e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HNAlHXDl+7Z9tt53iEkyR5eDQHUbRyz8+OYXXs3hMjyILfEWiSpBZebdlSR3UOTe Bf56845lRW/imMz3spy9pQ== 0000891618-04-000568.txt : 20040212 0000891618-04-000568.hdr.sgml : 20040212 20040212153156 ACCESSION NUMBER: 0000891618-04-000568 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20040102 FILED AS OF DATE: 20040212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS & POWER INDUSTRIES HOLDING CORP CENTRAL INDEX KEY: 0001000654 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 770407395 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-96858-01 FILM NUMBER: 04591290 BUSINESS ADDRESS: STREET 1: 607 HANSEN WY CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154934000 MAIL ADDRESS: STREET 1: 607 HANSEN WAY M/S A2000 STREET 2: P O BOX 51110 CITY: PALO ALTO STATE: CA ZIP: 94303-1110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS & POWER INDUSTRIES INC CENTRAL INDEX KEY: 0001000564 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 770407398 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-96858 FILM NUMBER: 04591291 BUSINESS ADDRESS: STREET 1: 607 HANSEN WAY CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154934000 MAIL ADDRESS: STREET 1: 811 HANSEN WAY STREET 2: P O BOX 51110 CITY: PALO ALTO STATE: CA ZIP: 94303-1110 10-Q 1 f96399e10vq.htm FORM 10-Q e10vq

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 January 2, 2004


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from ________ to ________


Commission file number: 33-96858-01		Commission file number: 33-96858
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION		COMMUNICATIONS & POWER INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)		(Exact Name of Registrant as Specified in Its Charter)
Delaware		Delaware
(State or Other Jurisdiction of Incorporation or Organization)		(State or Other Jurisdiction of Incorporation or Organization)
77-0407395		77-0405693
(I.R.S. Employer Identification No.)		(I.R.S. Employer Identification No.)
811 Hansen Way		811 Hansen Way
Palo Alto, California 94303-1110		Palo Alto, California 94303-1110
(650) 846-2900		(650) 846-2900
(Address of Principal Executive Offices and Telephone Number, Including Area Code)		(Address of Principal Executive Offices and Telephone Number, Including Area Code)

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding for each of the Registrant’s classes of Common Stock, as of the latest practicable date: Communications & Power Industries Holding Corporation: 100 shares of Common Stock, $.01 par value, at February 6, 2004. Communications & Power Industries, Inc.: 1 share of Common Stock, $.01 par value, at February 6, 2004.

TABLE OF CONTENTS


PART I: FINANCIAL STATEMENTS
	ITEM 1: CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
			CONSOLIDATED CONDENSED BALANCE SHEETS
			CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
			CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
		COMMUNICATIONS & POWER INDUSTRIES, INC.
			CONSOLIDATED CONDENSED BALANCE SHEETS
			CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
			CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
			NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
	ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4: CONTROLS AND PROCEDURES
PART II: OTHER INFORMATION
SIGNATURES
Exhibit Index
EXHIBIT 3.1
EXHIBIT 4.1
EXHIBIT 4.2
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 31
EXHIBIT 32
EXHIBIT 99

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries


PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
	COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
		Consolidated Condensed Balance Sheets, January 2, 2004 and October 3, 2003	2
		Consolidated Condensed Statements of Operations for the 13-week period ended January 2, 2004 and the 14-week period ended January 3, 2003	3
		Consolidated Condensed Statements of Cash Flows for the 13-week period ended January 2, 2004 and the 14-week period ended January 3, 2003	4
		Notes to Consolidated Condensed Financial Statements	8
	COMMUNICATIONS & POWER INDUSTRIES, INC.
		Consolidated Condensed Balance Sheets, January 2, 2004 and October 3, 2003	5
		Consolidated Condensed Statements of Operations for the 13-week period ended January 2, 2004 and the 14-week period ended January 3, 2003	6
		Consolidated Condensed Statements of Cash Flows for the 13-week period ended January 2, 2004 and the 14-week period ended January 3, 2003	7
		Notes to Consolidated Condensed Financial Statements	8
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			15
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			25
ITEM 4: CONTROLS AND PROCEDURES			25
PART II: OTHER INFORMATION			26
SIGNATURES			28

- 1 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)


		January 2,			October 3,
		2004			2003

ASSETS
Current Assets
	Cash and cash equivalents	$	38,067			33,751
	Accounts receivable, net		35,255			33,128
	Inventories		36,380			37,358
	Other current assets		2,191			2,210

Total current assets			111,893			106,447
Property, plant, and equipment, net			51,834			52,947
Goodwill			19,149			19,149
Intangibles, net			1,045			1,140
Debt issue costs, net			1,940			2,285

Total assets		$	185,861			181,968

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current Liabilities
	Senior subordinated notes	$	26,000			—
	Mortgage financing		17,500			17,500
	Accounts payable		12,876			15,624
	Accrued expenses		21,126			21,445
	Product warranty		6,130			5,401
	Income taxes payable		6,132			3,584
	Accrued dividends payable		17,058			15,449
	Advance payments from customers		8,961			10,203

Total current liabilities			115,783			89,206
Senior subordinated notes			74,000			100,000

Total liabilities			189,783			189,206

Senior Redeemable Preferred Stock of CPI			28,960			28,907

Junior Preferred Stock of CPI			30,349			29,300

Commitments and contingencies
Stockholders’ Deficit
	Common stock		50			50
	Additional paid-in capital		21,519			21,519
	Deferred compensation		(1,195	)		(1,289	)
	Accumulated deficit		(82,341	)		(84,469	)
	Stockholder loans		(1,264	)		(1,256	)

Net stockholders’ deficit			(63,231	)		(65,445	)

Total liabilities, preferred stock and stockholders’ deficit		$	185,861			181,968

See accompanying notes to the unaudited consolidated condensed financial statements.

- 2 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)


		13-Week			14-Week
		period ended			period ended
		January 2,			January 3,
		2004			2003

Sales		$	68,313			61,626
Cost of sales			47,141			44,936

Gross profit			21,172			16,690

Operating costs and expenses:
	Research and development		1,733			1,445
	Selling and marketing		3,624			3,924
	General and administrative		4,130			3,878

Total operating costs and expenses			9,487			9,247

Operating income			11,685			7,443
Other income			—			267
Interest expense			(3,559	)		(3,670	)

Income before taxes			8,126			4,040
Income tax expense			3,287			1,504

Net income			4,839			2,536
Preferred dividends:
	Senior redeemable preferred stock		1,609			1,402
	Junior preferred stock		1,048			914

Net income attributable to common stock		$	2,182			220

See accompanying notes to the unaudited consolidated condensed financial statements.

- 3 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)


		13-Week			14-Week
		period ended			period ended
		January 2,			January 3,
		2004			2003

OPERATING ACTIVITIES
	Net cash provided by operating activities	$	6,194			13,328

INVESTING ACTIVITIES
	Purchase of property, plant and equipment, net		(239	)		(263	)

FINANCING ACTIVITIES
	Repayments on capital leases		—			(27	)
	Payment of debt issue costs		—			(254	)
	Net repayment from bank overdraft		(1,639	)		(2,333	)
	Repayment of mortgage financing		—			(250	)

	Net cash used in financing activities		(1,639	)		(2,864	)

NET INCREASE IN CASH AND CASH EQUIVALENTS			4,316			10,201
Cash and cash equivalents at beginning of period			33,751			2,724

Cash and cash equivalents at end of period		$	38,067			12,925

See accompanying notes to the unaudited consolidated condensed financial statements.

- 4 -

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)


		January 2,			October 3,
		2004			2003

ASSETS
Current Assets
	Cash and cash equivalents	$	38,067			33,751
	Accounts receivable, net		35,255			33,128
	Inventories		36,380			37,358
	Other current assets		2,191			2,210

Total current assets			111,893			106,447
Property, plant, and equipment, net			39,144			40,132
Goodwill			19,149			19,149
Intangibles, net			1,045			1,140
Debt issue costs, net			1,935			2,263
Note receivable from parent			5,750			5,750

Total assets		$	178,916			174,881

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current Liabilities
	Senior subordinated notes	$	26,000			—
	Accounts payable		12,876			15,624
	Accrued expenses		22,612			22,783
	Product warranty		6,130			5,401
	Income taxes payable		6,429			3,838
	Accrued dividends payable		17,058			15,449
	Advance payments from customers		8,961			10,203

Total current liabilities			100,066			73,298
Senior subordinated notes			74,000			100,000
Deferred income on sale-leaseback			6,781			6,887

Total liabilities			180,847			180,185

Senior Redeemable Preferred Stock			28,960			28,907

Commitments and contingencies
Stockholders’ Deficit:
	Junior preferred stock		2			2
	Common stock		—			—
	Additional paid-in capital		51,807			50,758
	Deferred compensation		(1,195	)		(1,289	)
	Accumulated deficit		(80,241	)		(82,426	)
	Stockholder loans		(1,264	)		(1,256	)

Net stockholders’ deficit			(30,891	)		(34,211	)

Total liabilities, senior redeemable preferred stock and stockholders’ deficit		$	178,916			174,881

See accompanying notes to the unaudited consolidated condensed financial statements.

- 5 -

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)


		13-Week			14-Week
		period ended			period ended
		January 2,			January 3,
		2004			2003

Sales		$	68,313			61,626
Cost of sales			47,141			44,936

Gross profit			21,172			16,690

Operating costs and expenses:
	Research and development		1,733			1,445
	Selling and marketing		3,624			3,924
	General and administrative		4,511			4,222

Total operating costs and expenses			9,868			9,591

Operating income			11,304			7,099
Other income			—			267
Interest expense			(3,078	)		(3,124	)

Income before taxes			8,226			4,242
Income tax expense			3,330			1,581

Net income			4,896			2,661
Preferred dividends:
	Senior redeemable preferred stock		1,609			1,402
	Junior preferred stock		1,048			914

Net income attributable to common stock		$	2,239			345

See accompanying notes to the unaudited consolidated condensed financial statements.

- 6 -

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)


		13-Week			14-Week
		period ended			period ended
		January 2,			January 3,
		2004			2003

OPERATING ACTIVITIES
	Net cash provided by operating activities	$	6,194			13,078

INVESTING ACTIVITIES
	Purchase of property, plant and equipment, net		(239	)		(263	)

FINANCING ACTIVITIES
	Repayments on capital leases		—			(27	)
	Payment of debt issue costs		—			(254	)
	Net repayment of bank overdraft		(1,639	)		(2,333	)

	Net cash used in financing activities		(1,639	)		(2,614	)

NET INCREASE IN CASH AND CASH EQUIVALENTS			4,316			10,201
Cash and cash equivalents at beginning of period			33,751			2,724

Cash and cash equivalents at end of period		$	38,067			12,925

See accompanying notes to the unaudited consolidated condensed financial statements.

- 7 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Communications & Power Industries Holding Corporation (“Holding”) and Communications & Power Industries, Inc. (“CPI”, both companies together referred to as the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted and, accordingly, these financial statements should be read in conjunction with the financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended October 3, 2003. Management believes that these unaudited interim condensed financial statements contain all adjustments, all of which are of a normal recurring nature, necessary to present fairly the financial position of the Company, and its results of operations and cash flows for the interim period presented. The results for the interim periods reported are not necessarily indicative of the results for the complete fiscal year 2004.

As allowed by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” the Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under this method, compensation expense is recorded only if the current market price of the underlying stock exceeded the exercise price at the measurement date. During fiscal year 2003, the Company issued stock options to employees which were subsequently determined to have been issued below the fair value of the stock on the date of grant. The compensation cost associated with the 2003 stock options is amortized as a charge against income under the caption “General and administrative” in the Consolidated Statement of Operations on a straight-line basis over the four year vesting period of the options. If compensation cost for the Company’s stock-based compensation plan had been determined consistent with SFAS No. 123, the Company’s net income would have changed to the pro forma amounts indicated below:

- 8 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)


		Holding					CPI

		13-Week			14-Week		13-Week			14-Week
		Period Ended			Period Ended		Period Ended			Period Ended
		January 2,			January 3,		January 2,			January 3,
(In thousands)		2004			2003		2004			2003

Net income as reported		$	4,839			2,536	$	4,896			2,661
Add:
	Stock-based compensation included in net income determined under intrinsic value method, net of tax		94			0		94			0
Deduct:
	Stock-based compensation determined under fair value based method, net of tax		(203	)		32		(203	)		32

Pro forma net income		$	4,730		$	2,568	$	4,787		$	2,693

2. Inventories

Inventories are stated at the lower of average cost or market (net realizable value). The main components of inventories are as follows:


		January 2,		October 3,
(In thousands)		2004		2003

Raw materials and parts		$	25,186		26,330
Work in process			8,894		8,786
Finished goods			2,300		2,242

	Inventories	$	36,380		37,358

3. Accrued Warranty

The Company’s products are generally warranted for a variety of periods, typically one to three years or a predetermined product usage life. The Company assesses the adequacy of its preexisting warranty liabilities and adjusts the balance based on actual experience and changes in future expectations. The following table reconciles the changes in the Company’s accrued warranty:


		13-Week			14-Week
		Period Ended			Period Ended
		January 2,			January 3,
(In thousands)		2004			2003

Beginning accrued warranty		$	5,401			4,823
	Cost of warranty claims		(972	)		(1,300	)
	Accruals for product warranty		1,701			1,558

Ending accrued warranty		$	6,130			5,081

- 9 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

4. Supplemental Cash Flow Information


	Holding				CPI

	13-week		14-Week		13-week		14-Week
	Period		Period		Period		Period
	Ended		Ended		Ended		Ended
	January 2,		January 3,		January 2,		January 3,
(In thousands)	2004		2003		2004		2003

Cash Payments
Interest payments	$	302	$	546	$	58	$	86
Tax payments	$	739	$	64	$	739	$	64
Non-cash Financing
Unpaid cash dividends on senior preferred stock	$	1,609	$	1,402	$	1,609	$	1,409

5. Segments and Related Information

The Company has two reportable segments: vacuum electronic devices (“VEDs”) and satcom equipment. Management evaluates performance and allocates resources based on earnings before provision for income taxes, interest expense, depreciation and amortization (“EBITDA”).

Summarized financial information concerning the Company’s reportable segments is shown in the following table. Intersegment product transfers are recorded at cost.


			Satcom
(In thousands)	VEDs		Equipment		Other			Total

For the 13-week Period Ended
January 2, 2004:
Revenues from external customers	$	58,147		9,719		447			68,313
Intersegment product transfers		3,293		—		—			3,293
EBITDA – Holding		14,393		228		(1,512	)		13,109
EBITDA – CPI		14,393		228		(2,018	)		12,603
For the 14-Week Period Ended
January 3, 2003:
Revenues from external customers	$	50,956		10,586		84			61,626
Intersegment product transfers		2,207		—		—			2,207
EBITDA – Holding		9,608		1,298		(1,479	)		9,427
EBITDA – CPI		9,608		1,298		(1,983	)		8,923

EBITDA represents earnings before provision for income taxes, interest expense, depreciation and amortization. Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. A reconciliation of EBITDA from

- 10 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

reportable segments to Income before taxes is as follows:


	Holding				CPI

	13-week		14-Week		13-week		14-Week
	Period Ended		Period Ended		Period Ended		Period Ended
	January 2,		January 3,		January 2,		January 3,
(In thousands)	2004		2003		2004		2003

Segment EBITDA	$	13,109	$	9,427	$	12,603	$	8,923
Less:
Depreciation and amortization		1,424		1,717		1,299		1,557
Interest expense		3,559		3,670		3,078		3,124

Income before taxes	$	8,126	$	4,040	$	8,226	$	4,242

Sales by geographic area to unaffiliated customers (based on the location of customer) are as follows:


	13-Week		14-Week
	Period Ended		Period Ended
	January 2,		January 3,
(In thousands)	2004		2003

United States	$	44,760		38,036
All foreign countries		23,553		23,590

Total sales	$	68,313		61,626

CPI had one customer, the US Government, that accounted for 10% or more of consolidated sales. Sales to this customer were $15.0 million, or 22.0%, and $11.5 million, or 18.7%, of the Company’s consolidated sales for the 13-week period ended January 2, 2004 and the 14-week period ended January 3, 2003, respectively. A substantial majority of these sales were VED segment products, but this customer also purchased satcom equipment products.

6. Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (the “FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities”, which addresses consolidation by business enterprises of variable interest entities which have one or both of the following characteristics: (1) The equity investment at risk is not sufficient to permit the entity to finance its activities without support from other parties and (2) the equity investors lack one or more of the defined essential characteristics of a controlling financial interest. This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the participating parties. This Interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. On October 9, 2003, FASB Staff Position FIN 46-6, “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities” was issued. This delayed the effective date of this Interpretation for variable interest entities created before February 1, 2003 until January 3,

- 11 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

2004. The Company has evaluated the impact of the provisions of Interpretation 46 and it believes it will not have a material impact on the Company’s consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 requires that certain financial instruments with characteristics of both liabilities and equity be classified as liabilities in statements of financial position. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003 and must be applied to existing financial instruments at the beginning of the first fiscal period beginning after December 15, 2003 for non-public entities. The Company is currently analyzing this Statement and has not yet determined its impact on the Company’s consolidated financial position or results of operations.

7. Goodwill and Other Intangible Assets

Goodwill

As of January 2, 2004 and October 3, 2003, the Company had $19.1 million of goodwill, $13.4 million of which has been allocated to the VED segment and $5.7 million of which has been allocated to the satcom equipment segment. There were no changes in the carrying amount of goodwill for the quarter ended January 2, 2004.

Intangible Assets

As of January 2, 2004 and October 3, 2003, the Company had $1.9 million of intangible assets at cost, with accumulated amortization of $0.9 million and $0.8 million, respectively. Amortization of intangible assets for the fiscal quarters ended January 2, 2004 and January 3, 2003 was approximately $0.1 million each quarter. Amortization expense for these intangible assets is projected to be approximately $0.4 million per year through fiscal year 2006.

8. Redemption of 12% Senior Subordinated Notes of CPI

On December 4, 2003, CPI instructed the trustee under the indenture (“12% Indenture”) governing the 12% Senior Subordinated Notes due 2005 (“12% Notes”) to send a notice to all of the registered holders of the 12% Notes, notifying them that CPI had elected to redeem $26.0 million in principal amount of the 12% Notes on January 5, 2004, pursuant to and in accordance with the terms of the 12% Indenture.

On January 5, 2004, CPI redeemed $26.0 million in principal amount of the 12% Notes, pursuant to and in accordance with the terms of the 12% Indenture. The redemption occurred at a price equal to 101.5% of the principal amount of such notes plus accrued and unpaid interest to January 5, 2004. In connection with the redemption, CPI and Holding entered into an amendment to CPI’s secured credit facility (“Credit Facility”) that, among other things, permitted CPI to redeem up to an aggregate maximum amount of $30.0 million of the 12% Notes in any fiscal year. At the closing of the merger described in Note 9 below, CPI issued a notice of redemption for the remaining outstanding 12% Notes. The

- 12 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

Company has classified the $26.0 million of 12% Notes redeemed on January 5, 2004 as a current liability in the accompanying consolidated condensed balance sheets as of January 2, 2004.

9. Merger

On January 23, 2004, Holding completed the merger (“Merger”) of CPI Merger Sub Corp. (“Merger Sub”) with and into Holding pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of November 17, 2003, by and among Holding, CPI Acquisition Corp. (“Acquiror”), Merger Sub and Green Equity Investors II, L.P., as the representative of the securityholders of Holding, under which Acquiror, Merger Sub’s parent corporation and a corporation controlled by affiliates of The Cypress Group L.L.C. (collectively, “Cypress”), a New York-based private equity firm, agreed to acquire Holding. In connection with the Merger, Holding and CPI refinanced all of their outstanding indebtedness. As part of the refinancing, CPI effected a covenant defeasance under the 12% Indenture and elected to redeem in full the remaining $74.0 million outstanding aggregate principal amount of the 12% Notes pursuant to the terms of the 12% Indenture. In addition, CPI terminated the Credit Facility and Holding paid off all amounts owing under, and terminated, the loan agreement related to the San Carlos Property. CPI also redeemed all of the outstanding shares of its 14% Junior Cumulative Preferred Stock and elected to redeem all of the outstanding shares of its Series B 14% Senior Redeemable Exchangeable Cumulative Preferred Stock.

