequent Holders of Securities or New Securities if such subsequent Holders
are deemed to be Affiliates solely by reason of their holdings of such
Securities or New Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
<PAGE> 29
29
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
THE DII GROUP, INC.
by
--------------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
by SALOMON BROTHERS INC
by
------------------------------------
Name:
Title:
For themselves and the
other Purchasers named in
Schedule I to the Purchase
Agreement.
<PAGE> 30
ANNEX A
Each broker-dealer that receives New 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 New 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 New Securities received in exchange for Securities where such
New Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting
on the date hereof (the "Expiration Date") and ending on the close of business
on the 180th day after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE> 31
ANNEX B
Each broker-dealer that receives New Securities for its own
account in exchange for Securities, where such 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 New Securities. See "Plan of Distribution."
<PAGE> 32
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New Securities. The
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 Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business on
the 180th day 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.(*)
The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New 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 New 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
__________________________________
(*) In addition, the legend required by Item 502(e) of Regulation S-K
will appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 33
2
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Securities. Any
broker-dealer that resells New 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 New Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Securities and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of one year 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 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.
[If applicable, add information required by Regulation S-K
Items 507 and/or 508.]
<PAGE> 34
ANNEX D
Rider A
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:
--------------------------------------------
--------------------------------------------
Rider B
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
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for 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 New 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.
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") dated as of
August 1, 1997, is among THE DII GROUP, INC., a Delaware corporation, formerly
known as DOVatron International, Inc. ("DII"), DOVATRON INTERNATIONAL, INC., a
Delaware corporation, formerly known as DOVatron, Inc., CENCORP INC., a Delaware
corporation, MULTILAYER TECHNOLOGY, INC., a California corporation ("MTI"), and
TTI TESTRON, INC., a Delaware corporation, formerly known as TTI Merger
Corporation, as successor to TTI Testron, Inc., a Rhode Island corporation, by
virtue of its merger with TTI Merger Corporation (collectively, the "Original
Borrowers"), Orbit Semiconductor, Inc., a Delaware corporation (collectively
with the Original Borrowers, the "Existing Borrowers"), and MULTILAYER TEK,
L.P., a Texas limited partnership ("MTLP") (MTLP collectively with the Existing
Borrowers, the "Borrowers") and NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a
national banking association ("Norwest"), THE CHASE MANHATTAN BANK, a New York
state bank, as successor to The Chase Manhattan Bank, N.A., a national banking
association, HARRIS TRUST AND SAVINGS BANK, an Illinois state bank, and NBD
BANK, a Michigan banking corporation (together with their respective successors
and permitted assigns, if any, from time to time, individually, a "Lender" and
collectively, the "Lenders"), and Norwest, as agent for the Lenders (in such
capacity, the "Agent").
RECITALS
A. Original Borrowers, the Lenders and the Agent are parties to the
Loan Agreement, dated as of April 4, 1996, as amended by a First Amendment to
Loan Agreement executed December 20, 1996 by and among the Existing Borrowers,
the Lenders and the Agent (as further amended, and as it may hereafter be
amended, restated or supplemented from time to time, the "Loan Agreement"),
providing for a Loan from the Lenders to Existing Borrowers. Capitalized terms
that are used but not defined herein have the meanings set forth in the Loan
Agreement.
B. The parties desire to enter into this Amendment in order to (i)
increase the Maximum Loan Amount from $60,000,000 to $80,000,000, (ii) revise
certain financial covenants contained in the Loan Agreement as described herein,
(iii) extend the Maturity Date, (iv) provide for a pledge of the assets,
including real estate, acquired in connection with the Multilayer Tek Asset
Acquisition (as defined below), and (v) add MTLP as a co-Borrower under the Loan
Documents.
AGREEMENT
IN CONSIDERATION of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agent agree as follows:
1. Capitalized Terms. Capitalized terms that are used but not
defined in this Amendment have the meanings given to them in
the Loan Agreement.
2. Definitions. The following definitions in Section 1.1 of the
Loan Agreement are hereby amended and restated in their
entirety to read as follows:
<PAGE> 2
a. "Fixed Charges" means income taxes and interest expense for
Borrowers and their Subsidiaries, calculated on a Consolidated
basis in accordance with GAAP; plus the sum of regularly
scheduled payments of principal under any promissory notes
delivered in consideration for acquisition of Multilayer
Technology, Inc. and TTI TesTron (meaning notes payable to the
sellers of such companies in consideration of the purchase),
respectively; plus long-term debt principal payments and
redemption payments (except as set forth below); plus all
other payments of principal, interest and other amounts if the
failure to pay such amounts would have a material adverse
impact on any Borrower or its operations, calculated in each
case on the basis of the four Quarters immediately preceding
the date of calculation. Fixed Charges excludes earn-out
payments which the Borrowers are obligated to make arising out
of any acquisitions.
b. "Maturity Date" means the earlier of (i) acceleration, or
(ii) June 30, 2002.
c. "Maximum Loan Amount" means $80,000,000, subject to
reductions in such amount pursuant to Section 2.1(j) below,
minus the Letter of Credit Liability (taking into account the
face amount of any requested Letter of Credit).
d. "Notes" means the promissory notes made by Borrowers and
evidencing the Loan, as they may be amended, restated,
extended or supplemented from time to time and all notes given
in substitution therefor, including without limitation: (a)
the Promissory Note, as amended by Amendment to Promissory
Note executed December 20, 1996, as further amended by Second
Amendment to Promissory Note dated as of even date herewith,
in the amended principal amount of $20,000,000 from Borrowers
payable to Norwest evidencing Norwest's Percentage Interest of
the Loan, (b) the Promissory Note, as amended by Amendment to
Promissory Note executed December 20, 1996, as further amended
by Second Amendment to Promissory Note dated as of even date
herewith, in the amended principal amount of $20,000,000 from
Borrowers payable to Chase evidencing Chase's Percentage
Interest in the Loan, (c) the Promissory Note, as amended by
Amendment to Promissory Note executed December 20, 1996, as
further amended by Second Amendment to Promissory Note dated
as of even date herewith, in the amended principal amount of
$20,000,000 from Borrowers payable to Harris evidencing
Harris's Percentage Interest in the Loan, and (d) the
Promissory Note, as amended by Amendment to Promissory Note
executed December 20, 1996, as further amended by Second
Amendment to Promissory Note dated as of even date herewith,
in the amended principal amount of $20,000,000 from Borrowers
payable to NBD evidencing NBD's Percentage Interest in the
Loan, together with any and all renewals, extensions,
amendments and changes of, or substitutions for such notes.
3. Request for Advance under the Loan. Section 2.1(g)(i) of the
Loan Agreement is amended and restated in its entirety to read
as follows:
(i) Each request for an Advance under the Loan must
be substantially in the form of the Request for
Advance (subject to modifications approved by
2
<PAGE> 3
Agent) and submitted to the Agent on or before noon
Denver, Colorado time on (A) the Business Day such
Advance is requested to be made if such Advance is a
Base Rate Advance, or (B) three Business Days
preceding the date such Advance is requested to be
made if such Advance is a LIBOR Rate Advance. Upon
receipt of a Request for Advance, the Agent shall
promptly provide a copy thereof to each Lender. If
all conditions precedent to each Advance have been
met by noon Denver time on the Business Day such
Advance is requested to be made, each Lender shall
make available to the Agent, by 3:00 p.m. Denver,
Colorado time on such Business Day, in immediately
available funds the amount of such Lender's
Percentage Interest of the amount specified in the
Request for Advance; provided, however, that the
Lenders shall not be obligated to make any Advance to
Borrowers that would result in the aggregate unpaid
principal balance outstanding under the Loan
exceeding the Maximum Loan Amount (other than
Advances to the Agent to fund draws under a Letter of
Credit).