In connection with the Merger, CPI entered into a $130.0 million credit agreement (“Credit Agreement”). This Credit Agreement consists of a $40.0 million revolving commitment, with a sub-facility of $15.0 million for letters of credit and $5.0 million for swingline loans (“Revolver”), which expires on January 23, 2010, and a $90.0 million term loan (“Term Loan”), which expires on July 23, 2010. The Term Loan requires 1.0% of the loan amount to be repaid annually in quarterly installments of 0.25% beginning June 30, 2004 and continuing for five years with the remainder due in equal quarterly installments thereafter. The Credit Agreement is guaranteed by Acquiror, Holding and all of CPI’s domestic subsidiaries and collateralized with a security agreement, which includes a security interest in certain property and fixtures.

The Credit Agreement provides for Revolver and Term Loan borrowings that will initially bear interest at a rate equal to LIBOR plus 3.00% per annum (the 3.00% being referred to as the “Applicable LIBOR Margin”), or the Alternate Base Rate (“ABR”) plus 2.0% per annum; the ABR is the greater of (a) the Prime Rate and (b) the Federal Funds Rate plus 0.50%. In addition to customary fronting and administrative fees under the Credit Agreement, CPI will pay Letter of Credit Participation fees equal to the Applicable LIBOR Margin per annum on the average daily amount of letter of credit exposure, and a commitment fee of 0.50% per annum on the average daily unused amount of revolving commitment.

The Credit Agreement contains a number of covenants that, among other things, restrict the ability of Acquiror, Holding, CPI and certain of its subsidiaries to sell assets; engage in mergers and acquisitions; pay dividends and distributions or repurchase their capital stock; incur additional indebtedness or issue equity interests; make investments and loans; create liens or further negative pledges on assets; engage in certain transactions with affiliates; enter into sale and leaseback transactions; change their business or ownership; amend agreements or make prepayments relating to subordinated indebtedness; amend or waive provisions of charter documents, agreements with respect to capital stock or any other document related to the Merger Agreement or related transaction documents in a

- 13 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

manner that is materially adverse to the lenders; and change their fiscal year. These covenants are subject to certain exceptions.

In addition, the Credit Agreement requires CPI and its subsidiaries to maintain the following financial covenants: a minimum interest coverage ratio; a maximum total leverage ratio; a minimum fixed charge coverage ratio; and a maximum capital expenditures limitation.

In connection with the Merger, CPI issued an aggregate principal amount of $125.0 million of 8% Senior Subordinated Notes due 2012 (“8% Notes”). CPI is required to pay interest on the 8% Notes semiannually, beginning on August 1, 2004. The indenture governing the terms of the 8% Notes (the “8% Indenture”), contains restrictive provisions which, among other things, limit CPI and certain of its subsidiaries from incurring certain indebtedness, selling assets or consolidating or merging with or into other companies, paying dividends or repurchasing or redeeming capital stock, making certain investments and entering into certain types of transactions with their affiliates. The payment of principal, premium and interest on, and other obligations evidenced by the 8% Notes is subordinated in right of payment, as set forth in the 8% Indenture, to the prior payment in full of all senior debt (as defined in the 8% Indenture), including indebtedness under the Credit Agreement, whether outstanding on the date of the 8% Indenture or thereafter incurred. CPI’s payment obligations under the 8% Notes are jointly and severally guaranteed by Acquiror, Holding and all of CPI’s domestic subsidiaries. The 8% Notes may be redeemed as described in, and subject to the terms and conditions set forth in, the 8% Indenture. In addition, the 8% Indenture requires the Company to make an offer to purchase the 8% Notes in certain circumstances.

- 14 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion reflects the condensed consolidated results of Communications & Power Industries Holding Corporation (“Holding”), which are materially consistent with those of Communications & Power Industries, Inc. (“CPI”, both companies together referred to as the “Company”), except as identified below and should be read in conjunction with the condensed consolidated financial statements and notes thereto:

The Company is a leading designer, manufacturer and global marketer of vacuum electron devices (“VEDs”), satellite communications amplifiers, medical x-ray generators and other related products for critical defense and commercial applications. The Company’s defense applications include radar, electronic warfare and communications end markets and our commercial applications include communications, medical, industrial and scientific end markets. Communications applications consist of applications for military and commercial satellite communications uses and broadcast uses. The Company defines and discusses its recorded orders and sales trends by these end markets in order to more clearly relate its business to outside investors. Internally, however, the Company is organized into five operating divisions that are differentiated based on products operating in two segments. Four of these operating divisions comprise the Company’s vacuum electronic device (“VED”) segment. The Company also has a satellite communications equipment segment. Segment data is included in Note 5 of the Notes to Consolidated Condensed Financial Statements.

The Company’s fiscal years are the 52- or 53-week periods which end on the Friday nearest September 30. Fiscal year 2004 will be comprised of the 52-week period ending October 1, 2004, and fiscal year 2003 was comprised of the 53-week period ended October 3, 2003. The first quarter of fiscal year 2004 was comprised of 13 weeks, whereas the first quarter of fiscal year 2003 was comprised of 14 weeks.

On December 4, 2003, CPI elected to redeem $26.0 million in aggregate principal amount of its 12% Senior Subordinated Notes due 2005 (“12% Notes”) and on January 5, 2004, CPI redeemed such 12% Notes.

On January 23, 2004, Holding completed the merger (“Merger”) of CPI Merger Sub Corp. (“Merger Sub”) with and into Holding pursuant to the terms of the Agreement and Plan of Merger (the“Merger Agreement”), dated as of November 17, 2003, by and among Holding, CPI Acquisition Corp. (“Acquiror”), Merger Sub and Green Equity Investors II, L.P., as the representative of the securityholders of Holding, under which Acquiror, Merger Sub’s parent corporation and a corporation controlled by affiliates of The Cypress Group L.L.C. (collectively, “Cypress”), a New York-based private equity firm, agreed to acquire Holding. In connection with the Merger, Holding and CPI refinanced all of their outstanding indebtedness. As part of the refinancing, CPI effected a covenant defeasance under the indenture (“12% Indenture”) governing the 12% Notes and elected to redeem in full the remaining $74.0 million outstanding aggregate principal amount of the 12% Notes pursuant to the terms of the 12% Indenture. In addition, CPI terminated its existing secured credit facility and Holding paid off all amounts owing under, and terminated, the loan agreement related to the San Carlos Property. CPI also redeemed all of the outstanding shares of its 14% Junior Cumulative Preferred Stock

- 15 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

and elected to redeem all of the outstanding shares of its Series B 14% Senior Redeemable Exchangeable Cumulative Preferred Stock. See Note 9 of the Notes to Consolidated Condensed Financial Statements.

Orders recorded during the first quarter of fiscal year 2004 were $73.4 million, as compared to $75.3 million for the first quarter of fiscal year 2003. The $1.9 million or 2.5% decrease is not considered significant as order levels fluctuate from quarter to quarter based on the timing of when actual order receipts are received. The various increases and decreases within the markets discussed below are primarily related to timing rather than to any material changes in the Company’s markets. Electronic warfare orders for the first quarter of fiscal year 2004 were $7.9 million, a decrease of $3.6 million from the first quarter of fiscal year 2003. The decrease is due primarily to timing of order releases from quarter to quarter by original equipment manufacturers and government logistics agencies, and annual orders in this market are expected to be consistent with fiscal year 2003 levels. Medical orders decreased by $1.0 million to $6.2 million in the first quarter of fiscal year 2004, as compared to the first quarter of fiscal year 2003, due principally to the timing of orders from established customers. Communications orders decreased $3.6 million to $19.4 million, as compared to the first quarter of fiscal year 2003, due primarily to a large order from a direct-to-home service supplier that did not reoccur in the first quarter of fiscal year 2004. However, the Company received another large order from a direct-to-home service supplier in January 2004. Industrial orders increased $3.4 million to $5.2 million in the first quarter of fiscal year 2004 from $1.8 million in the comparable period of fiscal year 2003, due primarily to increased orders from the Company’s stocking distributor. Orders from this distributor were weak throughout fiscal year 2003 but are expected to return to normal levels in fiscal year 2004. Radar and scientific orders for the first quarter of fiscal year 2004 increased by $1.4 million and $1.6 million, respectively, as compared to the first quarter of 2003, due principally to fluctuations in the timing of order receipts. Incoming order levels fluctuate significantly on a quarterly basis and a particular quarter’s order rate may not be indicative of future order levels. In addition, the Company’s sales are highly dependent upon manufacturing scheduling, performance and shipments and, accordingly, it is not possible to accurately predict when these orders will be recognized as sales.

Order backlog consists of firm orders for which goods and services are yet to be provided. As of January 2, 2004, the Company had an order backlog of $178.1 million, representing approximately eight months of sales, compared to an order backlog of $159.0 million, representing approximately seven months of sales, as of January 3, 2003. Order backlog increased during the first quarter of fiscal year 2004 by $6.0 million from $172.1 million at the end of fiscal year 2003. Although orders can be and sometimes are modified or terminated, the amount of modifications and terminations has historically not been material compared to total contract volume.

- 16 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

Critical Accounting Policies

Management is required to make judgments, assumptions and estimates in preparing its financial statements and related disclosures in conformity with accounting principles generally accepted in the United States. The Company’s significant accounting policies are described in Note 2 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended October 3, 2003. The following critical accounting policies are those policies that management believes affect its more significant estimates and assumptions used in preparation of its consolidated financial statements.

Revenue Recognition

The estimated sales values of performance under certain contracts to commercial customers and U.S. Government fixed-price and fixed-price incentive contracts are recognized under the percentage of completion method of accounting. When applying the percentage of completion method, the Company relies on estimates of total expected contract revenue and costs. Recognized revenues and profit are subject to revisions as the contract progresses towards completion.

Allowance for Doubtful Accounts

The Company monitors the creditworthiness of its customers based on a variety of factors, including the length of time the receivables are past due, the financial health of the customer, economic conditions and historical experience. If collectibility is considered uncertain, then the Company will record a reserve to reduce the receivable to the amount considered collectable. If circumstances change, then further adjustments could be required.

Warranty Reserves

The Company’s products are generally subject to warranties, and the Company provides for the estimated future costs of repair, replacement or customer accommodation at the time of sale as an additional cost of sales. Management’s estimates are based on historical costs for warranty, and are adjusted when circumstances indicate that future costs are expected to vary from historical levels. If actual product failure rates or material usage incurred differs from the Company’s estimates, then revisions to the estimated warranty liability would be required.

Inventory Valuation

Inventories are stated at the lower of average cost or market (net realizable value). The carrying value of inventory is reduced for estimated obsolescence or unmarketability based upon assumptions about future demand, market conditions, product lifecycles and product pricing. If the Company’s assumptions were to be substantially different than estimated, further adjustments could be required. While these estimates require management to make assumptions and judgments, management believes its understanding of the markets and customers the Company serves, as well as the mature nature of many of the products the Company manufactures, provides it with the ability to make reliable estimates. Management also evaluates the carrying value of inventory for lower of cost or market on an individual product or contract basis. Analyses are performed based on the estimated costs at completion and if necessary, a provision is recorded to properly reflect the inventory value of the products or contracts at the lower of cost or net realizable value (selling price less estimated cost of disposal). If estimated costs, based on these analyses, for fixed-price contracts, which represent virtually all of the Company’s contracts, are significantly

- 17 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

higher than originally estimated, provisions are also required, and in such a case, the Company records a reserve that is charged to costs of goods sold.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, excluding intangible assets that are covered by Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to future net cash flows expected to be generated from the operation and sale of long-lived assets. If such assets are considered to be impaired, the Company’s carrying value is reduced to its estimated fair value with a charge to general and administrative at the time of the reduction. Adverse changes in the customers and markets served by the Company could result in future impairments of long-lived assets.

Goodwill Impairment

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. The Company performs an annual goodwill impairment test during the fourth quarter of each fiscal year, or earlier if an event or circumstance indicates that an impairment loss has occurred. Goodwill and certain other corporate assets and liabilities are assigned to the reporting units which are consistent with the Company’s operating divisions. The fair value of the reporting units are then compared to the carrying value to determine if there is any potential impairment. The process of evaluating potential impairment is subjective and requires judgments regarding revenue forecasts, discount rates, and weighted average cost of capital among other things. Adverse changes in the industries served by the Company, customer demand or other market conditions could result in future impairments of goodwill.

Results of Operations

The following table sets forth Holding’s historical results of operations as a percentage of sales for each of the periods indicated (both periods unaudited).

- 18 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)


		13-Week			14-Week
		period ended			period ended
		January 2,			January 3,
		2004			2003

Sales			100.0	%		100.0	%
Cost of sales			69.0			72.9

	Gross profit		31.0			27.1
Research and development			2.5			2.3
Selling and marketing			5.3			6.4
General and administrative (a)			6.0			6.3

Operating income			17.1			12.1
Other income			0.0			0.4
Interest expense			(5.2	)		(6.0	)

	Income before taxes		11.9			6.5
Income tax expense			4.8			2.4

	Net income		7.1	%		4.1	%

Other Data:
	EBITDA (b)		19.2	%		15.3	%

(a) General and administrative expense includes foreign currency gain (loss).

(b) EBITDA represents earnings before provision for income taxes, interest expense, depreciation and amortization. Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. Management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because they assist in analyzing and benchmarking the performance and value of our business. Although we use EBITDA as a financial measure to assess the performance of our business, the use of EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance or net cash provided by operating activities in accordance with GAAP as a measure of liquidity. For reconciliation of EBITDA to Income before taxes, see Note 5 of the Notes to Consolidated Condensed Financial Statements.

Sales. Sales for the first quarter of fiscal year 2004 were $68.3 million, an increase of $6.7 million or 10.9%, from the same period in fiscal year 2003. Radar and electronic warfare sales were $25.7 million and $6.3 million for the first quarter of fiscal year 2004, respectively, which represents increases of $2.3 million and $1.8 million, respectively, from the first quarter of fiscal year 2003. These increases were due to increased spending by the Department of Defense for VEDs that are sold in these markets. Communications sales in the first quarter of fiscal year 2004 were $2.9 million lower than the prior year level due primarily to the timing of shipments from quarter to quarter and somewhat lower demand for communications products. The increased sales of products in the medical market of $1.7 million were due to increased demand for x-ray generators and VED products for the medical market. Increased sales in the industrial market of $2.2 million were due to higher demand for semiconductor products. Scientific sales were $3.0 million, an increase of $1.6 million from the first quarter of fiscal year 2003, due primarily to higher VED shipments to the Department of Energy.

Gross Margin. Gross profit was $21.2 million in the first quarter of fiscal year 2004, compared to $16.7 million for the same period in fiscal year 2003, an increase of $4.5 million or 26.9%. Higher shipment

- 19 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

volume improved gross profit by approximately $2.9 million. As a percentage of sales, gross margin was 31.0% in the first quarter of fiscal year 2004, compared to 27.1% for the same period in fiscal year 2003. This increase in gross profit was offset somewhat by unfavorable movements in foreign currency exchange rates, primarily due to the weakness of the U.S. dollar relative to the Canadian dollar. The first quarter of fiscal year 2004 gross margin is consistent with the average for the prior three quarters (31.8%), with improvement in margins beginning in the second quarter of fiscal year 2003. The increase in gross profit as a percentage of sales since the first quarter of fiscal year 2003 resulted primarily from gains in production efficiencies, increase in sales volume, resolution of technical problems for products and in manufacturing, favorable product mix, improved pricing for certain products and completion of contracts with lower pricing in prior periods.

Research and Development Expenses. Research and development expenses were $1.7 million, or 2.5% of sales, for the first quarter of fiscal year 2004, compared to $1.4 million, or 2.3% of sales, for the first quarter of fiscal year 2003. The increase is primarily attributable to additional development efforts on products for the radar and medical markets.

Selling, Marketing, General and Administrative Expenses. Selling, marketing, general and administrative expenses were $7.8 million, or 11.4% of sales, for the first quarter of fiscal year 2004, compared to $7.8 million, or 12.7% of sales, for the first quarter of fiscal year 2003. Selling and marketing expenses decreased by $0.3 million to $3.6 million from the first quarter of fiscal year 2003, due primarily to lower third party commission costs and the timing of expenses for promotion and advertising. General and administrative expenses increased by $0.3 million to $4.1 million from the first quarter of fiscal year 2003, due primarily to expenses associated with the Merger.

Other Income. Other income of $0.3 million in the first quarter of fiscal year 2003 represents the Company’s portion of the fair value of stock received from its life and disability insurance provider resulting from the insurance company’s 2001 demutualization.

EBITDA. EBITDA for the first quarter of fiscal year 2004 was $13.1 million, or 19.2% of sales, compared to $9.4 million, or 15.3% of sales, for the first quarter of fiscal year 2003. This increase in EBITDA is attributable primarily to the improvement in gross margin as discussed above. For reconciliation of EBITDA to Income before taxes, see Note 5 of the Notes to Consolidated Condensed Financial Statements.

Interest Expense. Interest expense was $3.6 million, or 5.2% of sales, for the first quarter of fiscal year 2004 as compared to $3.7 million, or 6.0% of sales, for the first quarter of fiscal year 2003. Interest expense did not change significantly from the first quarter of fiscal year 2003. However, interest expense will increase in the future as a result of the consummation of the Merger and the related transactions.

Income Tax Expense. Income tax expense for the first quarter of fiscal year 2004 was $3.3 million compared to $1.5 million for the first quarter of fiscal year 2003. The tax expense for the first quarter of fiscal year 2004 represents an effective tax rate of approximately 40% compared to an effective tax rate of approximately 37% for the first quarter of fiscal year 2003. The lower effective tax rate in fiscal year 2003 was due to the expected utilization of net operating loss carryforwards in fiscal year 2003.

Net Income. Income before taxes and preferred dividends was $8.1 million for the first quarter of fiscal year 2004 compared to income before taxes and preferred dividends of $4.0 million for the

- 20 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

corresponding period of fiscal year 2003, an increase of $4.1 million. Net income after taxes but before preferred dividends was $4.8 million for the first quarter of fiscal year 2004, an improvement of $2.3 million compared to net income after taxes but before preferred dividends of $2.5 million for the first quarter of fiscal year 2003.

Differences between Holding and CPI. CPI’s operating results differ slightly from Holding’s due to a sale-leaseback transaction between CPI and Holding which took place in December 2000. In the first quarter of fiscal year 2004, CPI’s net income before taxes was $8.2 million compared to Holding’s net income before taxes of $8.1 million. As a result of this transaction, operating costs for CPI were approximately $0.4 million higher than those of Holding due to rental payments paid by CPI to Holding for use of the San Carlos facility, offset by amortization of the deferred gain on the sale-leaseback and additional depreciation by Holding on the San Carlos facility. Interest expense for CPI was approximately $0.5 million lower than that of Holding. The decrease primarily relates to the fact that Holding’s interest expense includes interest paid on the mortgage financing of the San Carlos facility. In addition, interest income from Holding of $0.2 million related to an intercompany receivable included in CPI’s results is eliminated upon consolidation for Holding. All other operations data for CPI are consistent with Holding’s operations data for the first quarter of fiscal year 2004.

Financial Condition

Operating Activities. As of January 2, 2004, the Company’s cash and cash equivalents were $38.1 million, as compared to $33.8 million at October 3, 2003. In the first quarter of fiscal year 2004 and 2003, cash and cash equivalents generated by Holding and CPI are the same. In the first quarter of fiscal year 2003, the components of Holding’s cash flow and that of CPI’s differ by Holding’s $0.3 million repayment of mortgage refinancing that was funded by an intercompany payment from CPI.

In the first quarter of fiscal year 2004, the Company’s $4.3 million increase in cash and cash equivalents relates to $6.2 million of cash generated from operating activities, offset in part by $0.2 million net cash used in investing activities and $1.6 million used in financing activities. Cash provided by operating activities in the first quarter of fiscal year 2004 was generated primarily from $4.8 million in net income.