4. Funded Debt to EBITDA. Section 7.11(a) of the Loan Agreement
is amended and restated in its entirety to read as follows:
(a) Funded Debt to EBITDA. (i) For the four-Quarter
period ending September 30, 1997 (based on the
Quarter ending such date and the preceding three
Quarters) and for the four-Quarter period ending
December 31, 1997 (based on the Quarter ending such
date and the preceding three Quarters), Borrowers
shall maintain a ratio of Funded Debt (as of the last
day of such Quarter) to EBITDA (excluding from EBITDA
an amount equal to four Quarters of interest due and
payable on the Convertible Subordinated Debt) of less
than or equal to 2.0 to 1.0. For each four-Quarter
period (based on the Quarter in which the
determination is being made and the preceding three
Quarters) after January 1, 1998, Borrowers shall
maintain a ratio of Funded Debt (as of the last day
of such Quarter) to EBITDA (excluding from EBITDA an
amount equal to four Quarters of interest due and
payable on the Convertible Subordinated Debt) of less
than or equal to 1.75 to 1.0.
5. Fixed Charge Coverage Ratio. Section 7.11(b) of the Loan
Agreement is hereby deleted; however, the LIBOR Rate shall
continue to be determined based on the ratio of EBITDA to
Fixed Charges.
6. Interest Coverage Ratio.
a. The Loan Agreement is amended by adding a new Section
7.11(f) of the Loan Agreement as follows:
(f) For each four-Quarter period (based on
the Quarter in which the determination is
being made and the preceding
3
<PAGE> 4
three Quarters), the Borrowers shall
maintain an Interest Coverage Ratio of at
least 2.0 to 1.0.
b. The following definitions are added to Section 1.1 of
the Loan Agreement:
i. "Interest Coverage Ratio" means for the
applicable period the ratio of (a) EBITDA
for such period to (b) Interest Expense for
such period.
ii. "Interest Expense" means all interest
expense of the Borrowers and their
Subsidiaries, including without limitation
interest expense attributable to capital
leases and operating leases, amortization of
debt discount and debt issuance costs,
capitalized interest, interest actually paid
by the Borrowers on the debt of any other
person or entity which is guaranteed by the
Borrowers or their Subsidiaries and any and
all other interest expense regardless of
form or amount; but excluding interest on
the Convertible Subordinated Debt.
7. Current Ratio. Section 7.11(c) of the Loan Agreement is
amended and restated in its entirety to read as follows:
(c) Current Ratio. [INTENTIONALLY DELETED]
8. Minimum Tangible Net Worth. Section 7.11(e) of the Loan
Agreement is amended and restated in its entirety to read as
follows:
(e) Minimum Tangible Net Worth. [INTENTIONALLY
DELETED]
9. Capital Expenditures.
a. Section 8.4 of the Loan Agreement is amended and
restated in its entirety to read as follows:
8.4 Capital Expenditures. [INTENTIONALLY DELETED]
10. Investments in New Business.
a. Section 8.5(a) of the Loan Agreement is amended and
restated in its entirety to read as follows:
"(a) Make any acquisitions of or capital
contributions to or other investments in any
Person, except that acquisitions are
permitted within the Industry; provided that
acquisitions within the Industry shall only
be permitted to the extent that the
Consolidated Net
4
<PAGE> 5
Worth of DII after the acquisition is not
less than the Consolidated Net Worth of DII
immediately prior to such acquisition; all
acquisitions of or capital contributions to
or other investments in any Person outside
of the Industry and all other investments
require the prior written consent of the
Lenders,"
b. Section 8.5(b) remains unchanged.
c. The following definitions are added to Section 1.1 of the
Loan Agreement:
i. "Industry" means the same business engaged
in by the Borrowers, as determined by Agent
in its reasonable discretion, which
industries include but are not limited to
printed circuit board contract
manufacturing, electronic interconnect
technologies, electronics process
technologies and semi-conductor
manufacturing.
ii. "Consolidated Net Worth" means the
consolidated net worth of Borrowers and
their Subsidiaries as determined in
accordance with GAAP.
11. Indebtedness. Section 8.1(e) of the Loan Agreement is amended
and restated in its entirety to read as follows:
(e) Indebtedness (which may include Accommodation
Obligations for the benefit of Affiliates and related
parties but no other Accommodation Obligations) in
the aggregate outstanding at any one time (including
(c) above, but excluding (a) and (b) above) not
exceeding $40,000,000.
12. Addition of MTLP as Co-Borrower.
a. MTLP is hereafter a co-borrower with respect to the
Loan, jointly and severally liable with the Existing
Borrowers pursuant to the terms of the Loan
Agreement, as amended by this Amendment, the Note (as
made by MTLP and amended concurrent herewith) and the
other Loan Documents (as amended concurrent
herewith). Accordingly, all references in this
Amendment and the Loan Agreement to the term
"Borrower" hereafter mean and refer to MTLP as well
as to each of the Existing Borrowers, and to the term
"Borrowers" hereafter mean and refer to MTLP and the
Existing Borrowers, collectively.
b. MTLP hereby represents that there is nothing
preventing MTLP from entering into this Amendment or
assuming all obligations of co-Borrower under the
Loan Documents and co-Maker of the Notes. MTLP
further represents and warrants that all
representations and warranties of "Borrowers" set
forth in the Loan Documents are true and correct with
5
<PAGE> 6
respect to MTLP as of the date hereof as if such
representations and warranties were being made by
MTLP.
13. Conditions Precedent. All of Lenders' agreements and
obligations under this Amendment are conditioned upon and
subject to satisfaction of all the following conditions in a
manner acceptable to Agent in its sole discretion on or before
August 8, 1997 (except as set forth below):
a. Borrowers shall have paid each of the Lenders a
facility fee in the amount of $15,000.00.
b. Borrowers shall have paid Agent such additional fee
as has been mutually agreed upon by Borrowers and
Agent.
c. No Event of Default or Unmatured Event of Default
shall have occurred as of the date hereof.
d. Borrowers shall have executed and delivered the
documents described on Schedule I attached hereto.
14. Failure of Conditions Precedent. In the event that any of the
conditions set forth above are not satisfied as of the date
hereof, all of Lenders' obligations hereunder shall be, at the
option of the Agent, null and void and of no further force and
effect whatsoever.
15. Multilayer Tek Asset Acquisition.
a. DII through MTLP, or another entity owned or
controlled by DII, intends to acquire certain circuit
board manufacturing assets (the "Multilayer Tek Asset
Acquisition") from International Business Machines,
Inc. ("IBM") in connection with IBM's existing
operation in Austin, Texas.
b. On or before 30 days after the closing of the
Multilayer Tek Asset Acquisition, Borrowers shall
have pledged or caused to be pledged to Agent, as
agent for Lenders, as additional security for the
Loan, all assets (including, without limitation, all
inventory, accounts receivable, equipment, general
intangibles, notes receivable and real estate)
acquired in the Multilayer Tek Asset Acquisition (the
"Collateral"), subject to only those liens and
encumbrances approved in writing by Agent.
c. On or before 30 days after the closing of the
Multilayer Tek Asset Acquisition, Borrowers shall
deliver such opinions of counsel and shall execute
all such documents and take all such actions or cause
any other party to execute all such documents and
take all such actions as Agent may reasonably require
in connection with the provisions of this Section 15
or the Multilayer Tek Asset Acquisition.
6
<PAGE> 7
d. On or before 30 days after the closing of the
Multilayer Tek Asset Acquisition, Borrower shall
obtain a landlord waiver, in form and substance
satisfactory to Agent, from the lessor of any
facilities at which any Collateral is located.
e. In the event that MTLP or any other subsidiary of DII
acquires any real estate in connection with the
Multilayer Tek Asset Acquisition at any time after
the closing of such acquisition, immediately upon
acquiring such real estate, MTLP shall grant to the
Agent or DII shall cause such other subsidiary to
grant to the Agent, as agent for the Lenders, a valid
perfected first priority lien on such real estate
subject only to exceptions approved by Agent in its
sole discretion and execute all documents required in
connection therewith, including, without limitation,
Environmental Indemnity Agreement.
16. Fees and Expenses. Borrowers shall pay all costs and expenses
incurred by Agent in connection with this Amendment and the
amendments to the other Loan Documents within 15 days after
request by Agent. At the option of the Agent, failure to pay
such costs and expenses shall constitute an Event of Default
under the Loan Agreement.
17. Further Assurances. Borrowers shall execute all documents and
instruments and take all actions, and shall use its best
efforts to cause any other party, to execute all documents and
instruments and take all actions as the Agent may reasonably
require to effect the transactions contemplated by this
Amendment.
18. Representations and Warranties. Borrowers hereby certify to
the Lenders that as of the date of this Amendment (taking into
consideration the transactions contemplated by this
Amendment), all of Borrowers' representations and warranties
contained in the Loan Documents are true, accurate and
complete in all material respects, and no Event of Default or
Unmatured Event of Default has occurred under any Loan
Document (as amended concurrent herewith). Without limiting
the generality of the foregoing, Borrowers represent and
warrant to the Lenders that the execution and delivery of this
Amendment has been authorized by all necessary action on the
part of Borrowers, that each person executing this Amendment
on behalf of Borrowers is duly authorized to do so, and that
this Amendment constitutes the legal, valid, binding and
enforceable obligation of Borrowers.
19. Loan Documents.
a. The Lenders, the Agent, and Borrowers agree that all
of the Loan Documents shall be amended to reflect the
amendments set forth herein.
7
<PAGE> 8
b. All references in any document to the Loan Agreement
hereafter refer to the Loan Agreement as amended
pursuant to this Amendment.
c. All references in the Loan Agreement to the Loan
Documents, or any particular Loan Document, hereby
refer to such Loan Documents as amended pursuant to
the amendments executed concurrent herewith.
20. Continuation of the Loan Agreement Except as specified in this
Amendment, the provisions of the Loan Agreement remain in full
force and effect, and if there is a conflict between the terms
of this Amendment and those of the Loan Agreement, the terms
of this Amendment control.
21. Miscellaneous.
a. This Amendment shall be governed by and construed
under the laws of the State of Colorado and shall be
binding upon and inure to the benefit of the parties
hereto and their successors and permissible assigns.
b. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an
original and all of which together shall constitute
one instrument.
c. This Amendment and all documents to be executed and
delivered hereunder may be delivered in the form of a
facsimile copy, subsequently confirmed by delivery of
the originally executed document.
d. Time is of the essence hereof with respect to the
dates, terms and conditions of this Amendment and the
documents to be delivered pursuant hereto.
e. This Amendment constitutes the entire agreement
between Borrowers, the Agent, and the Lenders
concerning the subject matter of this Amendment. This
Amendment may not be amended or modified orally, but
only by a written agreement executed by Borrowers,
the Agent and the Lenders and designated as an
amendment or modification of the Loan Agreement.
f. If any provision of this Amendment is held to be
invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining
provisions of this Amendment shall not be impaired
thereby.
g. The section headings herein are for convenience only
and shall not affect the construction hereof.
8
<PAGE> 9
EXECUTED as of the date first set forth above.
LENDERS:
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By:
---------------------------------------
Karen I. Hardy
Vice President
THE CHASE MANHATTAN BANK, a New York state
bank, as successor to The Chase
Manhattan Bank, N.A., a national banking
association
By:
---------------------------------------
Michael Brunner
Vice President
HARRIS TRUST AND SAVINGS BANK, an Illinois
state bank
By:
---------------------------------------
James H. Colley
Vice President
NBD BANK, a Michigan banking corporation
By:
---------------------------------------
Marguerite C. Mullins
Vice President
9
<PAGE> 10
AGENT:
NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
a national banking association
By:
---------------------------------------
Karen I. Hardy
Vice President
BORROWERS:
THE DII GROUP, INC. (formerly known as
DOVatron International, Inc.), a
Delaware corporation
By:
---------------------------------------
Carl R. Vertuca Jr.
Senior Vice President and
Chief Financial Officer
DOVATRON INTERNATIONAL, INC.,
(formerly known as DOVatron, Inc.),
a Delaware corporation
By:
---------------------------------------
Carl R. Vertuca Jr.
Senior Vice President and
Chief Financial Officer
CENCORP INC., a Delaware corporation
By:
---------------------------------------
Carl R. Vertuca Jr.
Senior Vice President and
Chief Financial Officer
10
<PAGE> 11
MULTILAYER TECHNOLOGY, INC., a
California corporation
By:
---------------------------------------
Carl R. Vertuca Jr.
Senior Vice President and
Chief Financial Officer
TTI TESTRON, INC., (formerly known as
TTI Merger Corporation), a Delaware
corporation, as successor to TTI
TesTron, Inc., a Rhode Island corporation
By:
---------------------------------------
Carl R. Vertuca Jr.
Senior Vice President and
Chief Financial Officer
ORBIT SEMICONDUCTOR, INC., a Delaware
corporation (formerly known as DII
Merger, Inc.
By:
---------------------------------------
Carl R. Vertuca Jr.
Senior Vice President and
Chief Financial Officer
MULTILAYER TEK, LP,
a Texas limited partnership
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
11
<PAGE> 12
SCHEDULE I
Attached to and forming a part of the Second Amendment to Loan Agreement,
dated August __, 1997,
among The DII Group, Inc.; DOVatron International, Inc.; CENCORP Inc.;
Multilayer Technology, Inc.; TTI TesTron, Inc.;
Orbit Semiconductor, Inc.; Multilayer Technology, LP;
Norwest Bank Colorado, National Association;
The Chase Manhattan Bank; Harris Trust and Savings Bank; and NBD Bank
(See Attached)
12
<PAGE> 1
EXHIBIT 10.2
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") dated as of
September 15, 1997, is among THE DII GROUP, INC., a Delaware corporation,
formerly known as DOVatron International, Inc. ("DII"), DOVATRON INTERNATIONAL,
INC., a Delaware corporation, formerly known as DOVatron, Inc., CENCORP INC., a
Delaware corporation, MULTILAYER TECHNOLOGY, INC., a California corporation
("MTI"), and TTI TESTRON, INC., a Delaware corporation, formerly known as TTI
Merger Corporation, as successor to TTI Testron, Inc., a Rhode Island
corporation, by virtue of its merger with TTI Merger Corporation (collectively,
the "Original Borrowers"), Orbit Semiconductor, Inc., a Delaware corporation
("Orbit"), and MULTILAYER TEK, L.P., a Texas limited partnership ("MTLP") (Orbit
and MTLP collectively with the Original Borrowers, the "Borrowers") and NORWEST
BANK COLORADO, NATIONAL ASSOCIATION, a national banking association ("Norwest"),
THE CHASE MANHATTAN BANK, a New York state bank, as successor to The Chase
Manhattan Bank, N.A., a national banking association, HARRIS TRUST AND SAVINGS
BANK, an Illinois state bank, and NBD BANK, a Michigan banking corporation
(together with their respective successors and permitted assigns, if any, from
time to time, individually, a "Lender" and collectively, the "Lenders"), and
Norwest, as agent for the Lenders (in such capacity, the "Agent").