In the first quarter of fiscal year 2003, the Company’s $10.2 million increase in cash and cash equivalents relates to $13.3 million of cash generated from operating activities, offset in part by $0.3 million net cash used in investing activities and $2.9 million used in financing activities. Cash provided by the Company’s operating activities in the first quarter of fiscal year 2003 was generated primarily from $2.5 million in net income, $4.4 million in advance payments from customers, and $4.1 million in inventory reduction.

Investing Activities. Net cash used in investing activities in the first quarter of fiscal year 2004 and 2003 was for the purchase of property, plant and equipment of $0.2 million and $0.3 million, respectively. The Company expects the level of capital expenditures in fiscal year 2004 to be moderately higher than fiscal year 2003 levels; however, the Company will continue to manage capital expenditures consistent with business conditions. The Company’s continuing operations typically do not have large capital requirements. Capital expenditures are generally made to replace existing assets, increase productivity, facilitate cost reductions or meet regulatory requirements.

Financing Activities. For both Holding and CPI, net cash used in financing activities in the first quarter

- 21 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

of fiscal year 2004 was primarily for the $1.6 million repayment of bank overdraft. For Holding, net cash used in financing activities in the first quarter of fiscal year 2003 was primarily for the $2.3 million repayment of bank overdraft, $0.3 million payment of debt issue costs and $0.3 million repayment on the mortgage. For CPI, net cash used in financing activities in the first quarter of fiscal year 2003 was primarily for the $2.3 million repayment of bank overdraft and $0.3 million payment of debt issue costs.

CPI’s financial condition differs from that of Holding, as discussed above, in that CPI’s debt obligations and financing activities do not include $17.5 million of mortgage financing due in January 2004. This mortgage financing resulted from Holding’s purchase of the San Carlos facility from CPI in a sale-leaseback transaction which took place in December 2000. In connection with the sale-leaseback transaction, CPI entered into a non-cancelable lease with Holding for the San Carlos real property for a term of twenty years with a fixed annual rent of $2.45 million. The mortgage financing was repaid in full in connection with the Merger in January 2004.

The Credit Agreement contains a number of covenants that, among other things, restrict the ability of Acquiror, Holding, CPI and certain of its subsidiaries to sell assets; engage in mergers and acquisitions; pay dividends and distributions or repurchase their capital stock; incur additional indebtedness or issue equity interests; make investments and loans; create liens or further negative pledges on assets; engage in certain transactions with affiliates; enter into sale and leaseback transactions; change their business or ownership; amend agreements or make prepayments relating to subordinated indebtedness; amend or waive provisions of charter documents, agreements with respect to capital stock or any other document relating to the Merger Agreement or related transaction documents in a manner that is materially adverse to the lenders; and change their fiscal year. These covenants are subject to certain exceptions.

- 22 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

In addition to the Credit Agreement, and in connection with the Merger, CPI issued an aggregate principal amount of $125.0 million of Notes due 2012 (“8% Notes”). CPI is required to pay interest on the 8% Notes semiannually, beginning on August 1, 2004. The indenture governing the terms of the 8% Notes (“8% Indenture”) contains restrictive provisions which limit, among other things, CPI and certain of its subsidiaries from incurring certain indebtedness, selling assets or consolidating or merging with or into other companies, paying dividends or repurchasing or redeeming capital stock, making certain investments and entering into certain types of transactions with their affiliates. The payment of principal, premium and interest on, and other obligations evidenced by the 8% Notes is subordinated in right of payment, as set forth in the 8% Indenture, to the prior payment in full of all senior debt (as defined in the 8% Indenture), including indebtedness under the Credit Agreement, whether outstanding on the date of the 8% Indenture or thereafter incurred. CPI’s payment obligations under the 8% Notes are jointly and severally guaranteed by Acquiror., Holding and all of CPI’s domestic subsidiaries. The 8% Notes may be redeemed as described in, and subject to the terms and conditions set forth in, the 8% Indenture. In addition, the 8% Indenture requires the Company to make an offer to purchase the 8% Notes in certain circumstances.

Generally, there can be no assurance that the combination of cash generated by operations, borrowing availability from the Credit Agreement and additional financing will be sufficient to meet the Company’s cash requirements. If the Company is unable to satisfy such cash requirements from these sources, the Company may adopt one or more alternatives, such as reducing or delaying capital expenditures, reducing discretionary costs, and attempting to negotiate an increase to the Company’s borrowing capacity under its Credit Agreement, although there can be no assurances that such alternatives will be available on acceptable terms, if at all.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities”, which addresses consolidation by business enterprises of variable interest entities which have one or both of the following characteristics: (1) The equity investment at risk is not sufficient to permit the entity to finance its activities without support from other parties and (2) the equity investors lack one or more of the defined essential characteristics of a controlling financial interest. This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the participating parties. This Interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. On October 9, 2003, FASB Staff Position FIN 46-6, “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities” was issued. This delayed the effective date of this Interpretation for variable interest entities created before February 1, 2003 until January 3, 2004. The Company has evaluated the impact of the provisions of Interpretation 46 and it believes it will not have a material impact on the Company’s consolidated financial statements.

- 23 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

Cautionary Statements Regarding Forward-Looking Statements

This document contains forward-looking statements that relate to future events or the Company’s future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “except,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements made in connection with this report that are attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the “risk factors,” including those contained in Exhibit 99 hereto, and other cautionary statements included herein and in the Company’s other filings with the Securities and Exchange Commission (“SEC”). The Company is under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in the Company’s expectations.

The information in this report is not a complete description of the Company’s business or the risks and uncertainties associated with an investment in the Company’s securities. You should carefully consider the various risks and uncertainties that impact the Company’s business and the other information in this report and the Company’s other filings with the SEC before you decide to invest in the Company or to maintain or increase your investment. Such risks and uncertainties include, but are not limited to, the following:

• the Company’s indebtedness is substantial;

• the Company’s debt agreements have restrictions that limit its flexibility in operating its business;

• the Company’s ability to generate the significant amount of cash needed to service its debt and to fund capital expenditures or other liquidity needs depends on many factors beyond its control;

• the Company has had historical losses;

• the Company may be unable to retain and/or recruit key management and other personnel;

• the markets in which the Company sells its products are competitive;

• the end markets in which the Company operates are subject to technological change;

- 24 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

• a significant portion of the Company’s sales is, and is expected to continue to be, from contracts with the U.S. Government;

• the Company generates sales from contracts with foreign governments;

• the Company’s international operations subject it to social, political and economic risks of doing business in foreign countries;

• the Company may not be successful in obtaining the necessary export licenses and technical assistance agreements to conduct operations abroad and Congress may prevent proposed sales to foreign customers.

• the Company’s results of operations and financial condition may be adversely affected by increased or unexpected costs incurred by it on its contracts and sales orders;

• the Company’s business could be adversely affected by environmental regulation and legislation, liabilities relating to contamination and changes in our ability to recover under Varian Medical Systems Inc.’s indemnity;

• the Company has only a limited ability to protect its intellectual property rights;

• the Company’s inability to obtain certain necessary raw materials and key components could disrupt the manufacture of its products and cause its financial condition and results of operations to suffer; and

• the Company is controlled by affiliates of The Cypress Group L.L.C.

Any of the foregoing factors could cause the Company’s business, results of operations, or financial condition to suffer, and actual results could differ materially from those expected.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk disclosures set forth in its Annual Report on Form 10-K for the fiscal year ended October 3, 2003, have not changed materially.

ITEM 4: CONTROLS AND PROCEDURES

Management, including the Company’s principal executive officer and principal financial officer, has evaluated, as of the end of the period covered by this report, the effectiveness of the design and operation of the Company’s disclosure controls and procedures with respect to the information generated for use in this report. Based upon, and as of the date of that evaluation, the principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 25 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 2: CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Holding submitted the following items to its stockholders for approval by written consent:

(i) the Merger Agreement, the Merger and the related transactions, and the amendment and restatement of the certificate of incorporation of Holding in connection with the Merger. Holding received written consents approving these matters from the holders of 4,720,672 shares of Common Stock, representing approximately 94.26 % of the total outstanding shares of Common Stock.

(ii) the payment by Holding and CPI of certain potential parachute payments to certain executives in accordance with Section 280G(b)(5)(A)(ii) of the Internal Revenue Code of 1986, as amended (the “IRC”). Holding received written consents approving these matters from the holders of 4,474,250 shares of Common Stock, representing approximately 92.78% of the total outstanding shares of Common Stock entitled to vote on these matters under the IRC.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following exhibits are being filed as part of this report:


Exhibit
No.		Description

3.1		Certificate of Incorporation of Communications & Power Industries Holding Corporation (as amended and restated on January 23, 2004).

3.2		Bylaws of Communications & Power Industries Holding Corporation (Incorporated by reference to Communications & Power Industries, Inc.’s Registration Statement on Form S-1 (Registration No. 33-96858), filed on September 12, 1995).

- 26 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)


Exhibit
No.		Description

3.3		Restated Certificate of Incorporation of Communications & Power Industries, Inc., filed with the Delaware Secretary of State on August 11, 1995 (Incorporated by reference to Communications & Power Industries, Inc.’s Registration Statement on Form S-1 (Registration No. 33-96858), filed on September 12, 1995).

3.4		Amended and Restated Bylaws of Communications & Power Industries, Inc., dated March 19, 2002 (Incorporated by reference to Communications & Power Industries, Inc.’s Quarterly Report on Form 10-Q, for the quarter ended March 29, 2002).

4.1		Indenture relating to the 8% Senior Subordinated Notes due 2012, dated as of January 23, 2004, among Communications & Power Industries, Inc., as Issuer, the Guarantors named therein, as Guarantors, and BNY Western Trust Company, as Trustee.

4.2		Registration Rights Agreement, dated as of January 23, 2004, among Communications & Power Industries, Inc., the Guarantors named therein, and UBS Securities LLC, Bear, Stearns & Co. Inc., and Wachovia Capital Markets, LLC, as the Initial Purchasers.

10.1		Credit Agreement, dated as of January 23, 2004, among Communications & Power Industries, Inc., as Borrower, the Guarantors named therein, the Lenders from time to time party thereto, UBS Securities LLC, Bear, Stearns & Co. Inc., UBS Loan Finance LLC, UBS AG, Stamford Branch, Bear Stearns Corporate Lending Inc., Wachovia Bank, National Association, and Wachovia Capital Markets, LLC.

10.2		Security Agreement, dated as of January 23, 2004, among Communications & Power Industries, Inc., the Guarantors party thereto, and UBS AG, Stamford Branch.

10.3		Form of Option Rollover Agreement (U.S. Employees).

10.4		Form of Option Rollover Agreement (Canadian Employees).

10.5		Form of Management Stockholders Agreement among CPI Acquisition Corp., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and certain management stockholders named therein.

31		Rule 13a-14 (a) /15d-14 (a) Certifications.

32		Section 1350 Certifications.

99		Risk factors related to the offering of 8% Senior Subordinated Notes due 2012.

(b) Reports on Form 8-K:

A report on Form 8-K was filed on November 21, 2003 under Item 5 to announce that Holding entered into the Agreement and Plan of Merger dated as of November 17, 2003.

- 27 -

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.


				COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION

				By:		/s/ O. Joe Caldarelli

						O. Joe Caldarelli
						Chief Executive Officer
						Date: February 11, 2004

				By:		/s/ Joel Littman

						Joel Littman
						Chief Financial Officer, Treasurer and Secretary
						(Principal Financial and Accounting Officer)
						Date: February 11, 2004

- 28 -

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.


				COMMUNICATIONS & POWER INDUSTRIES, INC.

				By:		/s/ O. Joe Caldarelli

						O. Joe Caldarelli
						Chief Executive Officer
						Date: February 11, 2004

				By:		/s/ Joel Littman

						Joel Littman
						Chief Financial Officer, Treasurer and Secretary
						(Principal Financial and Accounting Officer)
						Date: February 11, 2004

- 29 -

Exhibit Index


Exhibit
No.		Description

3.1		Certificate of Incorporation of Communications & Power Industries Holding Corporation (as amended and restated on January 23, 2004).

3.2		Bylaws of Communications & Power Industries Holding Corporation (Incorporated by reference to Communications & Power Industries, Inc.’s Registration Statement on Form S-1 (Registration No. 33-96858), filed on September 12, 1995).

3.3		Restated Certificate of Incorporation of Communications & Power Industries, Inc., filed with the Delaware Secretary of State on August 11, 1995 (Incorporated by reference to Communications & Power Industries, Inc.’s Registration Statement on Form S-1 (Registration No. 33-96858), filed on September 12, 1995).

3.4		Amended and Restated Bylaws of Communications & Power Industries, Inc., dated March 19, 2002 (Incorporated by reference to Communications & Power Industries, Inc.’s Quarterly Report on Form 10-Q, for the quarter ended March 29, 2002).

4.1		Indenture relating to the 8% Senior Subordinated Notes due 2012, dated as of January 23, 2004, among Communications & Power Industries, Inc., as Issuer, the Guarantors named therein, as Guarantors, and BNY Western Trust Company, as Trustee.

4.2		Registration Rights Agreement, dated as of January 23, 2004, among Communications & Power Industries, Inc., the Guarantors named therein, and UBS Securities LLC, Bear, Stearns & Co. Inc., and Wachovia Capital Markets, LLC, as the Initial Purchasers.

10.1		Credit Agreement, dated as of January 23, 2004, among Communications & Power Industries, Inc., as Borrower, the Guarantors named therein, the Lenders from time to time party thereto, UBS Securities LLC, Bear, Stearns & Co. Inc., UBS Loan Finance LLC, UBS AG, Stamford Branch, Bear Stearns Corporate Lending Inc., Wachovia Bank, National Association, and Wachovia Capital Markets, LLC.

10.2		Security Agreement, dated as of January 23, 2004, among Communications & Power Industries, Inc., the Guarantors party thereto, and UBS AG, Stamford Branch.

10.3		Form of Option Rollover Agreement (U.S. Employees).

10.4		Form of Option Rollover Agreement (Canadian Employees).

10.5		Form of Management Stockholders Agreement among CPI Acquisition Corp., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and certain management stockholders named therein.