RECITALS
A. Original Borrowers, the Lenders and the Agent are parties to the
Loan Agreement, dated as of April 4, 1996, as amended by a First Amendment to
Loan Agreement executed December 20, 1996 by and among the Original Borrowers,
Orbit, the Lenders and the Agent, as amended by Second Amendment to Loan
Agreement dated as of August 1, 1997, by and among the Borrowers, Lenders and
Agent (as further amended, and as it may hereafter be amended, restated or
supplemented from time to time, the "Loan Agreement"), providing for a Loan from
the Lenders to Borrowers. Capitalized terms that are used but not defined herein
have the meanings set forth in the Loan Agreement.
B. The Borrowers have requested that the Lenders consent to an
additional subordinate debt offering (the "Additional Subordinate Debt
Offering") by DII in the amount up to $150,000,000 in accordance with the terms
and conditions contemplated in the Preliminary Offering Memorandum, dated
September 15, 1997 (the "Offering Memorandum"), and the Indenture, to be dated
on or about September 19, 1997 between the Company and Chase Trust Company of
California (the "Indenture").
AGREEMENT
IN CONSIDERATION of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agent agree as follows:
<PAGE> 2
1. Capitalized Terms. Capitalized terms that are used but not
defined in this Amendment have the meanings given to them in
the Loan Agreement.
2. Consent to Additional Subordinate Debt Offering. Each of the
Lenders hereby agrees as follows:
a. The Additional Subordinate Debt Offering does not
constitute a violation of and shall be Indebtedness
permitted pursuant to Section 8.1 of the Loan
Agreement; provided that any increase in the amount
of the Additional Subordinated Debt Offering above
$150 million shall require the consent of the
Required Lenders, which shall be in the Required
Lenders sole and absolute discretion.
b. The Additional Subordinated Debt Offering does not
constitute a burdensome undertaking pursuant to
Section 8.9 of the Loan Agreement.
3. Consent to Certain Other Transactions. Each of the Lenders
hereby agrees as follows:
a. The Lenders consent to and waive any default under
Section 8.3 of the Loan Agreement arising out of the
loans to certain executives of Borrower, which loans
are described on Exhibit A attached hereto; on the
condition that the consent and waiver of Lenders set
forth herein is limited to the loan amounts and loan
terms described on Exhibit A attached hereto and not
to any changes or modifications thereto.
b. The Lenders consent to and waive any default under
Section 8.12 of the Loan Agreement arising out of the
Lease Agreement, dated August 12, 1997 between Ronald
R. Budacz and Carl R. Vertuca and DII; on the
condition that the consent and waiver of Lenders set
forth herein is limited to the terms and conditions
of the Lease Agreement and not to any amendments or
modificiations to the monetary or economic terms
thereof.
4. Amendment to Loan Agreement Article IX of the Loan Agreement
regarding Event of Default is hereby amended to add the
following Events of Default:
9.14 Default Under Subordinate Debt. A default or
event of default under the Indenture or the
Securities (as defined in the Indenture) whether or
not such default or event of default is declared,
waived or otherwise forgiven, shall, at the option of
Agent, constitute an Event of Default hereunder.
5. Agreement Not to Amend. The Borrowers hereby agree not to (a)
amend or modify the subordination provisions of any of the
Securities, the Indenture or any other document executed in
connection with the Additional Subordinate Debt
2
<PAGE> 3
Offering if such amendment would adversely effect the rights
of the Lenders, or (b) amend or modify the Securities, the
Indenture or any other document to increase the amount of the
Additional Subordinated Debt Offering to in excess of
$150,000,000, in either case without the prior written consent
of the Lenders.
6. Fees and Expenses. Borrowers shall pay all costs and expenses
incurred by Agent in connection with this Amendment and any
amendments to the other Loan Documents within 15 days after
request by Agent. At the option of the Agent, failure to pay
such costs and expenses shall constitute an Event of Default
under the Loan Agreement.
7. Further Assurances. Borrowers shall execute all documents and
instruments and take all actions, and shall use its best
efforts to cause any other party, to execute all documents and
instruments and take all actions as the Agent may reasonably
require to effect the transactions contemplated by this
Amendment.
8. Representations and Warranties. Borrowers hereby certify to
the Lenders that as of the date of this Amendment (taking into
consideration the transactions contemplated by this
Amendment), all of Borrowers' representations and warranties
contained in the Loan Documents are true, accurate and
complete in all material respects, and no Event of Default or
Unmatured Event of Default has occurred under any Loan
Document (as amended concurrent herewith). Without limiting
the generality of the foregoing, Borrowers represent and
warrant to the Lenders that the execution and delivery of this
Amendment has been authorized by all necessary action on the
part of Borrowers, that each person executing this Amendment
on behalf of Borrowers is duly authorized to do so, and that
this Amendment constitutes the legal, valid, binding and
enforceable obligation of Borrowers.
9. Loan Documents.
a. The Lenders, the Agent, and Borrowers agree that all
of the Loan Documents shall be amended to reflect the
amendments set forth herein.
b. All references in any document to the Loan Agreement
hereafter refer to the Loan Agreement as amended
pursuant to this Amendment.
c. All references in the Loan Agreement to the Loan
Documents, or any particular Loan Document, hereby
refer to such Loan Documents as amended pursuant to
the amendments executed concurrent herewith.
10. Continuation of the Loan Agreement Except as specified in this
Amendment, the provisions of the Loan Agreement remain in full
force and effect, and if there is a conflict between the terms
of this Amendment and those of the Loan Agreement, the terms
of this Amendment control.
3
<PAGE> 4
11. Miscellaneous.
a. This Amendment shall be governed by and construed
under the laws of the State of Colorado and shall be
binding upon and inure to the benefit of the parties
hereto and their successors and permissible assigns.
b. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an
original and all of which together shall constitute
one instrument.
c. This Amendment and all documents to be executed and
delivered hereunder may be delivered in the form of a
facsimile copy, subsequently confirmed by delivery of
the originally executed document.
d. Time is of the essence hereof with respect to the
dates, terms and conditions of this Amendment and the
documents to be delivered pursuant hereto.
e. This Amendment constitutes the entire agreement
between Borrowers, the Agent, and the Lenders
concerning the subject matter of this Amendment. This
Amendment may not be amended or modified orally, but
only by a written agreement executed by Borrowers,
the Agent and the Lenders and designated as an
amendment or modification of the Loan Agreement.
f. If any provision of this Amendment is held to be
invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining
provisions of this Amendment shall not be impaired
thereby.
g. The section headings herein are for convenience only
and shall not affect the construction hereof.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
4
<PAGE> 5
EXECUTED as of the date first set forth above.
LENDERS:
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By:
---------------------------------------
Karen I. Hardy
Vice President
THE CHASE MANHATTAN BANK, a New York state
bank, as successor to The Chase
Manhattan Bank, N.A., a national banking
association
By:
---------------------------------------
Michael Brunner
Vice President
HARRIS TRUST AND SAVINGS BANK, an Illinois
state bank
By:
---------------------------------------
James H. Colley
Vice President
NBD BANK, a Michigan banking corporation
By:
---------------------------------------
Marguerite C. Gordy
Vice President
5
<PAGE> 6
AGENT:
NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
a national banking association
By:
---------------------------------------
Karen I. Hardy
Vice President
BORROWERS:
THE DII GROUP, INC. (formerly known as
DOVatron International, Inc.), a
Delaware corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
DOVATRON INTERNATIONAL, INC.,
(formerly known as DOVatron, Inc.),
a Delaware corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CENCORP INC., a Delaware corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
6
<PAGE> 7
MULTILAYER TECHNOLOGY, INC., a
California corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TTI TESTRON, INC., (formerly known as
TTI Merger Corporation), a Delaware
corporation, as successor to TTI TesTron,
Inc., a Rhode Island corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ORBIT SEMICONDUCTOR, INC., a Delaware corporation
(formerly known as DII Merger, Inc.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MULTILAYER TEK, LP,
a Texas limited partnership
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
7
<PAGE> 8
EXHIBIT A
DII made loans to certain of its executives in order to enable the
executives to satisfy their tax obligations in connection with the vesting of
the performance shares in 1996 and 1997. The loans were advanced in January 1996
and April 1997. Interest on the loans accrues at a rate of 5.7% per annum and
6.5% per annum, respectively. As of June 29, 1997, the aggregate amount of
principal and interest outstanding with respect to the executive was as follows:
Ronald R. Budacz, $0.6 million; Carl R. Vertuca, Jr., $0.4 million; Ronald R.
Snyder, $0.2 million; Carl A. Plichta, $0.3 million; Thomas J. Smach, $0.2
million; Steven C. Schlepp, $0.2 million; and Mark D. Herbst, $0.1 million. The
loans will be forgiven ratably over four-years from the date of each advance.
A-1
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
Agreement, made as of the 12th day of August 1997, by and
between The DII Group, Inc., a Delaware corporation (the "Company"), and Ronald
R. Budacz (the "Executive").
RECITALS
A. The Company and the Executive are parties to an Employment Agreement,
dated as of January 1, 1997 (the "Employment Agreement); and
B. The Company desires to continue to employ the Executive pursuant to the
Employment Agreement and the Executive is willing to accept such employment on
the terms and conditions set forth in the Employment Agreement, in each case as
amended hereby.
THE PARTIES AGREE as follows:
1. The Employment Agreement is hereby amended by inserting the following
Section 3.2.1.:
"3.2.1. Forgiveness of Additional Indebtedness. The Company
agrees to forgive the outstanding indebtedness of Executive to the Company in
the principal amount of $255,707, evidenced by a Promissory Note dated April 16,
1997, together with interest accrued and accruing thereon (collectively, the
"Aggregate Additional Indebtedness"), subject to the following terms. On the
first anniversary of the date of the Employment Agreement, 25% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven; on the second
anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven; on the third
anniversary of the date of the Employment Agreement, 50% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven;
<PAGE> 2
and any remaining Aggregate Additional Indebtedness shall be forgiven on the
fourth anniversary of the date of the Employment Agreement. All other terms and
conditions set forth in Section 3.2. with respect to the forgiveness of the
Aggregate Indebtedness shall also apply to the forgiveness of the Additional
Aggregate Indebtedness provided for in this Section 3.2.1, including without
limitation, additional payments on an After-Tax Basis and forgiveness in the
event of termination of employment or a Change in Control."
2. Except as amended hereby, the Employment Agreement shall continue in
full force and effect in accordance with its terms.
3. This First Amendment may be executed in one or more separate
counterparts, all of which taken together shall constitute one and the same
First Amendment Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the day and year first above written.
THE DII GROUP, INC.
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
Ronald R. Budacz
-2-
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
Agreement, made as of the 12th day of August 1997, by and between The
DII Group, Inc., a Delaware corporation (the "Company"), and Carl R. Vertuca,
Jr. (the "Executive").
RECITALS
A. The Company and the Executive are parties to an Employment Agreement,
dated as of January 1, 1997 (the "Employment Agreement); and
B. The Company desires to continue to employ the Executive pursuant to the
Employment Agreement and the Executive is willing to accept such employment on
the terms and conditions set forth in the Employment Agreement, in each case as
amended hereby.
THE PARTIES AGREE as follows:
1. The Employment Agreement is hereby amended by inserting the following
Section 3.2.1.:
"3.2.1. Forgiveness of Additional Indebtedness. The Company agrees to
forgive the outstanding indebtedness of Executive to the Company in the
principal amount of $172,167, evidenced by a Promissory Note dated April 16,
1997, together with interest accrued and accruing thereon (collectively, the
"Aggregate Additional Indebtedness"), subject to the following terms. On the
first anniversary of the date of the Employment Agreement, 25% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven; on the second
anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven; on the third
anniversary of the date of the Employment Agreement, 50% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven;
<PAGE> 2
and any remaining Aggregate Additional Indebtedness shall be forgiven on the
fourth anniversary of the date of the Employment Agreement. All other terms and
conditions set forth in Section 3.2. with respect to the forgiveness of the
Aggregate Indebtedness shall also apply to the forgiveness of the Additional
Aggregate Indebtedness provided for in this Section 3.2.1, including without
limitation, additional payments on an After-Tax Basis and forgiveness in the
event of termination of employment or a Change in Control."
2. Except as amended hereby, the Employment Agreement shall continue in
full force and effect in accordance with its terms.
3. This First Amendment may be executed in one or more separate
counterparts, all of which taken together shall constitute one and the same
First Amendment Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the day and year first above written.
THE DII GROUP, INC.
By:
-------------------------------------
Title:
----------------------------------
----------------------------------------
Carl R. Vertuca, Jr.
-2-
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
Agreement, made as of the 12th day of August 1997, by and between The
DII Group, Inc., a Delaware corporation (the "Company"), and Ronald R. Snyder
(the "Executive").
RECITALS
A. The Company and the Executive are parties to an Employment Agreement,
dated as of January 1, 1997 (the "Employment Agreement); and
B. The Company desires to continue to employ the Executive pursuant to the
Employment Agreement and the Executive is willing to accept such employment on
the terms and conditions set forth in the Employment Agreement, in each case as
amended hereby.
THE PARTIES AGREE as follows:
1. The Employment Agreement is hereby amended by inserting the following
Section 3.2.1.:
"3.2.1. Forgiveness of Additional Indebtedness. The Company agrees to
forgive the outstanding indebtedness of Executive to the Company in the
principal amount of $93,161, evidenced by a Promissory Note dated April 16,
1997, together with interest accrued and accruing thereon (collectively, the
"Aggregate Additional Indebtedness"), subject to the following terms. On the
first anniversary of the date of the Employment Agreement, 25% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven; on the second
anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven; on the third
anniversary of the date of the Employment Agreement, 50% of the Aggregate
Additional Indebtedness then outstanding shall be forgiven;
<PAGE> 2
and any remaining Aggregate Additional Indebtedness shall be forgiven on the
fourth anniversary of the date of the Employment Agreement. All other terms and
conditions set forth in Section 3.2. with respect to the forgiveness of the
Aggregate Indebtedness shall also apply to the forgiveness of the Additional
Aggregate Indebtedness provided for in this Section 3.2.1, including without
limitation, additional payments on an After-Tax Basis and forgiveness in the
event of termination of employment or a Change in Control."