31		Rule 13a-14 (a) /15d-14 (a) Certifications.

32		Section 1350 Certifications.

99		Risk factors related to the offering of 8% Senior Subordinated Notes due 2012.

EX-3.1 3 f96399exv3w1.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION Communications & Power Industries Holding Corporation (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows: FIRST: The name of the Corporation is Communications & Power Industries Holding Corporation. SECOND: The registered office and registered agent of the Corporation in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. FOURTH: The total number of shares of stock that the Corporation is authorized to issue is 100 shares of Common Stock, par value $0.01 per share. FIFTH: The Board of Directors of the Corporation, acting by majority vote, may adopt, alter, amend or repeal the By-Laws of the Corporation. SIXTH: Except as otherwise provided by the Delaware General Corporation Law as the same exists or may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. EX-4.1 4 f96399exv4w1.txt EXHIBIT 4.1 EXHIBIT 4.1 ================================================================================ COMMUNICATIONS & POWER INDUSTRIES, INC. as Issuer, the GUARANTORS named herein, as Guarantors, and BNY Western Trust Company, as Trustee ------------------------ INDENTURE ------------------------ Dated as of January 23, 2004 ------------------------ 8% Senior Subordinated Notes due 2012 ================================================================================ CROSS-REFERENCE TABLE
Trust Indenture Act Indenture Section Section ------- ------- 310 (a)(1)................................................................ 7.10 (a)(2)................................................................ 7.10 (a)(3)................................................................ N.A. (a)(4)................................................................ N.A. (a)(5)................................................................ 7.08; 7.10 (b)................................................................... 7.08; 7.10; 12.02 (c)................................................................... N.A. 311 (a)................................................................... 7.11 (b)................................................................... 7.11 (c)................................................................... N.A. 312 (a)................................................................... 2.05 (b)................................................................... 12.03 (c)................................................................... 12.03 313 (a)................................................................... 7.06 (b)(1)................................................................ 7.06 (b)(2)................................................................ 7.06 (c)................................................................... 7.06; 12.02 (d)................................................................... 7.06 314 (a)................................................................... 4.06; 4.18; 12.02 (b)................................................................... N.A. (c)(1)................................................................ 7.02; 12.04; 12.05 (c)(2)................................................................ 7.02; 12.04; 12.05 (c)(3)................................................................ N.A. (d)................................................................... N.A. (e)................................................................... 12.05 (f)................................................................... N.A. 315 (a)................................................................... 7.01(b); 7.02(a) (b)................................................................... 7.05; 12.02 (c)................................................................... 7.01 (d)................................................................... 6.05; 7.01(c) (e)................................................................... 6.11 316 (a)(last sentence).................................................... 2.09 (a)(1)(A)............................................................. 6.05 (a)(1)(B)............................................................. 6.04 (a)(2)................................................................ 9.02 (b)................................................................... 6.07 (c)................................................................... 9.05 317 (a)(1)................................................................ 6.08 (a)(2)................................................................ 6.09 (b)................................................................... 2.04 318 (a)................................................................... 12.01 (c)................................................................... 12.01
N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions........................................................................ 1 SECTION 1.02. Other Definitions.................................................................. 32 SECTION 1.03. Incorporation by Reference of Trust Indenture Act.................................. 33 SECTION 1.04. Rules of Construction.............................................................. 33 ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating.................................................................... 34 SECTION 2.02. Execution, Authentication and Denomination; Additional Notes; Exchange Notes....... 35 SECTION 2.03. Registrar and Paying Agent......................................................... 36 SECTION 2.04. Paying Agent To Hold Assets in Trust............................................... 37 SECTION 2.05. Holder Lists....................................................................... 37 SECTION 2.06. Transfer and Exchange.............................................................. 37 SECTION 2.07. Replacement Notes.................................................................. 38 SECTION 2.08. Outstanding Notes.................................................................. 38 SECTION 2.09. Treasury Notes..................................................................... 39 SECTION 2.10. Temporary Notes.................................................................... 39 SECTION 2.11. Cancellation....................................................................... 39 SECTION 2.12. Defaulted Interest................................................................. 39 SECTION 2.13. CUSIP and ISIN Numbers............................................................. 40 SECTION 2.14. Deposit of Moneys.................................................................. 40 SECTION 2.15. Book-Entry Provisions for Global Notes............................................. 40 SECTION 2.16. Special Transfer and Exchange Provisions........................................... 41 ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee................................................................. 45 SECTION 3.02. Selection of Notes To Be Redeemed.................................................. 45 SECTION 3.03. Notice of Redemption............................................................... 46 SECTION 3.04. Effect of Notice of Redemption..................................................... 47 SECTION 3.05. Deposit of Redemption Price........................................................ 47 SECTION 3.06. Notes Redeemed in Part............................................................. 47
-i-
Page ---- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes................................................................... 48 SECTION 4.02. Maintenance of Office or Agency.................................................... 48 SECTION 4.03. Corporate Existence................................................................ 48 SECTION 4.04. Payment of Taxes................................................................... 49 SECTION 4.05. [Intentionally Omitted]............................................................ 49 SECTION 4.06. Compliance Certificate; Notice of Default.......................................... 49 SECTION 4.07. [Intentionally Omitted]............................................................ 49 SECTION 4.08. Waiver of Stay, Extension or Usury Laws............................................ 49 SECTION 4.09. Change of Control.................................................................. 50 SECTION 4.10. Limitations on Additional Indebtedness............................................. 52 SECTION 4.11. Limitations on Restricted Payments................................................. 54 SECTION 4.12. Limitations on Liens............................................................... 56 SECTION 4.13. Limitations on Asset Sales......................................................... 56 SECTION 4.14. Limitations on Transactions with Affiliates........................................ 60 SECTION 4.15. Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries........................................................ 62 SECTION 4.16. Additional Note Guarantees......................................................... 64 SECTION 4.17. Limitation on Layering Indebtedness................................................ 64 SECTION 4.18. Reports to Holders................................................................. 64 SECTION 4.19. Limitations on Designation of Unrestricted Subsidiaries............................ 65 SECTION 4.20. Limitation on the Issuance or Sale of Equity Interests of Restricted Subsidiaries........................................................ 67 SECTION 4.21. Business Activities................................................................ 67 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Mergers, Consolidations, Etc....................................................... 67 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default.................................................................. 70 SECTION 6.02. Acceleration....................................................................... 71 SECTION 6.03. Other Remedies..................................................................... 72 SECTION 6.04. Waiver of Past Defaults............................................................ 73 SECTION 6.05. Control by Majority................................................................ 73 SECTION 6.06. Limitation on Suits................................................................ 73 SECTION 6.07. Rights of Holders To Receive Payment............................................... 74 SECTION 6.08. Collection Suit by Trustee......................................................... 74
-ii-
Page ---- SECTION 6.09. Trustee May File Proofs of Claim................................................... 74 SECTION 6.10. Priorities......................................................................... 74 SECTION 6.11. Undertaking for Costs.............................................................. 75 ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee.................................................................. 75 SECTION 7.02. Rights of Trustee.................................................................. 76 SECTION 7.03. Individual Rights of Trustee....................................................... 78 SECTION 7.04. Trustee's Disclaimer............................................................... 78 SECTION 7.05. Notice of Default.................................................................. 78 SECTION 7.06. Reports by Trustee to Holders...................................................... 78 SECTION 7.07. Compensation and Indemnity......................................................... 79 SECTION 7.08. Replacement of Trustee............................................................. 80 SECTION 7.09. Successor Trustee by Merger, Etc................................................... 81 SECTION 7.10. Eligibility; Disqualification...................................................... 81 SECTION 7.11. Preferential Collection of Claims Against the Issuer............................... 81 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Issuer's Obligations............................................ 81 SECTION 8.02. Legal Defeasance and Covenant Defeasance........................................... 82 SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.............................. 83 SECTION 8.04. Application of Trust Money......................................................... 85 SECTION 8.05. Repayment to the Issuer............................................................ 85 SECTION 8.06. Reinstatement...................................................................... 85 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders......................................................... 86 SECTION 9.02. With Consent of Holders............................................................ 86 SECTION 9.03. Effect on Senior Debt.............................................................. 88 SECTION 9.04. Compliance with the Trust Indenture Act............................................ 88 SECTION 9.05. Revocation and Effect of Consents.................................................. 88 SECTION 9.06. Notation on or Exchange of Notes................................................... 89 SECTION 9.07. Trustee To Sign Amendments, Etc.................................................... 89
-iii-
Page ---- ARTICLE TEN SUBORDINATION OF NOTES SECTION 10.01. Notes Subordinated to Senior Debt.................................................. 89 SECTION 10.02. Suspension of Payment When Senior Debt Is in Default............................... 90 SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of the Issuer.................................... 91 SECTION 10.04. Payments May Be Made on Notes...................................................... 92 SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt....................... 93 SECTION 10.06. Obligations of the Issuer Unconditional............................................ 94 SECTION 10.07. Notice to Trustee.................................................................. 94 SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent..................... 94 SECTION 10.09. Trustee's Relation to Senior Debt.................................................. 95 SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders of Senior Debt......................................................... 95 SECTION 10.11. Holders Authorize Trustee To Effectuate Subordination of Notes..................... 95 SECTION 10.12. This Article Ten Not To Prevent Events of Default.................................. 96 SECTION 10.13. Trustee's Compensation Not Prejudiced.............................................. 96 ARTICLE ELEVEN NOTE GUARANTEE SECTION 11.01. Guarantee.......................................................................... 96 SECTION 11.02. Subordination of Note Guarantee.................................................... 97 SECTION 11.03. Limitation on Guarantor Liability.................................................. 97 SECTION 11.04. Execution and Delivery of Note Guarantee........................................... 98 SECTION 11.05. Release of a Subsidiary Guarantor.................................................. 98 ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls....................................................... 99 SECTION 12.02. Notices............................................................................ 99 SECTION 12.03. Communications by Holders with Other Holders....................................... 100 SECTION 12.04. Certificate and Opinion as to Conditions Precedent................................. 100 SECTION 12.05. Statements Required in Certificate or Opinion...................................... 100 SECTION 12.06. Rules by Paying Agent or Registrar................................................. 101 SECTION 12.07. Legal Holidays..................................................................... 101 SECTION 12.08. Governing Law...................................................................... 101 SECTION 12.09. No Adverse Interpretation of Other Agreements...................................... 101 SECTION 12.10. No Recourse Against Others......................................................... 101 SECTION 12.11. Successors......................................................................... 102 SECTION 12.12. Duplicate Originals................................................................ 102
-iv-
Page ---- SECTION 12.13. Severability....................................................................... 102 Signatures........................................................................................... S-1
Exhibit A - Form of Note Exhibit B - Form of Legends Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit E - Form of Certificate To Be Delivered in Connection with Transfers of Temporary Regulation S Global Note Exhibit F - Form of Notation of Subsidiary Guarantee Note: This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture. -v- INDENTURE dated as of January 23, 2004 among Communications & Power Industries, Inc., a Delaware corporation (the "ISSUER"), and each of the Guarantors named herein, as Guarantors, and BNY Western Trust Company, a state banking corporation organized and existing under the laws of the State of California, as Trustee (the "TRUSTEE"). The Issuer has duly authorized the creation of an issue of 8% Senior Subordinated Notes due 2012 and, to provide therefor, the Issuer and the Guarantors have duly authorized the execution and delivery of this Indenture. All things necessary to make the Notes, when duly issued and executed by the Issuer and authenticated and delivered hereunder, the valid and binding obligations of the Issuer and to make this Indenture a valid and binding agreement of the Issuer and the Guarantors has been done. THIS INDENTURE WITNESSETH For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. Set forth below are certain defined terms used in this Indenture. "12% SENIOR SUBORDINATED NOTES" means the $100.0 million in aggregate principal amount of the Issuer's 12% Senior Subordinated Notes due 2005. "144A GLOBAL NOTE" has the meaning given to such term in Section 2.01. "ACQUIRED INDEBTEDNESS" means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (2) with respect to the Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer or a Restricted Subsidiary) existing at the time such Person is merged with or into the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition. "ADDITIONAL INTEREST" has the meaning set forth in the Registration Rights Agreement. "AFFILIATE" of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person. For purposes of Section 4.14, Affiliates shall be deemed to include, with respect to any Person, any other Person (1) which beneficially owns or holds, directly or indirectly, 10% or more of any class of the Voting Stock of the referent Person, (2) of which 10% or more of the Voting Stock is beneficially owned or held, directly or indirectly, by the referenced Person or (3) with respect to an individual, any immediate family member of such Person. For purposes of this definition and the definition of "Control Investment Affiliate," "CONTROL" of a Person shall mean 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. "AGENT" means any Registrar or Paying Agent. "AMEND" means to amend, supplement, restate, amend and restate or otherwise modify, including successively; and "AMENDMENT" shall have a correlative meaning. "APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date, the greater of: (i) 1.0% of the principal amount of such Note; and (ii) the excess of: (A) the present value at such Redemption Date of (1) the redemption price of such Note on February 1, 2008 (such redemption price being that described in Section 6(a) of the Notes) plus (2) all required remaining scheduled interest payments due on such Note through February 1, 2008, computed using a discount rate equal to the Treasury Rate plus 50 basis points per annum discounted on a semi-annual bond basis, over (B) the principal amount of such Note on such Redemption Date. Calculation of the Applicable Premium will be made by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate; provided, however, that such calculation shall not be a duty or obligation of the Trustee. "ASSET" means any asset or property. "ASSET ACQUISITION" means (1) an Investment by the Issuer or any Restricted Subsidiary of the Issuer in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Issuer, or shall be merged with or into the Issuer or any Restricted Subsidiary of the Issuer, or (2) the acquisition by the Issuer or any Restricted Subsidiary of the Issuer of all or substantially all of the assets of any other Person or any division or line of business of any other Person. "ASSET SALE" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer or any Restricted Subsidiary to any Person other than the Issuer or any Restricted Subsidiary (including by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this definition, a "TRANSFER"), in one transaction or -2- a series of related transactions, of any assets of the Issuer or any of its Restricted Subsidiaries other than in the ordinary course of business. For purposes of this definition, the term "Asset Sale" shall not include: (1) transfers of cash or Cash Equivalents; (2) transfers of assets (including Equity Interests) that are governed by, and made in accordance with Section 5.01; (3) Permitted Investments and Restricted Payments permitted under Section 4.11; (4) the creation of or realization on any Permitted Lien; (5) transfers of damaged, worn-out or obsolete equipment or assets that, in the Issuer's reasonable judgment, are no longer used or useful in the business of the Issuer or its Restricted Subsidiaries; and (6) any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $2.5 million. "ATTRIBUTABLE INDEBTEDNESS" when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, the present value (discounted at a rate borne by the Notes, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction. "AUTHENTICATION ORDER" has the meaning set forth in Section 2.02. "BANKRUPTCY LAW" means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing. "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close. "CANADIAN SUBSIDIARY" means Communications & Power Industries Canada, Inc., an Ontario corporation, and its successors and assigns. -3- "CAPITALIZED LEASE" means a lease required to be capitalized for financial reporting purposes in accordance with GAAP. "CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of such Person to pay rent or other amounts under a Capitalized Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "CASH EQUIVALENTS" means: (7) marketable obligations with a maturity of 1 year or less from the date of determination issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (8) demand and time deposits and certificates of deposit or acceptances with a maturity of 180 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million and is assigned at least a "B" rating by Thomson Financial BankWatch; (9) commercial paper maturing no more than 180 days from the date of determination thereof issued by a corporation that is not the Issuer or an Affiliate of the Issuer, and is organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-2 by S&P or at least P-2 by Moody's; (10) repurchase obligations with a term of not more than ten days for underlying securities of the types described in clause (1) above entered into with any commercial bank meeting the specifications of clause (2) above; and (11) investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (1) through (4) above. "CHANGE OF CONTROL" means the occurrence of any of the following events: (12) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, except that in no event shall the parties to the Stockholders' Agreement be deemed a "group" solely by virtue of being parties to the Stockholders' Agreement), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause that person or group shall be deemed to have "beneficial ownership" of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock representing 50% or more of the voting power of the total outstanding Voting Stock of the Issuer; -4- (13) during any period of two consecutive years commencing after the Issue Date, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors or whose nomination for election by the stockholders of the Issuer was approved by a vote of the majority of the directors of the Issuer 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 the Board of Directors of the Issuer; (14) (a) all or substantially all of the assets of the Issuer and the Restricted Subsidiaries are sold or otherwise transferred to any Person other than a Wholly-Owned Restricted Subsidiary or one or more Permitted Holders or (b) the Issuer consolidates or merges with or into another Person or any Person consolidates or merges with or into the Issuer, in either case under this clause (3), in one transaction or a series of related transactions in which immediately after the consummation thereof Persons beneficially owning (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing in the aggregate a majority of the total voting power of the Voting Stock of the Issuer immediately prior to such consummation, together with the Permitted Holders, do not beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing a majority of the total voting power of the Voting Stock of the Issuer or the surviving or transferee Person; or (15) the Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer. "CONSOLIDATED AMORTIZATION EXPENSE" for any period means the amortization expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CASH FLOW" for any period means, without duplication, the sum of the amounts for such period of (16) Consolidated Net Income, plus (17) in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income, (a) Consolidated Income Tax Expense, (b) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense), (c) Consolidated Depreciation Expense, (d) Consolidated Interest Expense, -5- (e) Restructuring Expenses; and (f) all other non-cash items reducing the Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, in each case determined on a consolidated basis in accordance with GAAP, minus (18) the aggregate amount of all non-cash items (excluding any item which represents the reversal of any accrual of, or cash reserve for, anticipated cash charges in any period), determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period. "CONSOLIDATED DEPRECIATION EXPENSE" for any period means the depreciation expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INCOME TAX EXPENSE" for any period means the provision for taxes of the Issuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST COVERAGE RATIO" means the ratio of Consolidated Cash Flow during the most recent four consecutive full fiscal quarters for which financial statements are available (the "FOUR-QUARTER PERIOD") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the "TRANSACTION DATE") to Consolidated Interest Expense for the Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (19) the incurrence of any Indebtedness or the issuance of any Preferred Stock of the Issuer or any Restricted Subsidiary (and the application of the proceeds thereof) and any repayment of other Indebtedness or redemption of other Preferred Stock (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four-Quarter Period; and (20) any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or any Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated Cash Flow (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) associated with -6- any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence of, or assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period. If the Issuer or any Restricted Subsidiary directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if the Issuer or such Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. For purposes of calculating the Consolidated Interest Coverage Ratio prior to the expiration of the first Four-Quarter Period subsequent to the Issue Date, such calculation shall be on the same pro forma basis as the pro forma financial statements that are presented in the Offering Memorandum. In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Consolidated Interest Coverage Ratio: (21) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on this Indebtedness in effect on the Transaction Date; (22) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and (23) notwithstanding clause (1) or (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements. "CONSOLIDATED INTEREST EXPENSE" for any period means the sum, without duplication, of the total interest expense minus the interest income of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including without duplication, (24) imputed interest on Capitalized Lease Obligations and Attributable Indebtedness, (25) commissions, discounts and other fees and charges owed to Persons other than the Issuer or any Restricted Subsidiary with respect to letters of credit securing financial obligations, bankers' acceptance financing and receivables financings, -7- (26) the net costs associated with Hedging Obligations, (27) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses, (28) the interest portion of any deferred payment obligations, (29) all other non-cash interest expense, (30) capitalized interest, (31) the product of (a) all dividend payments on any series of Disqualified Equity Interests of the Issuer or any Preferred Stock of any Restricted Subsidiary (other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer or a Wholly-Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the Issuer and the Restricted Subsidiaries, expressed as a decimal, (32) all interest payable with respect to discontinued operations, and (33) all interest on any Indebtedness described in clause (7) or (8) of the definition of Indebtedness. Notwithstanding the preceding, all such amounts relating to the 12% Senior Subordinated Notes being redeemed (including any defeasance in connection therewith) in connection with the Transactions and the amortization of debt issuance costs, debt discount or premium and other financing fees and expenses incurred in connection with the Transactions shall be excluded in the calculation of Consolidated Interest Expense to the extent otherwise included therein. Consolidated Interest Expense shall be calculated after giving effect to Hedging Obligations (including associated costs) described in clause (1) of the definition of "Hedging Obligations," but excluding unrealized gains and losses with respect to Hedging Obligations. "CONSOLIDATED NET INCOME" for any period means the net income (or loss) of the Issuer and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein), without duplication: (34) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Issuer and the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer or any of its Wholly-Owned Restricted Subsidiaries during such period; -8- (35) except to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Issuer or any Restricted Subsidiary; (36) solely for purposes of calculating the Restricted Payments Basket, the net income of any