2. Except as amended hereby, the Employment Agreement shall continue in
full force and effect in accordance with its terms.
3. This First Amendment may be executed in one or more separate
counterparts, all of which taken together shall constitute one and the same
First Amendment Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the day and year first above written.
THE DII GROUP, INC.
By:
-------------------------------------
Title:
----------------------------------
----------------------------------------
Ronald R. Snyder
-2-
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
Agreement, made as of the 1st day of January 1997, by and
between The DII Group, Inc., a Delaware corporation (the "Company"), and Carl
A. Plichta (the "Executive").
RECITALS
A. The Company desires to continue to employ Executive as Senior
Vice President and Senior Vice President of Materials and Information Systems,
DOVatron International, Inc.; and
B. Executive is willing to accept such employment on the terms
and conditions set forth in this Agreement.
THE PARTIES AGREE as follows:
1. Position and Term of Employment. Executive's
employment hereunder shall commence as of January 1, 1997 and shall end
December 31, 2000, unless terminated sooner pursuant to Section 7 of this
Agreement or extended by the mutual agreement of the parties. During the term
hereof, Executive shall be employed as Senior Vice President (and Senior Vice
President of Materials and Information Systems, DOVatron International, Inc.)
of the Company and shall devote his full business time, skill, attention and
best efforts in carrying out his duties and promoting the best interests of the
Company. Executive shall also serve as a director and/or officer of one or
more of the Company's subsidiaries as may be requested from time to time by the
Board of Directors. Subject always to the instructions and control of the
Board of Directors of the Company, Executive shall report to the Chief
Executive Officer of the
<PAGE> 2
Company and shall be responsible for the duties of Senior Vice President and
Senior Vice President of Materials and Information Systems, DOVatron
International, Inc.
Executive shall not at any time while employed by the Company
or any of its affiliates or for a period of one (1) year following the later of
(i) termination of employment for any reason or (ii) the date on which the last
payment is required to be made under Section 2.1(a)(ii) hereof, without the
prior consent of the Board of Directors, knowingly acquire any financial
interests, directly or indirectly, in or perform any services for or on behalf
of any business, person or enterprise which undertakes any business in
competition with the business of the Company and its affiliates or sells to or
buys from or otherwise transacts business with the Company and its affiliates;
provided that Executive may acquire and own not more than five percent (5%) of
the outstanding capital stock of any public corporation or mutual fund.
Executive shall not at any time while employed by the Company or any of its
affiliates or for a period of two (2) years following termination of employment
for any reason, directly or indirectly, solicit for employment, employ or enter
into any business or contractual relationship with any employee of the Company
or any of its affiliates.
2.1 Base Salary. (a) (i) Executive shall be paid an
initial salary at the monthly rate of Thirteen Thousand Five Hundred
Eighty-Four Dollars ($13,584), which shall be paid in accordance with the
Company's normal payroll practice with respect to salaried employees, subject
to applicable payroll taxes and deductions (the "Base Salary"). Executive's
Base Salary shall be subject to review and possible change in accordance with
the usual practices and policies of the Company. However, Executive's base
annual salary shall not be reduced unless such reduction is part of a
Company-wide reduction in pay scale and such reduction is proportionate to
reductions imposed on the Company's and its subsidiaries'
-2-
<PAGE> 3
employees; however, in no event may Executive's then current Base Salary be
reduced by more than 10%.
(ii) If for any reason other than Executive's voluntary resignation
or termination pursuant to Sections 7(a), (b) or (c) hereof, Executive does not
continue to be employed by the Company, Executive shall continue to receive an
amount equal to his then current Base Salary plus an annual performance bonus
equal to the highest annual bonus payment Executive has received in the
previous three years for the then remaining balance of the term of this
Agreement. In no event shall such payment be less than one year's base salary
plus such highest annual bonus. The foregoing amounts shall be paid to
Executive over the remaining term of this Agreement or one year (whichever is
applicable) in accordance with the Company's payroll and bonus payment
policies. Notwithstanding the foregoing, no payments under this subparagraph
(ii) shall be made if the Company makes all payments to Executive required to
be made under the Executive's Senior Executive Severance Agreement (the
"Severance Agreement") in the event of a Change in Control. For purposes of
this Agreement, a Change in Control shall be deemed to have taken place upon
the occurrence of any of the following events:
(A) any corporation, person, other entity or group (other
than the trustee of any qualified retirement plan maintained by the Company)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of securities representing
twenty percent (20%) or more of the combined voting power of the Company's then
outstanding securities; or
(B) during any period of twenty-four consecutive months,
individuals who at the beginning of such consecutive twenty-four month period
constitute the Board of
-3-
<PAGE> 4
Directors cease for any reason (other than retirement upon reaching normal
retirement age, disability or death) to constitute at least a majority thereof,
unless the election or the nomination for election by the Company's
stockholders of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of
such twenty-four month period; or
(C) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets; or
(D) there shall occur a transaction or series of
transactions which the Board of Directors shall determine to have the effect of
a Change in Control.
(b) If Executive resigns voluntarily or ceases to be employed by
the Company (or any affiliate) for any reason described in Section 7(a) or (c)
of this Agreement, all benefits described in Sections 2 and 4 hereof shall
terminate (except to the extent previously earned or vested).
(c) If Executive's employment shall have been terminated pursuant
to Section 7(b), the Company shall pay in equal monthly installments for the
then remaining balance of the
-4-
<PAGE> 5
term of this Agreement to Executive (or his beneficiaries or personal
representatives, as the case may be) disability benefits at a rate per annum
equal to one hundred percent (100%) of his then current Base Salary, plus
amounts equal to the highest annual bonus as provided in clause (ii) of Section
2.1(a), less payments and benefits, if any, received under any disability plan
or insurance provided by the Company and less any "sick leave" payments
received from the Company for the applicable period.
2.2 Bonuses. Executive shall be eligible for an annual
performance bonus for calendar years beginning after December 31, 1996, in
accordance with the Company's Senior Executive Performance Bonus Plan. The
Company shall administer such bonus plan on a basis consistent with the past.
2.3 Expenses. During the term hereof, the Company shall
pay or reimburse Executive in accordance with the Company's normal practices
any travel, hotel and other expenses or disbursements reasonably incurred or
paid by Executive in connection with the services performed by Executive
hereunder, in each case upon presentation by Executive of itemized accounts of
such expenditures or such other supporting information as the Company may
require.
3.1 Stock Options; Performance Shares. Executive shall
be eligible for grants of stock options and performance share awards under the
Company's 1994 Stock Incentive Plan (the "Plan"), as may hereafter be
determined by the Compensation Committee of the Board of Directors of the
Company under the Plan.
3.2 Forgiveness of Indebtedness. The Company agrees to
forgive the outstanding indebtedness of Executive to the Company in the
principal amount of $139,392, together with interest accrued and accruing
thereon (collectively, the "Aggregate Indebtedness"),
-5-
<PAGE> 6
subject to the following terms. On the first anniversary of the date hereof,
25% of the Aggregate Indebtedness then outstanding shall be forgiven; on the
second anniversary of the date hereof, 33-1/3% of the Aggregate Indebtedness
then outstanding shall be forgiven; on the third anniversary of the date
hereof, 50% of the Aggregate Indebtedness then outstanding shall be forgiven;
and any remaining Aggregate Indebtedness shall be forgiven on the fourth
anniversary of the date hereof. In addition, the Company shall make certain
payments on an After-Tax Basis to Executive on each of the first, second, third
and fourth anniversary dates equal to Executive's actual federal, state and
local tax liability resulting from the forgiveness of the Aggregate
Indebtedness on any such date. Further, in the event that Executive's
employment is terminated as a result of death, disability, or for any reason
other than Executive's voluntary resignation or termination pursuant to Section
7(c), the amount of the Aggregate Indebtedness then outstanding shall be
forgiven in full and the Company shall make additional payments on an After-Tax
Basis to Executive equal to Executive's actual federal, state and local tax
liability resulting from the forgiveness of the Aggregate Indebtedness.
Further, if at any time during the term of employment there is a Change in
Control, the amount of the Aggregate Indebtedness then outstanding shall be
forgiven in full effective immediately upon the Change in Control and the
Company shall immediately make additional payments on an After-Tax Basis to
Executive equal to Executive's actual federal, state and local tax liability
resulting from the forgiveness of the Aggregate Indebtedness. For purposes of
this Section 3.2, After-Tax Basis shall mean with respect to any payment to be
received or deemed to be received by Executive, the amount of such payment (the
"Base Payment") supplemented by a further payment (the "Additional Payment") to
Executive so that the sum of the Base Payment plus the Additional Payment
shall, after deducting all taxes imposed on such Executive as a result of the
receipt or accrual of the Base
-6-
<PAGE> 7
Payment and such Additional Payment, be equal to the Base Payment. If at any
time during the term of employment, Executive voluntarily resigns or is
terminated pursuant to Section 7(c), Executive shall forfeit any benefits not
yet then realized under this Section 3.2. For example, if Executive
voluntarily resigns in December 1998, Executive shall not realize any of the
forgiveness which would have occurred on January 1, 1999.
3.3 Effect of Termination of Employment; Change in
Control. (a) Notwithstanding the provisions of Executive's options, if
Executive shall resign voluntarily or cease to be employed by the Company (or
an affiliate) other than as a result of death or disability, Executive shall be
entitled to exercise such options to the extent such options could otherwise
have been exercised immediately prior to the time of termination at any time up
to and including 90 days after the date of termination, but not beyond the
expiration date of an option. This provision is not intended to limit any
other rights that Executive may have with respect to the vesting or exercise of
options.
(b) If Executive shall die or become disabled,
all options and performance shares which have not vested will accelerate and
vest immediately, and, in the event of Executive's death, all option rights
will transfer to Executive's representative. All then unexercised options will
be cancelled one year after Executive dies or becomes disabled.
(c) If there is a Change in Control, all options
and performance shares which have not vested will accelerate and vest
immediately.
4. Other Benefits. Executive shall be entitled to (i)
participate in medical, dental, hospitalization, disability and life insurance
benefit plans made available by the Company to its senior executives and shall
also be eligible to participate in existing retirement or pension plans offered
by the Company to its senior executives, subject in each case to the terms and
-7-
<PAGE> 8
requirements of each such plan or program, (ii) reimbursement for country club
dues at one country club, (iii) reimbursement for automobile lease payments up
to $700 per month and non-routine maintenance costs, and (iv) an annual
financial and tax-planning allowance up to 1% of base salary.
5. Confidential Information. Except as specifically
permitted by this Section 5, and except as required in the course of his
employment with the Company, while in the employ of the Company or thereafter,
Executive will not communicate or divulge to or use for the benefit of himself
or any other person, firm, association, or corporation without the prior
written consent of the Company, any Confidential Information (as defined
herein) owned, or used by the Company or any of its affiliates that may be
communicated to, acquired by or learned of by Executive in the course of, or as
a result of, Executive's employment with the Company or any of its affiliates.
All Confidential Information relating to the business of the Company or any of
its affiliates which Executive shall use or prepare or come into contact with
shall become and remain the sole property of the Company or its affiliates.
"Confidential Information" means information not generally
known about the Company and its affiliates, services and products, whether
written or not, including information relating to research, development,
purchasing, marketing plans, computer software or programs, any copyrightable
material, trade secrets and proprietary information, including, but not limited
to, customer lists.
Executive may disclose Confidential Information to the extent
it (i) becomes part of the public domain otherwise than as a result of
Executive's breach hereof or (ii) is required to be disclosed by law. If
Executive is required by applicable law or regulation or by legal process
-8-
<PAGE> 9
to disclose any Confidential Information, Executive will provide the Company
with prompt notice thereof so as to enable the Company to seek an appropriate
protective order.
Upon request by the Company, Executive agrees to deliver to
the Company at the termination of Executive's employment, or at such other
times as the Company may request, all memoranda, notes, plans, records, reports
and other documents (and all copies thereof) containing Confidential
Information that Executive may then possess or have under his control.
6. Assignment of Patents and Copyrights. Executive
shall assign to the Company all inventions and improvements within the existing
or contemplated scope of the Company's business made by Executive while in the
Company's employ, together with any such patents or copyrights as may be
obtained thereon, both domestic and foreign. Upon request by the Company and
at the Company's expense, Executive will at any time during his employment with
the Company and after termination regardless of the reason therefor, execute
all proper papers for use in applying for, obtaining and maintaining such
domestic and foreign patents and/or copyrights as the Company may desire, and
will execute and deliver all proper assignments therefor.
7. Termination.
(a) This Agreement shall terminate upon
Executive's death.
(b) The Company may terminate Executive's
employment hereunder upon fifteen (15) days' written notice if in the opinion
of the Board of Directors, Executive's physical or mental disability has
continued or is expected to continue for one hundred and eighty (180)
consecutive days and as a result thereof, Executive will be unable to continue
the proper performance of his duties hereunder. For the purpose of determining
disability, Executive agrees to submit to such reasonable physical and mental
examinations, if any, as the Board of Directors
-9-
<PAGE> 10
may request and hereby authorizes the examining person to disclose his findings
to the Board of Directors of the Company.
(c) The Company may terminate Executive's
employment hereunder "for cause" (as hereinafter defined). If Executive's
employment is terminated for cause, Executive's salary and all other rights not
then vested under this Agreement shall terminate upon written notice of
termination being given to Executive. As used herein, the term "for cause"
means the occurrence of any of the following:
(i) Executive having willfully and
continually failed to perform substantially his duties with
the Company (other than such failure resulting from incapacity
due to physical or mental illness, death or disability) after
a written demand for substantial performance has been
delivered to the Executive by the Board or the President of
the Company which specifically identifies the manner in which
the Executive is not substantially performing his duties; or
(ii) Executive having willfully engaged in conduct which is
materially demonstrably injurious to the Company. For
purposes of this section, no act, or failure to act, on the
part of the Executive shall be considered "willful" unless
done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that such action or omission was in,
or not opposed to, the best interests of the Company. Any act
or failure to act based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice
of counsel to the Company shall be conclusively presumed to be
done or omitted to be done by the Executive in good faith and
in the best interests of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause unless and until there shall have been
delivered to the Executive a copy of a written resolution duly
adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at
a meeting called and held for that purpose after reasonable
notice to and opportunity for the Executive and the
executive's counsel to be heard by the Board, finding that in
the good faith opinion of the Board the Executive was guilty
of the conduct set forth above in (i) or (ii) and specifying
the particulars thereof in detail.