Restricted Subsidiary during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period, except that the Issuer's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income; (37) for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets; (38) other than for purposes of calculating the Restricted Payments Basket, any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Issuer or any Restricted Subsidiary or (b) any Asset Sale by the Issuer or any Restricted Subsidiary; (39) any increase in amortization or depreciation of goodwill or other intangible assets resulting from purchase accounting in connection with the Merger; (40) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP; (41) unrealized gains and losses with respect to Hedging Obligations; (42) the cumulative effect of a change in accounting principles under GAAP; (43) any payments made in connection with the consummation of the Transactions as described in the Offering Memorandum; and (44) any extraordinary gain or loss and, other than for purposes of calculating the Restricted Payments Basket, any nonrecurring gain or loss, together, as applicable, with any related provision for taxes on any such extraordinary or nonrecurring gain (or the tax effect of any such extraordinary or nonrecurring loss), realized by the Issuer or any Restricted Subsidiary during such period. -9- In addition: (a) Consolidated Net Income shall be reduced by the amount of any payments to or on behalf of Parent or Holding made pursuant to Section 4.14(b)(4); and (b) any return of capital with respect to an Investment that increased the Restricted Payments Basket pursuant to Section 4.11(a)(3)(d) or decreased the amount of Investments outstanding pursuant to clause (12) of the definition of "Permitted Investment" shall be excluded from Consolidated Net Income for purposes of calculating the Restricted Payments Basket. For purposes of this definition of "Consolidated Net Income," "NONRECURRING" means any gain or loss as of any date that is not reasonably likely to recur within the two years following such date; provided that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the consolidated stockholders' equity of such Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) (1) any amounts thereof attributable to Disqualified Equity Interests of such Person or its Subsidiaries or any amount attributable to Unrestricted Subsidiaries and (2) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within twelve months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a Subsidiary of such Person. "CONTROL INVESTMENT AFFILIATE" means, as to any Person, any other Person which directly or indirectly is in control of, is controlled by, or is under common control with such Person and is organized by such Person (or any Person controlling such Person) primarily for making equity or debt investments in portfolio companies. "CORPORATE TRUST OFFICE" means the corporate trust office of the Trustee located at 700 S. Flower Street, Suite 500, Los Angeles, CA 90017, Attention: Corporate Trust Department, or such other office, designated by the Trustee by written notice to the Issuer, at which at any particular time its corporate trust business shall be administered. "COVERAGE RATIO EXCEPTION" has the meaning set forth in Section 4.10(a). "CREDIT AGREEMENT" means the Credit Agreement dated on or about the Issue Date by and among the Issuer, as Borrower, UBS AG, Stamford Branch, as administrative agent and collateral agent, UBS Securities LLC and Bear, Stearns & Co. Inc., as joint lead arrangers and bookrunners, and the other agents and lenders named therein, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith (including Hedging Obligations related to the Indebtedness incurred thereunder), and in each case as amended or refinanced from time to time. -10- "CREDIT FACILITIES" means one or more debt facilities (which may be outstanding at the same time and including, without limitation, the Credit Agreement) providing for revolving credit loans, term loans or letters of credit and, in each case, as such agreements may be amended, amended and restated, supplemented, modified, refinanced, replaced or otherwise restructured, in whole or in part from time to time (including increasing the amount of available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder), with respect to all or any portion of the Indebtedness under such agreement or agreements or any successor or replacement agreement or agreements and whether or not with the same or any other agent, lender or group of lenders and whether or not provided under the Credit Agreement or any other credit or other agreement or indenture. "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "DEFAULT" means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default. "DESIGNATED SENIOR DEBT" means (1) Senior Debt and Guarantor Senior Debt under or in respect of the Credit Agreement and (2) any other Indebtedness constituting Senior Debt or Guarantor Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt." "DESIGNATION" has the meaning given to this term in Section 4.19(a). "DESIGNATION AMOUNT" has the meaning given to this term in Section 4.19(a)(2). "DEPOSITORY" means The Depository Trust Company, New York, New York, or a successor thereto registered under the Exchange Act or other applicable statute or regulation. "DISQUALIFIED EQUITY INTERESTS" of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Notes; provided, however, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, however, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable -11- or exercisable) the right to require the Issuer to redeem such Equity Interests upon the occurrence of a change in control or an asset disposition occurring prior to the final maturity date of the Notes shall not constitute Disqualified Equity Interests if the change in control or asset disposition provisions applicable to such Equity Interests are no more favorable to such holders than the provisions set forth in Section 4.09 and Section 4.13 respectively, and such Equity Interests specifically provide that the Issuer will not redeem any such Equity Interests pursuant to such provisions prior to the Issuer's purchase of the Notes as required pursuant to the provisions described under Section 4.09 and Section 4.13 respectively. "EQUITY INTERESTS" of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person. "EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER" means the offer that may be made by the Issuer pursuant to the Registration Rights Agreement to exchange Notes bearing the Private Placement Legend for the Exchange Notes. "FAIR MARKET VALUE" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) that would be negotiated in an arm's-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction, as such price is determined in good faith by members of the Board of Directors of the Issuer disinterested with respect to the applicable transaction or a duly authorized committee thereof, as evidenced by a resolution of such Board or committee. "FOREIGN SUBSIDIARY" means any Restricted Subsidiary of the Issuer which (i) is not organized under the laws of (x) the United States or any State thereof or (y) the District of Columbia and (ii) conducts substantially all of its business operations outside the United States of America. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date. "GLOBAL NOTE" has the meaning given to such term in Section 2.01. -12- "GUARANTEE" means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); "GUARANTEE," when used as a verb, and "GUARANTEED" have correlative meanings. "GUARANTOR SENIOR DEBT" means, with respect to any Guarantor, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of such Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (45) all monetary obligations of every nature of such Guarantor under, or with respect to, the Credit Facilities, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (46) all Hedging Obligations in respect of the Credit Facilities; in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (47) any Indebtedness of such Guarantor owed to Parent or any of its Subsidiaries; (48) Indebtedness to, or guaranteed on behalf of, any director, officer or employee of Parent or any of its other Subsidiaries (including, without limitation, amounts owed for compensation); -13- (49) any accounts payable and other obligations to trade creditors and other amounts incurred (but not under the Credit Facilities) in connection with obtaining goods, materials or services; (50) Indebtedness represented by Disqualified Equity Interests; (51) any liability for taxes owed or owing by such Guarantor; (52) that portion of any Indebtedness incurred in violation of Section 4.10 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers' certificate of the Issuer to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); (53) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to such Guarantor; and (54) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "GUARANTORS" means Parent, Holding and each Restricted Subsidiary of the Issuer on the Issue Date, and each other Person that is required to, or at the election of the Issuer does, become a Guarantor by the terms of this Indenture after the Issue Date, in each case, until such Person is released from its Note Guarantee in accordance with the terms of this Indenture. "HEDGING OBLIGATIONS" of any Person means the obligations of such Person under swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies. "HOLDER" means any registered holder, from time to time, of the Notes. "HOLDING" means Communications & Power Industries Holding Corporation, a Delaware corporation, and its successors and assigns. "IAI GLOBAL NOTE" has the meaning given to such term in Section 2.01. "INCUR" means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary at such time and (2) neither the accrual of interest nor the accretion of original issue discount shall be deemed to be an incurrence of Indebtedness. -14- "INDEBTEDNESS" of any Person at any date means, without duplication: (55) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof); (56) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (57) all reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers' acceptances and similar credit transactions; (58) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services; (59) the maximum fixed redemption or repurchase price of all Disqualified Equity Interests of such Person; (60) all Capitalized Lease Obligations of such Person; (61) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (62) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Issuer or its Subsidiaries that is guaranteed by the Issuer or the Issuer's Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer and its Subsidiaries on a consolidated basis; (63) all Attributable Indebtedness; (64) to the extent not otherwise included in this definition, net obligations of such Person under Hedging Obligations of such Person (the amounts of any such obligations to be equal at any time to the termination value of such Hedging Obligation that would be payable by, or to, such Person at such time); and (65) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person. The amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of -15- others on the date that the Lien attaches and (b) the amount of the Indebtedness secured. For purposes of clause (5), the "maximum fixed redemption or repurchase price" of any Disqualified Equity Interests that do not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interests as if such Disqualified Equity Interests were redeemed or repurchased on any date on which an amount of Indebtedness outstanding shall be required to be determined pursuant to this Indenture. "INDENTURE" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "INDEPENDENT DIRECTOR" means a director of the Issuer who (66) is independent with respect to the transaction at issue; (67) does not have any material financial interest in the Issuer or any of its Affiliates (other than as a result of holding securities of Parent or Holding); and (68) has not and whose Affiliates or affiliated firm has not, at any time during the twelve months prior to the taking of any action hereunder, directly or indirectly, received, or entered into any understanding or agreement to receive, any compensation, payment or other benefit, of any type or form, from the Issuer or any of its Affiliates, other than customary directors' fees for serving on the Board of Directors of the Issuer or any Affiliate and reimbursement of out-of-pocket expenses for attendance at the Issuer's or Affiliate's board and board committee meetings. "INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Issuer's Board of Directors, qualified to perform the task for which it has been engaged and is not an Affiliate of the Issuer and is otherwise disinterested with respect to the applicable transaction. "INITIAL GLOBAL NOTES" has the meaning given to such term in Section 2.01. "INITIAL NOTES" has the meaning given to such term in Section 2.01. "INITIAL PURCHASERS" means UBS Securities LLC, Bear, Stearns & Co. Inc. and Wachovia Capital Markets, LLC. "INSTITUTIONAL ACCREDITED INVESTOR" or "IAI" means an "accredited investor" with the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INTEREST" means, with respect to the Notes, interest and Additional Interest, if any, on the Notes. "INTEREST PAYMENT DATE" means the Stated Maturity of an installment of interest on the Notes. -16- "INVESTMENTS" of any Person means: (69) all direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person; (70) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof); (71) all other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP (including, if required by GAAP, purchases of assets outside the ordinary course of business); and (72) the Designation of any Subsidiary as an Unrestricted Subsidiary. Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with Section 4.19. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Restricted Subsidiary not sold or disposed of, which amount shall be determined by the Board of Directors. The acquisition by the Issuer or any Restricted Subsidiary of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Issuer or such Restricted Subsidiary in the third Person in an amount equal to the Fair Market Value of the Investment held by the acquired Person in the third Person. Notwithstanding the foregoing, purchases or redemptions of Equity Interests of the Issuer, Parent or Holding shall be deemed not to be Investments. "ISSUE DATE" means the date on which the Notes are originally issued. "JUNIOR PREFERRED STOCK" means the Issuer's 14% Junior Cumulative Preferred Stock. "LIEN" means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, and any lease in the nature thereof, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases); provided, that in no event shall an operating lease constitute a Lien. -17- "MATURITY DATE" means February 1, 2012. "MERGER" means the merger of Merger Sub with and into Holding, with Holding as the surviving corporation. "MERGER SUB" means CPI Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Parent, and its successors and assigns. "MOODY'S" means Moody's Investors Service, Inc., and its successors. "NET AVAILABLE PROCEEDS" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, net of (73) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) of such Asset Sale; (74) relocation and demolition expenses incurred in connection with, or as a result of, such Asset Sale; (75) provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements); (76) amounts required to be paid to any Person (other than the Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or having a Lien thereon; (77) payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold at the time of, or within 30 days after the date of, such Asset Sale; and (78) appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any adjustment in the sale price of such asset or assets or liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds at such time; provided, that in the case of an Asset Sale of San Carlos, Net Available Proceeds shall mean the amount calculated in accordance with this definition in excess of $6.0 million. "NON-RECOURSE DEBT" means Indebtedness of an Unrestricted Subsidiary: (79) as to which neither the Issuer nor any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that -18- would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; (80) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Credit Agreement or the Notes) of the Issuer or any Restricted Subsidiary to declare a default on the other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity; and (81) as to which the lenders have been notified in writing that they will not have any recourse to the Equity Interests or assets of the Issuer or any Restricted Subsidiary. "NON-U.S. PERSON" has the meaning assigned to such term in Regulation S. "NOTE GUARANTEE" means the subordinated guarantee by each Guarantor of the Issuer's payment obligations under this Indenture and the Notes, executed pursuant to this Indenture. "NOTES" means, collectively, the Issuer's 8% Senior Subordinated Notes due 2012 issued in accordance with Section 2.02 (whether issued on the Issue Date, issued as Additional Notes, issued as Exchange Notes or Private Exchange Notes, or otherwise issued after the Issue Date) treated as a single class of securities under this Indenture, as amended or supplemented from time to time in accordance with the terms of this Indenture. "OBLIGATION" means any principal, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING MEMORANDUM" means the offering memorandum of the Issuers relating to the Notes dated January 15, 2004. "OFFICER" means any of the following of the Issuer or a Guarantor, as applicable: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers. "OPINION OF COUNSEL" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Issuer, a Guarantor or the Trustee. "PARENT" means CPI Acquisition Corp., a Delaware corporation, and its successors and assigns. -19- "PARI PASSU INDEBTEDNESS" means any Indebtedness of the Issuer or any Guarantor that ranks pari passu in right of payment with the Notes or the Note Guarantees, as applicable. "PERMANENT REGULATION S GLOBAL NOTE" has the meaning given to such term in Section 2.01. "PERMITTED BUSINESS" means the businesses engaged in by the Issuer and its Subsidiaries on the Issue Date as described in the Offering Memorandum and businesses that are reasonably related thereto or reasonable extensions thereof or complementary thereto. "PERMITTED HOLDER" means (i) Sponsor, (ii) its Control Investments Affiliates and (iii) any Person with whom Sponsor or any of its Control Investment Affiliates (x) is part of a "group" within the meaning of Section 13(d)(3) of the Exchange Act or (y) are parties to a Securityholders' Agreement; provided that clause (iii) will be applicable only if on the first date that Sponsor and its Control Investment Affiliates beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing less than a majority of the voting power of the total outstanding Voting Stock of the Issuer, the ratio of total Indebtedness of Issuer and the Restricted Subsidiaries on a consolidated basis on such date to Consolidated Cash Flow (calculated on a pro forma basis in accordance with Regulation S-X under the Exchange Act) for the Four-Quarter Period is not higher than such ratio on the Issue Date. "PERMITTED INVESTMENT" means: (82) Investments by the Issuer or any Restricted Subsidiary in (a) any Restricted Subsidiary or (b) in any Person that will become immediately after such Investment a Restricted Subsidiary or that will merge or consolidate into the Issuer or a Restricted Subsidiary; (83) Investments in the Issuer by any Restricted Subsidiary; (84) loans and advances to directors, employees and officers of the Issuer and the Restricted Subsidiaries for bona fide business purposes and to purchase Equity Interests of the Issuer not in excess of $2.0 million at any one time outstanding; (85) Hedging Obligations incurred pursuant to Section 4.10(b)(4); (86) cash and Cash Equivalents; (87) receivables owing to the Issuer or any 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 Issuer or any such Restricted Subsidiary deems reasonable under the circumstances; -20- (88) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (89) Investments made by the Issuer or any Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.13; (90) lease, utility and other similar deposits in the ordinary course of business; (91) Investments made by the Issuer or a Restricted Subsidiary for consideration consisting only of Qualified Equity Interests of the Issuer; (92) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments; and (93) other Investments in an aggregate amount not to exceed $15.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value). The amount of Investments outstanding at any time pursuant to clause (12) above shall be deemed to be reduced: (a) upon the disposition or repayment of or return on any Investment made pursuant to clause (12) above, by an amount equal to the return of capital or principal with respect to such Investment to the Issuer or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income), less the cost of the disposition of such Investment and net of taxes; and (b) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Issuer's proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clause (12) above. "PERMITTED JUNIOR SECURITIES" means: (94) Equity Interests in the Issuer or any Guarantor; or (95) debt securities that are subordinated to (a) all Senior Debt and Guarantor Senior Debt and (b) any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt and Guarantor Senior Debt under this Indenture. -21- "PERMITTED LIENS" means the following types of Liens: (96) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Issuer or the Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (97) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (98) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (99) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (100) judgment Liens not giving rise to a Default so long as such Liens are adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which the proceedings may be initiated has not expired; (101) easements, rights-of-way, zoning restrictions and other similar charges, restrictions or encumbrances in respect of real property or immaterial imperfections of title which do not, in the aggregate, impair in any material respect the ordinary conduct of the business of the Issuer and the Restricted Subsidiaries taken as a whole; (102) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof; (103) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer or any Restricted Subsidiary, including rights of offset and setoff; (104) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more of accounts maintained by the Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing -22- amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; (105) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer or any Restricted Subsidiary; (106) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (107) Liens securing all of the Notes and Liens securing any Note Guarantee; (108) Liens securing Senior Debt or Guarantor Senior Debt; (109) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date; (110) Liens in favor of the Issuer or a Guarantor; (111) Liens securing Indebtedness under the Credit Facilities; (112) Liens securing Purchase Money Indebtedness and Capitalized Lease Obligations; provided that such Liens shall not extend to any asset other than the specified asset being financed and additions and improvements thereon; (113) Liens securing Acquired Indebtedness permitted to be incurred under this Indenture; provided that the Liens do not extend to assets not subject to such Lien at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than those securing such Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary; (114) Liens on assets of Foreign Subsidiaries securing Indebtedness of Foreign Subsidiaries; (115) Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Issuer or any such Restricted Subsidiary (and not created in anticipation or contemplation thereof); (116) Liens to secure Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (13), (16), (17) and (18); provided that in the case of Liens securing Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (14) and (17) such Liens do not extend to any additional assets (other than improvements thereon and replacements thereof); (117) Liens to secure Attributable Indebtedness; provided that any such Lien shall not extend to or cover any assets of the Issuer or any Restricted Subsidiary other -23- than the assets which are the subject of the Sale and Leaseback Transaction in which the Attributable Indebtedness is incurred; (118) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and (119) Liens incurred in the ordinary course of business of the Issuer or any Restricted Subsidiary with respect to obligations that do not in the aggregate exceed $10.0 million at any one time outstanding. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "PLAN OF LIQUIDATION" with respect to any Person means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person. "PREFERRED STOCK" means, with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date. "PRINCIPAL" means, with respect to the Notes, the principal of, and premium, if any, on the Notes. "PRIVATE EXCHANGE" has the meaning given to it in the Registration Rights Agreement. "PRIVATE EXCHANGE NOTES" has the meaning given to it in the Registration Rights Agreement. "PRIVATE PLACEMENT LEGEND" means the legends initially set forth on the Notes in the form set forth in Exhibit B. "PURCHASE MONEY INDEBTEDNESS" means Indebtedness, including Capitalized Lease Obligations, of the Issuer or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer or any Restricted Subsidiary or the cost of installation, construction or improvement thereof; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost and (2) such Indebtedness shall be incurred within 90 days after such acquisi- -24- tion of such asset by the Issuer or such Restricted Subsidiary or such installation, construction or improvement. "QUALIFIED EQUITY INTERESTS" means Equity Interests of the Issuer other than Disqualified Equity Interests; provided that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of the Issuer or financed, directly or indirectly, using funds (1) borrowed from the Issuer or any Subsidiary of the Issuer until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Issuer or any Subsidiary of the Issuer (including, without limitation, in respect of any employee stock ownership or benefit plan). "QUALIFIED EQUITY OFFERING" means the issuance and sale of Qualified Equity Interests of Parent or Holding to Persons other than any Permitted Holder or any other Person who is not, prior to such issuance and sale, an Affiliate of Parent or Holding, other than in connection with a transaction or series of transactions constituting a Change of Control; provided, however, that cash proceeds therefrom equal to not less than 100% of the aggregate principal amount of any Notes to be redeemed are received by the Issuer as a capital contribution immediately prior to such redemption. "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "RECORD DATE" means the applicable Record Date specified in the Notes; provided that if any such date is not a Business Day, the Record Date shall be the first day immediately succeeding such specified day that is a Business Day. "REDEEM" means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and "REDEMPTION" shall have a correlative meaning; provided that this definition shall not apply for purposes of Section 5 or Section 6 of the Notes or Article III. "REDEMPTION DATE," when used with respect to any Note to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Notes. "REDEMPTION PRICE," when used with respect to any Note to be redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Notes. "REDESIGNATION" has the meaning given to such term in Section 4.19(d). "REFINANCE" means to refinance, repay, prepay, replace, renew or refund, including successively. "REFINANCING INDEBTEDNESS" means Indebtedness of the Issuer or a Restricted Subsidiary issued in exchange for, or the proceeds of which are used, within 90 days of such issuance or receipt of such proceeds to redeem or refinance in whole or in part, or constituting an -25- amendment of, any Indebtedness of the Issuer or any Restricted Subsidiary (the "REFINANCED INDEBTEDNESS"); provided that: (120) the principal amount (or accreted value, in the case of Indebtedness issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (or accreted value, as the case may be) of the Refinanced Indebtedness plus the amount of accrued and unpaid interest on the Refinanced Indebtedness, any premium paid to the holders of the Refinanced Indebtedness and reasonable expenses incurred in connection with the incurrence of the Refinancing Indebtedness; (121) the obligor of Refinancing Indebtedness does not include any Person (other than the Issuer or any Guarantor) that is not an obligor of the Refinanced Indebtedness; (122) if the Refinanced Indebtedness was subordinated to the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is subordinate in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness, and if the Refinanced Indebtedness was pari passu with the Notes or the Note Guarantees, as the case may be, then the Refinancing Indebtedness ranks pari passu with, or is subordinated in right of payment to the Notes or the Note Guarantees, as the case may be; (123) the Refinancing Indebtedness is scheduled to mature no earlier than the earlier of (a) the maturity of the Refinanced Indebtedness being repaid or amended or (b) after the maturity date of the Notes; and (124) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of January 23, 2004 among the Issuer, the Guarantors and the Initial Purchasers, as amended, supplemented or modified from time to time, and any similar agreement entered into in connection with the issuance of any Additional Notes. "REGULATION S" means Regulation S under the Securities Act. "REGULATION S GLOBAL NOTE" has the meaning given to such term in Section 2.01. "REPRESENTATIVE" means any agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt. -26- "RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any officer in the Corporate Trust Office of the Trustee to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject and shall also mean any officer who shall have direct responsibility for the administration of this Indenture. "RESTRICTED PAYMENT" means any of the following: (125) the declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding (a) dividends or distributions payable solely in Qualified Equity Interests and (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Issuer or to a Restricted Subsidiary and pro rata dividends or distributions payable to minority stockholders of any Restricted Subsidiary; (126) the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding any such Equity Interests held by the Issuer or any Restricted Subsidiary; (127) any Investment other than a Permitted Investment; or (128) any redemption prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness. "RESTRICTED PAYMENTS BASKET" has the meaning given to