8. Additional Remedies. Executive recognizes that
irreparable injury will result to the Company and to its business and
properties in the event of any breach by Executive of the non-compete or
non-solicitation provisions of Section 1, the confidentiality provisions of
-10-
<PAGE> 11
Section 5 or the assignment provisions of Section 6 and that Executive's
continued employment is predicated on the covenants made by him pursuant to
such Sections. In the event of any breach by Executive of his obligations
under said provisions, the Company shall be entitled, in addition to any other
remedies and damages available, to injunctive relief to restrain any such
breach by Executive or by any person or persons acting for or with Executive in
any capacity whatsoever and other equitable relief.
9. Successors and Assigns. This Agreement is intended
to bind and inure to the benefit of and be enforceable by Executive and the
Company and their respective legal representatives, successors and assigns.
Neither this Agreement nor any of the duties or obligations hereunder shall be
assignable by Executive.
10. Governing Law; Jurisdiction. This Agreement shall be
interpreted and construed in accordance with the laws of the State of Colorado.
Each of the Company and Executive consents to the jurisdiction of any state or
federal court sitting in Colorado, in any action or proceeding arising out of
or relating to this Agreement.
11. Headings. The paragraph headings used in this
Agreement are for convenience of reference only and shall not constitute a part
of this Agreement for any purpose or in any way affect the interpretation of
this Agreement.
12. Severability. If any provision, paragraph or
subparagraph of this Agreement is adjudged by any court to be void or
unenforceable in whole or in part, this adjudication shall not affect the
validity of the remainder of this Agreement. In addition, to the extent
possible, a like valid term which meets the objective of the void or
unenforceable term shall be substituted for any such void or unenforceable
term.
-11-
<PAGE> 12
13. Complete Agreement. This document embodies the
complete agreement and understanding among the parties, written or oral, which
may have related to the subject matter hereof in any way and shall not be
amended orally, but only by the mutual agreement of the parties hereto in
writing, specifically referencing this Agreement.
14. Counterparts. This Agreement may be executed in
one or more separate counterparts, all of which taken together shall constitute
one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
THE DII GROUP, INC.
By:
------------------------------------
Title:
---------------------------------
------------------------------------
CARL A. PLICHTA
-12-
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
Agreement, made as of the 12th day of August 1997, by and
between The DII Group, Inc., a Delaware corporation (the "Company"), and Carl
A. Plichta (the "Executive").
RECITALS
A. The Company and the Executive are parties to an Employment
Agreement, dated as of January 1, 1997 (the "Employment Agreement); and
B. The Company desires to continue to employ the Executive
pursuant to the Employment Agreement and the Executive is willing to accept
such employment on the terms and conditions set forth in the Employment
Agreement, in each case as amended hereby.
THE PARTIES AGREE as follows:
1. The Employment Agreement is hereby amended by inserting the
following Section 3.2.1.:
"3.2.1. Forgiveness of Additional Indebtedness. The
Company agrees to forgive the outstanding indebtedness of Executive to the
Company in the principal amount of $130,142, evidenced by a Promissory Note
dated April 16, 1997, together with interest accrued and accruing thereon
(collectively, the "Aggregate Additional Indebtedness"), subject to the
following terms. On the first anniversary of the date of the Employment
Agreement, 25% of the Aggregate Additional Indebtedness then outstanding shall
be forgiven; on the second anniversary of the date of the Employment Agreement,
33-1/3% of the Aggregate Additional Indebtedness then outstanding shall be
forgiven; on the third anniversary of the date of the Employment Agreement, 50%
of the Aggregate Additional Indebtedness then outstanding shall be forgiven;
<PAGE> 2
and any remaining Aggregate Additional Indebtedness shall be forgiven on the
fourth anniversary of the date of the Employment Agreement. All other terms
and conditions set forth in Section 3.2. with respect to the forgiveness of the
Aggregate Indebtedness shall also apply to the forgiveness of the Additional
Aggregate Indebtedness provided for in this Section 3.2.1, including without
limitation, additional payments on an After-Tax Basis and forgiveness in the
event of termination of employment or a Change in Control."
2. Except as amended hereby, the Employment Agreement shall
continue in full force and effect in accordance with its terms.
3. This First Amendment may be executed in one or more separate
counterparts, all of which taken together shall constitute one and the same
First Amendment Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the day and year first above written.
THE DII GROUP, INC.
By:
---------------------------------------
Title:
------------------------------------
---------------------------------------
Carl A. Plichta
-2-
<PAGE> 1
EXHIBIT 11.1
THE DII GROUP, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
--------------------- ------------------------
SEPT. 28, SEPT. 29, SEPT. 28, SEPT. 29,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Earnings Available for Primary Earnings Per Share:
Net income $ 9,955 1,491 22,572 13,163
======= ======= ======= =======
Shares Used in Computation:
Weighted average common shares outstanding 25,058 23,738 24,533 23,612
Common share equivalents outstanding:
Stock options 1,234 1,142 1,250 1,358
Deferred stock compensation 240 112 216 112
------- ------- ------- -------
26,532 24,992 25,999 25,082
======= ======= ======= =======
Primary Earnings Per Share $ 0.38 0.06 0.87 0.52
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE:
Earnings Available for Fully Diluted Earnings
Per Share:
Net income $ 9,955 1,491 22,572 13,163
Interest expense (net of tax) on 6% convertible
subordinated notes 776 -- (1) 2,328 -- (1)
Amortization (net of tax) of debt issuance cost on
convertible subordinated notes 65 -- (1) 195 -- (1)
------- ------- ------- -------
Earnings available for fully diluted earnings per share $10,796 1,491 25,095 13,163
======= ======= ======= =======
Shares Used in Computation:
Weighted average common shares outstanding 25,058 23,738 24,533 23,612
Additional potentially dilutive securities
(equivalent in common stock):
Stock options 1,299 1,142 1,635 1,358
Deferred stock compensation 246 112 246 112
Convertible subordinated notes 4,600 -- (1) 4,600 -- (1)
------- ------- ------- -------
31,203 24,992 31,014 25,082
======= ======= ======= =======
Fully Diluted Earnings Per Share $ 0.35 0.06 0.81 0.52
======= ======= ======= =======
</TABLE>
(1) The 6% convertible subordinated notes were antidilutive for the three
and nine months ended September 29, 1996, and therefore not assumed to
be converted for fully diluted earnings per share computations.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 94,441
<SECURITIES> 0
<RECEIVABLES> 128,785
<ALLOWANCES> 2,983
<INVENTORY> 78,399
<CURRENT-ASSETS> 307,689
<PP&E> 255,935
<DEPRECIATION> 57,917
<TOTAL-ASSETS> 589,268
<CURRENT-LIABILITIES> 150,164
<BONDS> 0
0
0
<COMMON> 252
<OTHER-SE> 190,704
<TOTAL-LIABILITY-AND-EQUITY> 589,268
<SALES> 534,041
<TOTAL-REVENUES> 534,041
<CGS> 441,880
<TOTAL-COSTS> 441,880
<OTHER-EXPENSES> 53,203
<LOSS-PROVISION> 1,248
<INTEREST-EXPENSE> 5,924
<INCOME-PRETAX> 31,786
<INCOME-TAX> 9,214
<INCOME-CONTINUING> 22,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,572
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.81
</TABLE>