such term in Section 4.11(a). "RESTRICTED SECURITY" means a Note that constitutes a "Restricted Security" within the meaning of Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Issuer other than an Unrestricted Subsidiary. "RESTRUCTURING EXPENSES" means losses, charges and expenses incurred in connection with restructuring within the Issuer and/or one or more Restricted Subsidiaries, including in connection with integration of acquired businesses or Persons, disposition of one or more Subsidiaries or businesses, exiting of one or more lines of businesses and relocation or consolidation of facilities, including severance, lease termination and other non-ordinary course, non-operating costs and expenses in connection therewith. "RULE 144A" means Rule 144A under the Securities Act. -27- "S&P" means Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors. "SALE AND LEASEBACK TRANSACTIONS" means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset. "SAN CARLOS" means the Issuer's San Carlos, California facility. "SEC" means the U.S. Securities and Exchange Commission. "SECRETARY'S CERTIFICATE" means a certificate signed by the Secretary of the Issuer. "SECURITIES ACT" means the U.S. Securities Act of 1933, as amended. "SECURITYHOLDERS' AGREEMENT" means an agreement among the Sponsor and/or its Control Investment Affiliates and one or more Persons that beneficially own Voting Stock of the Issuer pursuant to which (i) the vote of the Sponsor and/or its Control Investment Affiliates is required for (a) the merger, consolidation or sale of all or substantially all of the assets of the Issuer (other than a merger, consolidation or sale of all or substantially all of the assets with or to Holding or Parent), (b) a sale of assets of the Issuer or any of its Subsidiaries with a Fair Market Value of $25.0 million or more (c) the incurrence of Indebtedness by the Issuer or any of its Subsidiaries of $25.0 million in principal amount or more and (ii) Sponsor and/or its Control Investment Affiliates shall be entitled to designate a number of directors of the Board of Directors of the Issuer at least proportional to its direct or indirect equity ownership of the Issuer (excluding directors who are also officers of the Issuer) but not less than one. "SENIOR DEBT" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Issuer, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: -28- (129) all monetary obligations of every nature under, or with respect to, the Credit Facilities, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (130) all Hedging Obligations in respect of the Credit Facilities; in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (131) any Indebtedness of the Issuer owed to Parent or any of its Subsidiaries; (132) Indebtedness to, or guaranteed on behalf of, any director, officer or employee of Parent or any of its Subsidiaries (including, without limitation, amounts owed for compensation); (133) any accounts payable and other obligations to trade creditors and other amounts incurred (but not under the Credit Facilities) in connection with obtaining goods, materials or services; (134) Indebtedness represented by Disqualified Equity Interests; (135) any liability for taxes owed or owing by the Issuer; (136) that portion of any Indebtedness incurred in violation of Section 4.10 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Issuer to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); (137) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Issuer; and (138) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Issuer. "SENIOR PREFERRED STOCK" means the Issuer's Series B 14% Senior Redeemable Exchangeable Cumulative Preferred Stock. "SIGNIFICANT SUBSIDIARY" means (1) any Restricted Subsidiary that would be a "significant subsidiary" as defined in Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and -29- as to which any event described in clause (7) or (8) under Section 6.01 has occurred and is continuing, would constitute a Significant Subsidiary under clause (1) of this definition. "SPONSOR" means one or more investment funds controlled by The Cypress Group L.L.C. "STOCKHOLDERS' AGREEMENT" means the stockholders' agreement dated on or about the Issue Date among Parent and its stockholders. "STATED MATURITY" means, with respect to any installment of interest or principal on any Indebtedness, the date on which such payment of interest or principal is scheduled to be paid in the documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Issuer or any Restricted Subsidiary that is subordinated in right of payment to the Notes or the Note Guarantees, respectively. "SUBSIDIARY" means, with respect to any Person: (139) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof are at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (140) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). Unless otherwise specified, "Subsidiary" refers to a Subsidiary of the Issuer. "SUBSIDIARY GUARANTOR" means any Guarantor other than Parent and Holding. "TEMPORARY REGULATION S GLOBAL NOTE" has the meaning given to such term in Section 2.01. "TRANSACTIONS" means the Merger and the transactions related thereto, the offering of senior subordinated notes being offered hereby, the redemption (including any defeasance in connection therewith) of the 12% Senior Subordinated Notes, the Senior Preferred Stock and the Junior Preferred Stock and borrowings made pursuant to the Credit Agreement. -30- "TREASURY RATE" means, with respect to a Redemption Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to such Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Redemption Date to February 1, 2008; provided, however, that if the period from such Redemption Date to February 1, 2008 is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such Redemption Date to February 1, 2008 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended. "TRUSTEE" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with Section 4.19 and (2) any Subsidiary of an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged. "U.S. LEGAL TENDER" means such coin or currency of the United States of America that at the time of payment shall be legal tender for the payment of public and private debts. "VOTING STOCK" with respect to any Person means securities of any class of Equity Interests of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY," when applied to any Indebtedness at any date, means the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness. "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of which 100% of the Equity Interests (except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stock- -31- holder, but which interest is not in excess of what is required for such purpose) are owned directly by the Issuer or through one or more Wholly-Owned Restricted Subsidiaries. SECTION 1.02. Other Definitions.
Term Defined in Section - ---- ------------------ "Additional Notes".......................................................... 2.02 "Affiliate Transaction"..................................................... 4.14 "Change of Control Offer"................................................... 4.09 "Change of Control Payment Date"............................................ 4.09 "Change of Control Purchase Price".......................................... 4.09 "Covenant Defeasance"....................................................... 8.02 "Coverage Ratio Exception".................................................. 4.10 "Designation"............................................................... 4.19 "Designation Amount"........................................................ 4.19 "Event of Default".......................................................... 6.01 "Excess Proceeds"........................................................... 4.13 "Four-Quarter Period"....................................................... 1.01 "Guarantee Obligations"..................................................... 11.01 "Legal Defeasance".......................................................... 8.02 "Net Proceeds Deficiency"................................................... 4.13 "Net Proceeds Offer"........................................................ 4.13 "Net Proceeds Payment Date"................................................. 4.13 "Non-Payment Default"....................................................... 10.02 "Offered Price"............................................................. 4.13 "Pari Passu Indebtedness Price"............................................. 4.13 "Parent Successor".......................................................... 5.01 "Participants".............................................................. 2.15 "Paying Agent".............................................................. 2.03 "Payment Amount"............................................................ 4.13 "Payment Blockage Notice"................................................... 10.02 "Payment Blockage Period"................................................... 10.02 "Payment Default"........................................................... 10.02 "Permitted Indebtedness".................................................... 4.10 "Physical Notes"............................................................ 2.01 "Redesignation"............................................................. 4.19 "Registrar"................................................................. 2.03 "Restricted Payments Basket"................................................ 4.11 "Successor"................................................................. 5.01 "Transaction Date" ......................................................... 1.01
-32- SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act, such provision is incorporated by reference in, and made a part of, this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings: "indenture securities" means the Notes. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Issuer, any Guarantor or any other obligor on the Notes. All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. 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) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (7) the words "including," "includes" and similar words shall be deemed to be followed by "without limitation." -33- ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Issuer shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and show the date of its authentication. Each Note shall have an executed Note Guarantee from each of the Guarantors existing on the Issue Date endorsed thereon substantially in the form of Exhibit F. The terms and provisions contained in the Notes and the Note Guarantees shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuer, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Note in registered form, substantially in the form set forth in Exhibit A (the "144A GLOBAL NOTE"), deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legends set forth in Exhibit B. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Note in registered form, substantially in the form of Exhibit A (the "TEMPORARY REGULATION S GLOBAL NOTE"), deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legends set forth in Exhibit B. Reasonably promptly following the date that is 40 days after the later of the commencement of the offering of the Notes in reliance on Regulation S and the Issue Date, upon receipt by the Trustee and the Issuer of a duly executed certificate certifying that the Holder of the beneficial interest in the Temporary Regulation S Global Note is a Non-U.S. Person, substantially in the form of Exhibit E from the Depository, a single permanent global Note in registered form substantially in the form of Exhibit A (the "PERMANENT REGULATION S GLOBAL NOTE," and together with the Temporary Regulation S Global Note, the "REGULATION S GLOBAL NOTE") duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as custodian for the Depository, and the Registrar shall reflect on its books and records the cancellation of the Temporary Regulation S Global Note and the issuance of the Permanent Regulation S Global Note. -34- The initial offer and resale of the Notes shall not be to an Institutional Accredited Investor. The Notes resold to Institutional Accredited Investors in connection with the first transfer made pursuant to Section 2.16(a) shall be issued initially in the form of a single permanent Global Note in registered form, substantially in the form set forth in Exhibit A (the "IAI GLOBAL NOTE," and, together with the 144A Global Note and the Regulation S Global Note, the "INITIAL GLOBAL NOTES"), deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit B. Notes issued after the Issue Date shall be issued initially in the form of one or more global Notes in registered form, substantially in the form set forth in Exhibit A, deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear any legends required by applicable law (together with the Initial Global Notes, the "GLOBAL NOTES") or as Physical Notes. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Notes issued in exchange for interests in a Global Note pursuant to Section 2.16 may be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A and bearing the applicable legends, if any, (the "PHYSICAL NOTES"). SECTION 2.02. Execution, Authentication and Denomination; Additional Notes; Exchange Notes One Officer of the Issuer (who shall have been duly authorized by all requisite corporate actions) shall sign the Notes for such Issuer by manual or facsimile signature. One Officer of a Guarantor (who shall have been duly authorized by all requisite corporate actions) shall sign the Note Guarantee for such Guarantor by manual or facsimile signature. If an Officer whose signature is on a Note or Note Guarantee, as the case may be, was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note (and the Guarantees in respect thereof) shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) on the Issue Date, Notes for original issue in the aggregate principal amount not to exceed $125,000,000 (the "Initial Notes"), (ii) additional Notes (the "ADDITIONAL NOTES") in an unlimited amount (so long as not otherwise prohibited by the terms of this Indenture, including, without limitation, Section 4.10) and (iii) Exchange Notes or Private Exchange Notes (x) in exchange for a like principal amount of Initial Notes or (y) in exchange for a like principal amount of Additional Notes in each case upon a written order of the -35- Issuer in the form of a certificate of an Officer of the Issuer (an "AUTHENTICATION ORDER"). Each such Authentication Order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Initial Notes, Exchange Notes, Private Exchange Notes or Additional Notes and whether the Notes are to be issued as certificated Notes or Global Notes or such other information as the Trustee may reasonably request. In addition, with respect to authentication pursuant to clause (ii) or (iii) of the first sentence of this paragraph, the first such Authentication Order from the Issuer shall be accompanied by an Opinion of Counsel of the Issuer in a form reasonably satisfactory to the Trustee. All Notes issued under this Indenture shall be treated as a single class for all purposes under this Indenture. The Additional Notes and the Private Exchange Notes shall bear any legend required by applicable law. The Trustee may appoint an authenticating agent reasonably acceptable to the Issuer to authenticate Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Issuer and Affiliates of the Issuer. The Trustee shall have the right to decline to authenticate and deliver any Notes under this Indenture if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability. The Notes shall be issuable only in registered form without coupons in denominations of $1,000 and integral multiples thereof. SECTION 2.03. Registrar and Paying Agent. The Issuer shall maintain or cause to be maintained an office or agency in the Borough of Manhattan, The City of New York, where (a) Notes may be presented or surrendered for registration of transfer or for exchange ("REGISTRAR"), (b) Notes may, subject to Section 2 of the Notes, be presented or surrendered for payment ("PAYING AGENT") and (c) notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain or cause to be maintained an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuer may act as Registrar or Paying Agent, except that for the purposes of Articles Three and Eight and Sections 4.09 and 4.13, neither the Issuer nor any Affiliate of the Issuer shall act as Paying Agent. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuer, upon notice to the Trustee, may have one or more co-registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Issuer initially appoints the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned or a successor has been appointed. -36- The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuer shall notify the Trustee, in advance, of the name and address of any such Agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Issuer shall require each Paying Agent other than the Trustee or the Issuer or any Subsidiary to agree in writing that, subject to Article Ten and Section 11.02, each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Notes (whether such assets have been distributed to it by the Issuer or any other obligor on the Notes), and shall notify the Trustee of any Default by the Issuer (or any other obligor on the Notes) in making any such payment. The Issuer at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuer to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least two (2) Business Days prior to 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 Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. Subject to Sections 2.15 and 2.16, when Notes are presented to the Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar, duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. Without the prior written consent of the Issuer, the Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of -37- business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part, and (iii) beginning at the opening of business on any Record Date and ending on the close of business on the related Interest Payment Date. Any Holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Notes may be effected only through a book-entry system maintained by the Holder of such Global Note (or its agent) in accordance with the applicable legends thereon, and that ownership of a beneficial interest in the Note shall be required to be reflected in a book-entry system. SECTION 2.07. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the Trustee's requirements are met. Such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Issuer and the Trustee, to protect the Issuer, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Issuer may charge such Holder for its reasonable out-of-pocket expenses in replacing a Note pursuant to this Section 2.07, including reasonable fees and expenses of counsel and of the Trustee. Every replacement Note is an additional obligation of the Issuer and every replacement Note Guarantee shall constitute an additional obligation of the Guarantor thereof. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of lost, destroyed or wrongfully taken Notes. SECTION 2.08. Outstanding Notes. Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Issuer, the Guarantors or any of their respective Affiliates hold the Note (subject to the provisions of Section 2.09). If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless a Responsible Officer of the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. If the principal amount of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date or the Maturity -38- Date the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof) holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer or any of its Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be disregarded. SECTION 2.10. Temporary Notes. Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuer considers appropriate for temporary Notes. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. Notwithstanding the foregoing, so long as the Notes are represented by a Global Note, such Global Note may be in typewritten form. SECTION 2.11. Cancellation. The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Issuer or a Subsidiary), and no one else, shall cancel and, at the written direction of the Issuer, shall dispose of all Notes surrendered for transfer, exchange, payment or cancellation in accordance with its customary procedures. Subject to Section 2.07, the Issuer may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Issuer or any Guarantor shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, in any lawful manner. The Issuer may pay the defaulted interest to the persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Issuer for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before any such subsequent special record -39- date, the Issuer shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP and ISIN Numbers. The Issuer in issuing the Notes may use "CUSIP" or "ISIN" numbers, and if so, the Trustee shall use the "CUSIP" or "ISIN" numbers in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the "CUSIP" or "ISIN" numbers printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Issuer will promptly notify the Trustee of any change in the "CUSIP" or "ISIN" numbers. SECTION 2.14. Deposit of Moneys. Subject to Section 2 of the Notes, prior to 10:00 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Payment Date, the Issuer shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Payment Date, as the case may be. SECTION 2.15. Book-Entry Provisions for Global Notes. (a) The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit B, as applicable. Members of, or participants in, the Depository ("PARTICIPANTS") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Note, and the Depository may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of Global Notes shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial inter- -40- ests in Global Notes if (i) the Depository notifies the Issuer that it is unwilling or unable to act as Depository for any Global Note, the Issuer so notifies the Trustee in writing and a successor Depository is not appointed by the Issuer within 90 days of such notice, (ii) the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in the form of Physical Notes under the Indenture, or (iii) a Default or Event of Default has occurred and is continuing and the Registrar has received a written request from any owner of a beneficial interest in a Global Note to issue Physical Notes. Upon any issuance of a Physical Note in accordance with this Section 2.15(b) the Trustee is required to register such Physical Note in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). All such Physical Notes shall bear the applicable legends, if any. (c) In connection with any transfer or exchange of a portion of the beneficial interest in a Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Issuer shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of authorized denominations in an aggregate principal amount equal to the principal amount of the beneficial interest in the Global Note so transferred. (d) In connection with the transfer of a Global Note as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and (i) the Issuer shall execute, (ii) the Guarantors shall execute notations of Note Guarantees on and (iii) the Trustee shall upon written instructions from the Issuer authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (f) The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.16. Special Transfer and Exchange Provisions. (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Restricted Security to any Institutional Accredited Investor which is not a QIB: (i) the Registrar shall register the transfer of any Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; provided, however, that neither the Issuer nor any Affiliate of the Issuer has held any beneficial interest in such Note, or portion -41- thereof, at any time on or prior to the second anniversary of the Issue Date or (y) the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto and any legal opinions and certifications as may be reasonably requested by the Trustee and the Issuer; (ii) if the proposed transferee is a Participant and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the IAI Global Note, upon receipt by the Registrar of the Physical Note and (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the certificate, if required, referred to in clause (y) of paragraph (i) above (and any legal opinion or other certifications), the Registrar shall register the transfer and reflect on its books and records the date and an increase in the principal amount of the IAI Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Registrar shall cancel the Physical Notes so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in a Global Note, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the certificate, if required, referred to in clause (y) of paragraph (i) above, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which such interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the IAI Global Note in an amount equal to the principal amount of the Notes to be transferred. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Restricted Security to a QIB: (i) the Registrar shall register the transfer of any Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; provided, however, that neither the Issuer nor any Affiliate of the Issuer has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date or (y) such transfer is being made by a proposed transferor who has checked the box provided for on the applicable Global Note stating, or has otherwise advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the applicable Global Note stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; -42- (ii) if the proposed transferee is a Participant and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the 144A Global Note, upon receipt by the Registrar of the Physical Note and written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its book and records the date and an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Registrar shall cancel the Physical Notes so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in the IAI Global Note or the Regulation S Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the IAI Global Note or the Regulation S Global Note, as the case may be, in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of the Notes to be transferred. (c) Transfers of Interests in the Temporary Regulation S Global Note. The following provisions shall apply with respect to the registration of any proposed transfer of interests in the Temporary Regulation S Global Note: (i) the Registrar shall register the transfer of an interest in the Temporary Regulation S Global Note, whether or not such Global Note bears the Private Placement Legend if the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit E stating, among other things, that the proposed transferee is a Non-U.S. Person (except for a transfer to an Initial Purchaser); (ii) if the proposed transferee is a Participant, upon receipt by the Registrar of the documents referred to in clause (i)(x) above, if required, and instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and amount of such transfer of an interest in the Temporary Regulation S Global Note. (d) Transfers to Non-U.S. Persons. The following provisions shall apply with respect to any transfer of a Restricted Security to a Non-U.S. Person under Regulation S: (i) the Registrar shall register any proposed transfer of a Restricted Security to a Non-U.S. Person upon receipt of a certificate substantially in the form of Exhibit D from the proposed transferor and such certifications, legal opinions and other information as the Trustee or the Issuer may reasonably request; and (ii) (a) if the proposed transferor is a Participant holding a beneficial interest in the Rule 144A Global Note or the IAI Global Note or the Note to be transferred consists of Physical Notes, upon receipt by the Registrar of (x) the documents required by paragraph (i) and (y) instructions in accordance with the Depository's and the Registrar's -43- procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Rule 144A Global Note or the IAI Global Note, as the case may be, in an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Note or the IAI Global Note, as the case may be, to be transferred or cancel the Physical Notes to be transferred, and (b) if the proposed transferee is a Participant, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Permanent Regulation S Global Note in an amount equal to the principal amount of the Rule 144A Global Note, the IAI Global Note or the Physical Notes, as the case may be, to be transferred. (e) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate one or more Global Notes and/or Physical Notes not bearing the Private Placement Legend in an aggregate principal amount equal to the principal amount of the beneficial interests in the Initial Global Notes or Physical Notes, as the case may be, tendered for acceptance in accordance with the Exchange Offer and accepted for exchange in the Exchange Offer. (f) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (g) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend unless otherwise required by applicable law, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (ii) such Note has been offered and sold (including pursuant to the Exchange Offer) pursuant to an effective registration statement under the Securities Act. (h) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or Section 2.16. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. -44- The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository Participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. The Trustee shall have no responsibility for the actions or omissions of the Depository, or the accuracy of the books and records of the Depository. (i) Cancellation and/or Adjustment of Global Note. At such time as all beneficial interests in a particular Global Note have been exchanged for Physical Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Physical Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Issuer elects to redeem Notes pursuant to Section 5 or Section 6 of the Notes, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of Notes to be redeemed. The Issuer shall give notice of redemption to the Trustee at least 45 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with such documentation and records as shall enable the Trustee to select the Notes to be redeemed. SECTION 3.02. Selection of Notes To Be Redeemed. If less than all of the Notes are to be redeemed at any time pursuant to Sections 5 and 6 of the Notes, the Trustee will select Notes for redemption as follows: -45- (x) if the Notes are listed on a national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (y) if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that, in the case of such redemption pursuant to Section 6(a) of the Notes, the Trustee will select the Notes on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the Depository) unless that method is otherwise prohibited. No Notes of $1,000 or less shall be redeemed in part. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Issuer shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Notes are to be redeemed at its registered address (except that a notice issued in connection with a redemption referred to in Section 8.01 may be more than 60 days before such Redemption Date). At the Issuer's request, the Trustee shall forward the notice of redemption in the Issuer's name and at the Issuer's expense. Each notice for redemption shall identify the Notes (including the CUSIP or ISIN number) to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (5) that, unless the Issuer defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Notes redeemed; (6) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender and cancellation of such Note, a new Note or Notes in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal -46- amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption; and (8) the Section of the Notes or the Indenture, as applicable, pursuant to which the Notes are to be redeemed. The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Except with respect to redemption pursuant to Section 6(b) of the Notes, notices of redemption may not be conditional. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to, but not including, the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. On and after the Redemption Date interest shall cease to accrue on Notes or portions thereof called for redemption unless the Issuer shall have not complied with its obligations pursuant to Section 3.05. SECTION 3.05. Deposit of Redemption Price. On or before 10:00 a.m. New York time on the Redemption Date, the Issuer shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued and unpaid interest, if any, of all Notes to be redeemed on that date. If the Issuer complies with the preceding paragraph, then, unless the Issuer defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment. SECTION 3.06. Notes Redeemed in Part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note or Notes in principal amount equal to the unredeemed portion of the original Note or Notes shall be issued in the name of the Holder thereof upon surrender and cancellation of the original Note or Notes. -47- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. The Issuer shall pay the principal of (and premium, if any) and interest on the Notes in the manner provided in the Notes, the Registration Rights Agreement and this Indenture. An installment of principal of, or interest on, the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof) holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Issuer shall pay interest on overdue principal (including, without limitation, post petition interest in a proceeding under any Bankruptcy Law), and overdue interest, to the extent lawful, at the same rate per annum borne by the Notes. SECTION 4.02. Maintenance of Office or Agency. The Issuer shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03 (which may be an office of the Trustee or an affiliate of the Trustee or Registrar). The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02. The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Issuer hereby initially designates The Bank of New York, located at 101 Barclay Street, New York, New York 10286, Lobby Level, Attn: Corporate Trust, as such office of the Issuer in accordance with Section 2.03. SECTION 4.03. Corporate Existence. Except as otherwise permitted by Article Five, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and material franchises of the Issuer and each of its Restricted Subsidiaries; provided, however, that the Issuer shall not be required to preserve any such right, franchise or corporate existence with respect to itself or any Restricted Subsidiary if the Board of Directors -48- shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.04. Payment of Taxes. The Issuer and the Guarantors shall, and shall cause each of the Restricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any of the Restricted Subsidiaries or upon the income, profits or property of it or any of the Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material liability or Lien upon the property of it or any of the Restricted Subsidiaries; provided, however, that the Issuer and the Guarantors shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount the applicability or validity is being contested in good faith by appropriate actions and for which appropriate provision has been made. SECTION 4.05. [Intentionally Omitted] SECTION 4.06. Compliance Certificate; Notice of Default. (a) The Issuer shall deliver to the Trustee, within 120 days after the close of each fiscal year, an Officers' Certificate stating that a review of the activities of the Issuer and its Subsidiaries has been made under the supervision of the signing Officers with a view to determining whether the Issuer and the Guarantors have kept, observed, performed and fulfilled their obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge, the Issuer and the Guarantors during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default occurred during such year and at the date of such certificate there is no Default that has occurred and is continuing or, if such signers do know of such Default, the certificate shall specify such Default and what action, if any, the Issuer is taking or proposes to take with respect thereto. The Officers' Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes the fiscal year end. (b) The Issuer shall deliver to the Trustee promptly and in any event within five days after the Issuer becomes aware of the occurrence of any Default an Officers' Certificate specifying the Default and what action, if any, the Issuer is taking or proposes to take with respect thereto. SECTION 4.07. [Intentionally Omitted] SECTION 4.08. Waiver of Stay, Extension or Usury Laws. The Issuer and each Guarantor covenants (to the extent permitted by applicable law) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit -49- or forgive such Issuer or such Guarantor from paying all or any portion of the principal of and/or interest on the Notes or the Note Guarantee of any such Guarantor as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent permitted by applicable law) each hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.09. Change of Control. Upon the occurrence of any Change of Control, each Holder of Notes will have the right to require the Issuer to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder's Notes pursuant to a Change of Control Offer (the "CHANGE OF CONTROL OFFER"). In the Change of Control Offer, the Issuer will offer to pay an amount in cash (the "CHANGE OF CONTROL PURCHASE PRICE") equal to 101% of the aggregate principal amount of Notes purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase. Within 30 days following any Change of Control, the Issuer will mail, or cause to be mailed, a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to purchase Notes on the date (the "CHANGE OF CONTROL PAYMENT DATE") specified in such notice, which date shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures described below. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the Change of Control Payment Date; (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Issuer defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; -50- (7) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered (equal to $1,000 or an integral multiple thereof); and (8) the circumstances and relevant facts regarding such Change of Control. On or before the Change of Control Payment Date, the Issuer will, to the extent lawful: (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Change of Control Purchase Price in respect of all Notes or portions thereof so tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Issuer. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Purchase Price for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Issuer will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Issuer shall cause the Change of Control Offer to remain open for at least 20 Business Days or for such longer period as may be required by law. The Issuer will comply, and will cause any third party making a Change of Control Offer to comply, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with a Change of Control Offer. To the extent the provisions of any applicable securities laws or regulations conflict with the provisions of this Section 4.09, the Issuer will not be deemed to have breached their obligations under this Section 4.09 by virtue of complying with such laws or regulations. -51- SECTION 4.10. Limitations on Additional Indebtedness. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness; provided that the Issuer or any Guarantor may incur additional Indebtedness if, after giving effect thereto, the Consolidated Interest Coverage Ratio would be at least 2.00 to 1.00 (the "COVERAGE RATIO EXCEPTION"). (b) Notwithstanding Section 4.10(a), each of the following shall be permitted (the "PERMITTED INDEBTEDNESS"): (1) Indebtedness of the Issuer, any Guarantor and/or the Canadian Subsidiary under the Credit Facilities in an aggregate principal amount at any time outstanding not to exceed $90.0 million, less, to the extent a permanent repayment and/or commitment reduction is required thereunder as a result of such application, the aggregate amount of Net Available Proceeds applied to repayments under the Credit Facilities in accordance with Section 4.13(d), plus the greater of (x) $40.0 million and (y) the sum of (i) 85% of the book value of the accounts receivable plus (ii) 65% of the book value of inventory of the Issuer and the Restricted Subsidiaries, calculated on a consolidated basis and in accordance with GAAP; (2) the Notes issued on the Issue Date and the Note Guarantees and the Exchange Notes and the Note Guarantees in respect thereof to be issued pursuant to the Registration Rights Agreement; (3) Indebtedness of the Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clauses (1) and (2) above, and after giving effect to the Transactions); (4) Indebtedness under Hedging Obligations entered into in the ordinary course of business for bona fide hedging purposes and not for the purpose of speculation that are designed to protect against fluctuations in interest rates, foreign currency exchange rates and commodity prices; provided that if such Hedging Obligations are of the type described in clause (1) of the definition thereof, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this Section 4.10, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate; (5) Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however, that upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have incurred Indebtedness not permitted by this clause (5); -52- (6) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Issuer or any Restricted Subsidiary in the ordinary course of business, including guarantees or obligations of the Issuer or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (7) Purchase Money Indebtedness incurred by the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed at any time outstanding $20.0 million; (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within fifteen Business Days of incurrence; (9) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business; (10) Refinancing Indebtedness with respect to Indebtedness incurred pursuant to the Coverage Ratio Exception or clauses (2) or (3) above or (12) below; (11) Indebtedness of the Issuer or a Restricted Subsidiary arising in connection with the sale, remediation or relocation work at San Carlos not to exceed $20.0 million at any time outstanding; provided that such Indebtedness shall be extinguished upon the consummation of the sale of San Carlos; (12) Indebtedness of Foreign Subsidiaries; provided that at the time of incurrence of Indebtedness under this clause (12) and after giving effect thereto, Consolidated Interest Coverage Ratio of the Foreign Subsidiaries (calculated by replacing the references to the Issuer in the relevant definitions to all Foreign Subsidiaries) is at least 2.00 to 1.00; and (13) Indebtedness of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $10.0 million at any time outstanding. (c) For purposes of determining compliance with this Section 4.10, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (13) of Section 4.10(b) or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall in its sole discretion, classify such item of Indebtedness and may divide and classify such Indebtedness in more than one of the types of Indebtedness described, except that Indebtedness incurred under the Credit Facilities on the Issue Date shall be deemed to have been incurred under clause (1) of Section 4.10(b) and may later reclassify any item of Indebtedness described in clauses (1) through (13) above (provided that at the time of reclassification it meets the criteria in such category or categories). In addition, for purposes of determining any particular amount of Indebtedness under this Section -53- 4.10, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness. SECTION 4.11. Limitations on Restricted Payments. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment if at the time of such Restricted Payment: (1) a Default shall have occurred and be continuing or shall occur as a consequence thereof; (2) the Issuer cannot incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or (3) the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after the Issue Date (other than Restricted Payments made pursuant to clause (2), (3), (4), (5), (6) or (7) of Section 4.11(b)), exceeds the sum (the "RESTRICTED PAYMENTS BASKET") of (without duplication): (a) 50% of Consolidated Net Income for the period (taken as one accounting period) commencing on the first day of the fiscal quarter in which the Issue Date occurs to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), plus (b) 100% of the aggregate net proceeds, including cash and the Fair Market Value of property other than cash, received by the Issuer either (x) as contributions to the common equity of the Issuer after the Issue Date, (y) from the repayment by Holding or Parent of loans made to it on the Issue Date by the Issuer out of the proceeds of this offering or the initial borrowing under the Credit Agreement or (z) from the issuance and sale of Qualified Equity Interests after the Issue Date, other than any such proceeds which are used to redeem Notes in accordance with Section 6(a) of the Notes, plus (c) the aggregate amount by which Indebtedness (other than any Subordinated Indebtedness) incurred by the Issuer or any Restricted Subsidiary subsequent to the Issue Date is reduced on the Issuer's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Issuer) into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Issuer or any Restricted Subsidiary upon such conversion or exchange), plus (d) in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an -54- amount (to the extent not included in the computation of Consolidated Net Income) equal to the lesser of (i) 100% of the aggregate amount received by the Issuer or any Restricted Subsidiary in cash or other property (valued at the Fair Market Value thereof) as the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, in either case, less the cost of the disposition of such Investment and net of taxes, plus (e) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Issuer's proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Issuer's Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced. (b) The foregoing provisions will not prohibit: (1) the payment by the Issuer or any Restricted Subsidiary of any dividend within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of this Indenture; (2) the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests; (3) the redemption of Subordinated Indebtedness of the Issuer or any Restricted Subsidiary (a) in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests; (b) in exchange for, or out of the proceeds of the substantially concurrent incurrence of, Refinancing Indebtedness permitted to be incurred under Section 4.10 and the other terms of this Indenture; or (c) upon a Change of Control or in connection with an Asset Sale to the extent required by the agreement governing such Subordinated Indebtedness but only if the Issuer shall have complied with Section 4.09 and Section 4.13 and purchased all Notes validly tendered pursuant to the relevant offer prior to purchasing or repaying such Subordinated Indebtedness; (4) payments to Parent or Holding to permit Parent or Holding, and which are used by Parent or Holding, to redeem Equity Interests of Parent held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), upon their death, disability, retirement, severance or termination of employment or service; provided that the aggregate cash consideration paid for all such redemptions shall not exceed $2.0 million during any calendar year (with unused amounts in any calendar year being usable, without duplication, in subsequent calendar years, provided that not more than $4.0 million of unused amounts from previous calendar years may be utilized in any single calendar year); -55- (5) payments, distributions, or Investments permitted pursuant to clauses (2), (3), (4), (10) and (11) of Section 4.14(b); (6) repurchases of Equity Interests deemed to occur upon the exercise of stock options or warrants if the Equity Interests represent a portion of the exercise price thereof; (7) any payments made in connection with the consummation of the Transactions as described in the Offering Memorandum, including any loans or distributions to Holding or Parent to make such payments; or (8) other Restricted Payments in an aggregate amount not to exceed $10.0 million; provided that (a) in the case of any Restricted Payment pursuant to clauses (2), (3) or (4) above, no Default shall have occurred and be continuing or occur as a consequence thereof and (b) to the extent the issuance and sale of Qualified Equity Interests are used to make a payment pursuant to clauses (2) or (3) above, such issuance and sale shall not increase the Restricted Payments Basket. SECTION 4.12. Limitations on Liens. The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any assets of the Issuer or any Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom securing any Indebtedness (other than Permitted Liens), unless contemporaneously therewith: (1) in the case of any Lien securing an obligation that ranks pari passu with the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, at least equally and ratably with or prior to such obligation with a Lien on the same collateral; and (2) in the case of any Lien securing an obligation that is subordinated in right of payment to the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, with a Lien on the same collateral that is prior to the Lien securing such subordinated obligation, in each case, for so long as such obligation is secured by such Lien. SECTION 4.13. Limitations on Asset Sales. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless: -56- (1) the Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; and (2) at least 75% of the total consideration received in such Asset Sale consists of cash or Cash Equivalents. (b) For purposes of clause (2) of Section 4.13(a), the following shall be deemed to be cash: (1) the amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Issuer or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Issuer or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, (2) the amount of any obligations received from such transferee that are within 30 days converted by the Issuer or such Restricted Subsidiary to cash (to the extent of the cash actually so received), and (3) the Fair Market Value of (i) any assets (other than securities) received by the Issuer or any Restricted Subsidiary to be used by it in a Permitted Business, (ii) Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the acquisition of such Person by the Issuer or (iii) a combination of (i) and (ii). (c) If at any time any non-cash consideration received by the Issuer or any Restricted Subsidiary of the Issuer, as the case may be, in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.13. (d) If the Issuer or any Restricted Subsidiary engages in an Asset Sale, the Issuer or such Restricted Subsidiary shall, no later than 365 days following the consummation thereof, apply all or any of the Net Available Proceeds therefrom to: (1) repay Senior Debt or Guarantor Senior Debt, and in the case of any such repayment under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility; (2) repay any Indebtedness which was secured by the assets sold in such Asset Sale; and/or (3) (A) invest all or any part of the Net Available Proceeds thereof in the purchase of assets (other than securities) to be used by the Issuer or any Restricted Subsidiary -57- in the Permitted Business, (B) acquire Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (C) a combination of (A) and (B). The amount of Net Available Proceeds not applied or invested as provided in this paragraph will constitute "EXCESS PROCEEDS". (e) When the aggregate amount of Excess Proceeds equals or exceeds $15.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows: (1) the Issuer will (a) make an offer to purchase (a "NET PROCEEDS OFFER") to all Holders in accordance with the procedures set forth below, and (b) redeem (or make an offer to do so) any such other Pari Passu Indebtedness, pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be redeemed, the maximum principal amount of Notes and Pari Passu Indebtedness that may be redeemed out of the amount (the "PAYMENT AMOUNT") of such Excess Proceeds; (2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds Offer is consummated (the "OFFERED PRICE"), in accordance with the procedures set forth in this Indenture and the redemption price for such Pari Passu Indebtedness (the "PARI PASSU INDEBTEDNESS PRICE") shall be as set forth in the related documentation governing such Indebtedness; (3) if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis; and (4) upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero. (f) To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfall constituting a "NET PROCEEDS DEFICIENCY"), the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of this Indenture. -58- (g) In the event of the transfer of substantially all (but not all) of the assets of the Issuer and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with Article Five, the successor shall be deemed to have sold for cash at Fair Market Value the assets of the Issuer and the Restricted Subsidiaries not so transferred for purposes of this Section 4.13, and the successor shall comply with the provisions of this Section 4.13 with respect to such deemed sale as if it were an Asset Sale (with such Fair Market Value being deemed to be Net Available Proceeds for such purpose). (h) Upon the commencement of a Net Proceeds Offer, the Issuer shall send, by first class mail, a notice to the Trustee and to each Holder at is registered address. The notice shall contain all instructions and materials necessary to enable such Holder to tender Notes pursuant to the Net Proceeds Offer. Any Net Proceeds Offer shall be made to all Holders. The notice, which shall govern the terms of the Net Proceeds Offer, shall state: (1) that the Net Proceeds Offer is being made pursuant to this Section; (2) the Payment Amount, the Offered Price, and the date on which Notes tendered and accepted for payment shall be purchased, which date shall be at least 30 days and not later than 60 days from the date such notices is mailed (the "NET PROCEEDS PAYMENT DATE"); (3) that any Notes not tendered or accepted for payment shall continue to accrue interest; (4) that, unless the Issuer defaults in making such payment, any Notes accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest on and after the Net Proceeds Payment Date; (5) that Holders electing to have any Notes purchased pursuant to any Net Proceeds Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Issuer, a depository, if appointed by the Issuer, or the Paying Agent at the address specified in the notice at least three days before the Net Proceeds Payment Date; (6) that Holders shall be entitled to withdraw their election if the Issuer, the Depository or the Paying Agent, as the case may be, receives, not later than the Net Proceeds Payment Date, a notice setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (7) that if the aggregate principal amount of Notes surrendered by Holders exceeds the Payment Amount, the Issuer shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and -59- (8) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry). (i) On the Net Proceeds Payment Date, the Issuer shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Net Proceeds Offer, subject to pro ration if the aggregate Notes tendered exceed the Payment Amount allocable to the Notes; (2) deposit with the Paying Agent U.S. Legal Tender equal to the lesser of the Payment Amount allocable to the Notes and the amount sufficient to pay the Offered Price in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being repurchased by the Issuer. The Issuer shall publicly announce the results of the Net Proceeds Offer on the Net Proceeds Payment Date. (j) The Paying Agent shall promptly mail to each Holder of Notes so tendered the Offered Price for such Notes, and the Trustee shall promptly authenticate pursuant to an Authentication Order and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unrepurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in principal amount of $1,000 or an integral multiple thereof. However, if the Net Proceeds Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Net Proceeds Offer. (k) The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.13, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.13 by virtue of this compliance. SECTION 4.14. Limitations on Transactions with Affiliates. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an "AFFILIATE TRANSACTION"), unless: (1) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm's-length basis by the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer or that Restricted Subsidiary; and -60- (2) the Issuer delivers to the Trustee: (x) with respect to any Affiliate Transaction involving aggregate value in excess of $5.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (1) above and a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted by the Independent Directors approving such Affiliate Transaction; and (y) with respect to any Affiliate Transaction involving aggregate value of $25.0 million or more, the certificates described in the preceding clause (x) and a written opinion as to the fairness of such Affiliate Transaction to the Issuer or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor. (b) The foregoing restrictions shall not apply to: (1) transactions exclusively between or among (a) the Issuer and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries; provided, in each case, that no Affiliate of the Issuer (other than another Restricted Subsidiary) owns Equity Interests of any such Restricted Subsidiary; (2) reasonable director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case approved by the Independent Directors, and payments to Parent or Holding or on behalf of Parent or Holding to pay such amounts incurred by Parent or Holding; (3) payments by the Issuer and/or one or more Subsidiaries to any other Person with which the Issuer or such Subsidiaries are required or permitted to file a consolidated tax return or with which the Issuer or such Subsidiaries are part of a consolidated group for tax purposes, to be used by such Person to pay taxes, and which payments by the Issuer and such Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis; (4) payments by the Issuer to or on behalf of Parent or Holding in an amount sufficient to pay out-of-pocket legal, accounting and filing costs, franchise taxes and other fees required to maintain the corporate existence of Parent or Holding actually incurred by Parent or Holding, in any case in an aggregate amount not to exceed $1.0 million in any calendar year; (5) loans and advances permitted by clause (3) of the definition of "Permitted Investment"; (6) any Restricted Payments which are made in accordance with Section 4.11; -61- (7) any transaction with an Affiliate where the only consideration paid by the Issuer or any Restricted Subsidiary is Qualified Equity Interests; (8) the payment of fees and other expenses to be paid by the Issuer or on behalf of Parent or Holding in connection with the consummation of the Transactions as described in the Offering Memorandum; (9) payments by the Issuer or on behalf of Parent or Holding to Sponsor and its Control Investment Affiliates for any (a) management, consulting, monitoring or advisory fees and expenses not in excess of $1.0 million per annum and (b) transaction fees and expenses not in excess of 2% of the value of the transaction for which such transaction fees and expenses are being paid; (10) the consolidation or merger of the Issuer and Holding as described in the Offering Memorandum; or (11) the unwinding of the terms of the sale-leaseback transaction between the Issuer and Holding relating to San Carlos and described in the consolidated financial statements of each of Holding and CPI for the fiscal year ended October 3, 2003. SECTION 4.15. Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions on or in respect of its Equity Interests; (b) make loans or advances or pay any Indebtedness or other obligation owed to the Issuer or any other Restricted Subsidiary; or (c) transfer any of its assets to the Issuer or any other Restricted Subsidiary; except for: (1) encumbrances or restrictions existing under or by reason of applicable law; (2) encumbrances or restrictions existing under this Indenture, the Notes and the Note Guarantees; (3) non-assignment provisions of any contract or any lease entered into in the ordinary course of business; -62- (4) encumbrances or restrictions existing under agreements existing on the date of this Indenture (including, without limitation, the Credit Facilities) as in effect on that date; (5) restrictions on the transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien; (6) restrictions on the transfer of assets imposed under any agreement to sell such assets permitted under this Indenture to any Person pending the closing of such sale; (7) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (8) any other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive than those in effect on the Issue Date pursuant to agreements in effect on the Issue Date; (9) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person; (10) Purchase Money Indebtedness incurred in compliance with Section 4.10, that impose restrictions of the nature described in clause (c) above on the assets acquired; (11) encumbrances or restrictions contained in Indebtedness of Foreign Subsidiaries permitted to be incurred under this Indenture; provided that any such encumbrances or restrictions are ordinary and customary with respect to the type of Indebtedness being incurred under the relevant circumstances and do not, in the good faith judgment of the Board of Directors of the Issuer, materially impair the Issuer's ability to make payment on the Notes when due; and (12) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (10) above; provided that such amendments or refinancings are, in the good faith judgment of the Issuer's Board of Directors, no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing. -63- SECTION 4.16. Additional Note Guarantees. (a) If, after the Issue Date, (x) the Issuer or any Restricted Subsidiary shall acquire or create another Subsidiary (other than a Foreign Subsidiary or a Subsidiary that has been designated an Unrestricted Subsidiary), (y) any Unrestricted Subsidiary is designated a Restricted Subsidiary (other than a Foreign Subsidiary) or (z) the Issuer otherwise elects to have any Restricted Subsidiary become a Guarantor, then, in each such case, the Issuer shall cause such Restricted Subsidiary to: (1) execute and deliver to the Trustee a supplemental indenture in form and substance satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuer's obligations under the Notes and this Indenture; and (2) deliver to the Trustee one or more opinions of counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture. (b) Notwithstanding Section 4.16(a), a Subsidiary Guarantor will be automatically and unconditionally released and discharged from its obligations under its Note Guarantee, the Indenture and the Registration Rights Agreement under the circumstances set forth in Section 11.05. The form of the Note Guarantee is attached hereto as Exhibit F. SECTION 4.17. Limitation on Layering Indebtedness. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur or suffer to exist any Indebtedness that is or purports to be by its terms (or by the terms of any agreement governing such Indebtedness) senior in right of payment to the Notes or the Note Guarantee of such Restricted Subsidiary and subordinated in right of payment to any other Indebtedness of the Issuer or of such Restricted Subsidiary, as the case may be. For purposes of the foregoing, no Indebtedness will be deemed to be subordinated in right of payment to any other Indebtedness of the Issuer or any Restricted Subsidiary solely by virtue of being unsecured or by virtue of the fact that the holders of such Indebtedness have entered into intercreditor agreements or other arrangements giving one or more of such holders priority over the other holders in the collateral held by them. SECTION 4.18. Reports to Holders. Whether or not required by the SEC, so long as any Notes are outstanding, the Issuer or Parent will furnish to the Holders of Notes, or file electronically with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval System (or any successor system), within the time periods that would be applicable to the Issuer or Parent, as applicable, if it were subject to Section 13(a) or 15(d) of the Exchange Act: -64- (1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Issuer or Parent, as applicable, were required to file these Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Issuer's or Parent's, as applicable, certified independent accountants; and (2) all current reports that would be required to be filed with the SEC on Form 8-K if the Issuer were required to file these reports. In addition, whether or not required by the SEC, the Issuer will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept the filing) and make the information available to prospective investors upon request. The Issuer and the Guarantors have agreed that, for so long as any Notes remain outstanding, the Issuer will furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Neither the Issuer nor any Guarantor shall provide information to any Person or the public not otherwise authorized to receive such information relative to performance requirements or performance contracts when such information requires access to information classified pursuant to Executive Order 12356, April 2, 1982 (47 Federal Register 14874, April 6, 1982), or successor or predecessor orders, or the Atomic Energy Act of 1954 (as amended). Neither the Issuer nor any Guarantor shall be required to acknowledge to any Person or the public not otherwise authorized to receive such information the existence or non-existence of work under special access or compartmented programs. Notwithstanding the foregoing, should the Issuer or any Guarantor withhold information permitted pursuant to this paragraph, such entity shall nonetheless use its commercially reasonable efforts to comply with the rules and regulations of the SEC relating to the information to be provided pursuant to the first paragraph above, but shall not be obligated to make disclosures required by the rules and regulations of the SEC to the extent such disclosures would conflict with the two preceding sentences. SECTION 4.19. Limitations on Designation of Unrestricted Subsidiaries. (a) The Issuer may designate any Subsidiary of the Issuer as an "Unrestricted Subsidiary" under this Indenture (a "DESIGNATION") only if: (1) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and (2) the Issuer would be permitted to make, at the time of such Designation, (a) a Permitted Investment or (b) an Investment pursuant to Section 4.11(a), in either case, in an amount (the "DESIGNATION AMOUNT") equal to the Fair Market Value of the Issuer's proportionate interest in such Subsidiary on such date. -65- (b) No Subsidiary shall be Designated as an "Unrestricted Subsidiary" unless such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Issuer or any Restricted Subsidiary unless the terms of the agreement, contract, arrangement or understanding are no less favorable to the Issuer or the Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates; (3) is a Person with respect to which neither the Issuer nor any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve the Person's financial condition or to cause the Person to achieve any specified levels of operating results; and (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Issuer or any Restricted Subsidiary, except for any guarantee given solely to support the pledge by the Issuer or any Restricted Subsidiary of the Equity Interests of such Unrestricted Subsidiary, which guarantee is not recourse to the Issuer or any Restricted Subsidiary. (c) If, at any time, any Unrestricted Subsidiary fails to meet the requirements of Section 4.19(a) and (b) as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under Section 4.10 or the Lien is not permitted under the covenant described under Section 4.12, the Issuer shall be in default of the applicable covenant. (d) The Issuer may designate an Unrestricted Subsidiary as a Restricted Subsidiary (a "REDESIGNATION") only if: (1) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and (2) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, have been permitted to be incurred or made for all purposes of this Indenture. (e) All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer, delivered to the Trustee certifying compliance with the foregoing provisions. -66- SECTION 4.20. Limitation on the Issuance or Sale of Equity Interests of Restricted Subsidiaries. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, sell or issue any shares of Equity Interests of any Restricted Subsidiary except (1) to the Issuer, a Restricted Subsidiary or the minority stockholders of any Restricted Subsidiary, on a pro rata basis, at Fair Market Value, or (2) to the extent such shares represent directors' qualifying shares or shares required by applicable law to be held by a Person other than the Issuer or a Wholly-Owned Restricted Subsidiary. The sale of all the Equity Interests of any Restricted Subsidiary is permitted by this Section 4.20 but is subject to Section 4.13. SECTION 4.21. Business Activities. The Issuer will not, and will not permit any Restricted Subsidiary to, engage in any business other than the Permitted Business. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Mergers, Consolidations, Etc. (a) The Issuer will not, directly or indirectly, in a single transaction or a series of related transactions, (i) consolidate or merge with or into another Person (other than a merger with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the Issuer's jurisdiction of incorporation to another State of the United States), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer or the Issuer and the Restricted Subsidiaries (taken as a whole) or (ii) adopt a Plan of Liquidation unless, in either case: (1) either: (a) the Issuer will be the surviving or continuing Person; or (b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the "SUCCESSOR") is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by supplemental indenture in form and substance satisfactory to the Trustee, all of the obligations of the Issuer under the Notes, this Indenture and the Registration Rights Agreement; (2) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the incurrence -67- of any Indebtedness to be incurred in connection therewith, no Default shall have occurred and be continuing; and (3) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, (a) the Consolidated Net Worth of the Issuer or the Successor, as the case may be, would be at least equal to the Consolidated Net Worth of the Issuer immediately prior to such transaction and (b) either (x) the Issuer or the Successor, as the case may be, could incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception or (y) the Consolidated Interest Coverage Ratio of the Issuer or the Successor, as the case may be, would be at least equal to the Consolidated Interest Coverage Ratio of the Issuer immediately prior to such transaction. For purposes of this Section 5.01(a), any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction. (b) Parent will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into another Person, or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of Parent and its Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in either case: (1) either: (a) Parent will be the surviving or continuing Person; or (b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the "PARENT SUCCESSOR") is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Parent Successor expressly assumes, by supplemental indenture in form and substance satisfactory to the Trustee, all of the obligations of Parent under its Note Guarantee, this Indenture and the Registration Rights Agreement; and (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing. (c) Except as provided in Section 11.05, no Guarantor (other than Parent) may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, unless: -68- (1) either: (a) such Guarantor will be the surviving or continuing Person; or (b) the Person formed by or surviving any such consolidation or merger is another Guarantor or assumes, by supplemental indenture in form and substance satisfactory to the Trustee, all of the obligations of such Guarantor under the Note Guarantee of such Guarantor, this Indenture and the Registration Rights Agreement, and, in the case of a consolidation or merger with Parent, is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia; and (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing. (d) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Equity Interests of which constitute all or substantially all of the properties and assets of the Issuer, will be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer or Parent, as the case may be. (e) Upon any such consolidation, combination or merger of the Issuer or a Guarantor, or any such transfer of all or substantially all of the assets of the Issuer or Parent in accordance with the foregoing, in which the Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer or such Guarantor is merged or the entity to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer or such Guarantor under this Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Issuer or such Guarantor and, except in the case of a lease, the Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Issuer's or such Guarantor's other obligations and covenants under the Notes, this Indenture and its Note Guarantee, if applicable. (f) Notwithstanding the foregoing, any Restricted Subsidiary may consolidate with or merge with or into the Issuer or another Restricted Subsidiary. -69- ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. Each of the following is an "EVENT OF DEFAULT": (1) failure by the Issuer to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days (whether or not such payment is prohibited by the subordination provisions of this Indenture); (2) failure by the Issuer to pay the principal on any of the Notes when it becomes due and payable, whether at Stated Maturity, upon redemption, upon purchase, upon acceleration or otherwise (whether or not such payment is prohibited by the subordination provisions of this Indenture); (3) failure by the Issuer to comply with Section 5.01 or in respect of its obligations to make a Change of Control Offer as described under Section 4.09 (whether or not such compliance is prohibited by the subordination provisions of this Indenture); (4) failure by the Issuer to comply with any other agreement or covenant in this Indenture and continuance of such failure for 60 days after notice of such failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding; (5) default under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness of the Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date, which default: (a) is caused by a failure to pay at final maturity, principal on such Indebtedness within the applicable express grace period and any extensions thereof, (b) results in the acceleration of such Indebtedness prior to its express final maturity or (c) results in the commencement of judicial proceedings to foreclose upon, or to exercise remedies under applicable law or applicable security documents to take ownership of, the assets securing such Indebtedness, and in each case, the principal amount of such Indebtedness, together with any other Indebtedness with respect to which an event described in clause (a), (b) or (c) has occurred and is continuing, aggregates $25.0 million or more; -70- (6) one or more judgments or orders that exceed $25.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; (7) the Issuer or any Significant 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 all or substantially all of its assets, or (d) makes a general assignment for the benefit of its creditors; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Issuer or any Significant Subsidiary as debtor in an involuntary case, (b) appoints a Custodian of the Issuer or any Significant Subsidiary or a Custodian for all or substantially all of the assets of the Issuer or any Significant Subsidiary, or (c) orders the liquidation of the Issuer or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 60 days; or (9) any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and this Indenture) or is declared null and void and unenforceable or found to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of this Indenture and the Note Guarantee). SECTION 6.02. Acceleration. (a) If an Event of Default specified in clause (7) or (8) of Section 6.01 with respect to the Issuer occurs, all outstanding Notes shall become due and payable without any further action or notice. If an Event of Default (other than an Event of Default specified in clause (7) or (8) of Section 6.01 with respect to the Issuer) shall have occurred and be continuing under this Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in -71- aggregate principal amount of the Notes then outstanding, by written notice to the Issuer and the Trustee, may declare (an "ACCELERATION DECLARATION") all amounts owing under the Notes to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal of and accrued and unpaid interest on the outstanding Notes shall become due and payable (a) if there is no Indebtedness outstanding under any Credit Facility at such time, immediately and (b) if otherwise, upon the earlier of (x) the final maturity (after giving effect to any applicable grace period or extensions thereof) or an acceleration of any Indebtedness under any Credit Facility prior to the express final Stated Maturity thereof and (y) five business days after the Representative under each Credit Facility receives the acceleration declaration, but only, if such Event of Default is then continuing; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of such outstanding Notes may rescind and annul such acceleration: (1) if the rescission would not conflict with any judgment or decree; (2) if all existing Defaults have been cured or waived except nonpayment of principal and interest that has become due solely because of this acceleration; (3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (4) if the Issuer has paid to the Trustee its reasonable compensation and reimbursed the Trustee of its expenses, disbursements and advances; and (5) in the event of a cure or waiver of a Default of the type set forth in Section 6.01(7) or (8), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. (b) The Issuer shall provide prompt written notice to the holders of Senior Debt and Guarantor Senior Debt of any acceleration pursuant to Section 6.02(a). SECTION 6.03. Other Remedies. If a Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, or interest on, the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon a Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. -72- SECTION 6.04. Waiver of Past Defaults. Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Notes (which may include consents obtained in connection with a tender offer or exchange offer of Notes) by notice to the Trustee may waive an existing Default and its consequences, except a Default in the payment of principal of, or interest on, any Note as specified in Section 6.01(1) or (2). The Issuer shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. When a Default is waived, it is cured and ceases. SECTION 6.05. Control by Majority. The Holders of not less than a majority in principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification against any loss or expense caused by taking such action or following such direction. SECTION 6.06. Limitation on Suits. No Holder will have any right to institute any proceeding with respect to this Indenture or for any remedy thereunder, unless the Trustee: (1) has failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at least 25% in aggregate principal amount of Notes outstanding; (2) has been offered indemnity satisfactory to it in its reasonable judgment; and (3) has not received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request. However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of or interest on such Note on or after the due date therefor. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. -73- SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, and interest on, a Note, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If a Default in payment of principal or interest 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 Issuer or any other obligor on the Notes for the whole amount of principal and accrued interest and fees remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Issuer, their creditors or their property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. The Trustee shall be entitled to participate as a member of any official committee of creditors in the matters as it deems necessary or advisable. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: First: to the Trustee for amounts due under Section 7.07; -74- Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Third: to Holders for principal amounts due and unpaid on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; and Fourth: to the Issuer or, if applicable, the Guarantors, as their respective interests may appear. The Trustee, upon prior notice to the Issuer, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Notes. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If a Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of a Default: (1) The Trustee need perform only those duties as are specifically set forth herein or in the Trust Indenture Act and no duties, covenants, responsibilities or obligations shall be implied in this Indenture against the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. -75- However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) Notwithstanding anything to the contrary herein, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of Section 7.01(b). (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (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) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the application of any money by any Paying Agent other than the Trustee. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may rely conclusively on any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or 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. -76- (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee) 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 reasonably believes to be authorized or within its rights or powers under this Indenture. (e) The Trustee may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Issuer, to examine the books, records, and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer. (h) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. (j) Except with respect to Section 4.01 and 4.06, the Trustee shall have no duty to inquire as to the performance of the Issuer with respect to the covenants contained in Article 4. In addition, the Trustee shall not be deemed to have knowledge of an Event of Default except (i) any Default or Event of Default occurring pursuant to Sections 4.01, 6.01(1) or 6.01(2) or (ii) any Default or Event of Default of which the Trustee shall have received written notification. -77- (k) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer, its Subsidiaries or its respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in this Indenture or any document issued in connection with the sale of Notes or any statement in the Notes other than the Trustee's certificate of authentication. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture. SECTION 7.05. Notice of Default. If a Default occurs and is continuing and the Trustee receives actual notice of such Default, the Trustee shall mail to each Holder notice of the uncured Default within 30 days after such Default occurs. Except in the case of a Default in payment of principal of, or interest on, any Note, including an accelerated payment and the failure to make a payment on the Change of Control Payment Date pursuant to a Change of Control Offer or the Net Proceeds Payment Date pursuant to a Net Proceeds Offer, or a Default in complying with the provisions of Article Five, the Trustee may withhold the notice if and so long as the Board of Directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determines that withholding the notice is in the interest of the Holders. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each January 1, beginning with January 1, 2005, the Trustee shall, to the extent that any of the events described in Trust Indenture Act Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with Trust Indenture Act Section 313(a). The Trustee also shall comply with Trust Indenture Act Sections 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Holders shall be mailed to the Issuer and filed with the SEC and each securities exchange, if any, on which the Notes are listed. -78- The Issuer shall notify the Trustee if the Notes become listed on any securities exchange or of any delisting thereof and the Trustee shall comply with Trust Indenture Act Section 313(d). SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to the Trustee from time to time such compensation as the Issuer and the Trustee shall from time to time agree in writing for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence, bad faith or willful misconduct. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Issuer shall indemnify each of the Trustee or any predecessor Trustee and its agents for, and hold them harmless against, any and all loss, damage, claims including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), liability or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against or investigating any claim or liability in connection with the exercise or performance of any of the Trustee's rights, powers or duties hereunder. The Trustee shall notify the Issuer promptly of any claim asserted against the Trustee or any of its agents for which it may seek indemnity. The Issuer may, subject to the approval of the Trustee (which approval shall not be unreasonably withheld), defend the claim and the Trustee shall cooperate in the defense. The Trustee and its agents subject to the claim may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel; provided, however, that the Issuer will not be required to pay such fees and expenses if, subject to the approval of the Trustee (which approval shall not be unreasonably withheld), it assumes the Trustee's defense and there is no conflict of interest between the Issuer and the Trustee and its agents subject to the claim in connection with such defense as reasonably determined by the Trustee. The Issuer need not pay for any settlement made without its written consent. The Issuer need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Issuer's payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes against all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal and interest on particular Notes. The obligations of the Issuer and the Guarantors under this Section shall not be subordinated to the payment of Senior Debt pursuant to Article Ten or Section 11.02 except assets or money held in trust to pay principal of or interest on particular Notes. -79- When the Trustee incurs expenses or renders services after a Default specified in Section 6.01(7) or (8) occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law. Notwithstanding any other provision in this Indenture, the foregoing provisions of this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the appointment of a successor Trustee. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Issuer in writing. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Issuer and the Trustee and may appoint a successor Trustee. The Issuer may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of at least 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Issuer. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. -80- Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided that such corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of Trust Indenture Act Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $150,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with Trust Indenture Act Section 310(b); provided, however, that there shall be excluded from the operation of Trust Indenture Act Section 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding, if the requirements for such exclusion set forth in Trust Indenture Act Section 310(b)(1) are met. The provisions of Trust Indenture Act Section 310 shall apply to the Issuer and any other obligor of the Notes. SECTION 7.11. Preferential Collection of Claims Against the Issuer. The Trustee, in its capacity as Trustee hereunder, shall comply with Trust Indenture Act Section 311(a), excluding any creditor relationship listed in Trust Indenture Act Section 311(b). A Trustee who has resigned or been removed shall be subject to Trust Indenture Act Section 311(a) to the extent indicated. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Issuer's Obligations. The Issuer may terminate its obligations under the Notes and this Indenture and the obligations of the Guarantors under the Note Guarantees and the Indenture and this Indenture shall cease to be of further effect, except those obligations referred to in the penultimate paragraph of this Section 8.01, if: (1) all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or -81- (2) (a) all Notes not delivered to the Trustee for cancellation otherwise have become due and payable or have been called for redemption pursuant to Section 5 or Section 6 of the Notes and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in trust sufficient to pay and discharge the entire Indebtedness (including all principal and accrued interest) on the Notes not theretofore delivered to the Trustee for cancellation, (b) the Issuer has paid all sums payable by them under this Indenture, and (c) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be. In addition, in the case of clause (2), the Issuer must deliver an Officer's Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been complied with. In the case of clause (2) of this Section 8.01, and subject to the next sentence and notwithstanding the foregoing paragraph, the Issuer's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 4.03 (as to legal existence of the Issuer only), 7.07, 8.05 and 8.06 shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.08. After the Notes are no longer outstanding, the Issuer's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuer's obligations under the Notes and this Indenture except for those surviving obligations specified above. SECTION 8.02. Legal Defeasance and Covenant Defeasance. (a) The Issuer may, at its option and at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.03. (b) Upon the Issuer's exercise under Section 8.02(a) hereof of the option applicable to this Section 8.02(b), the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from their obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Issuer and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Note Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture and the Guarantors shall be deemed to have satisfied all of their obligations under the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense -82- of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive, solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section 8.04, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due; (ii) the Issuer's obligations with respect to such Notes under Article Two and Section 4.02 hereof; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer's obligations in connection therewith; and (iv) the provisions of this Article Eight applicable to Legal Defeasance. Subject to compliance with this Article Eight, the Issuer may exercise its option under this Section 8.02(b) notwithstanding the prior exercise of its option under Section 8.02(c) hereof. (c) Upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.03 hereof, be released from their respective obligations under the covenants contained in Sections 4.03 (other than with respect to the legal existence of the Issuer), 4.04 and 4.09 through 4.21, clause (3) of Section 5.01(a) and Article 11 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.03 are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, clauses (3), (4), (5), (6) and (9) of Section 6.01 hereof shall not constitute Events of Default. SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Notes: -83- (1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. Legal Tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment), in the opinion of a nationally recognized firm of independent public accountants selected by the Issuer, to pay the principal of and interest and premium, if any, on the Notes on the stated date for payment or on the redemption date of the Notes, (2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: (a) the Issuer has received from, or there has been published by the Internal Revenue Service, a ruling, or (b) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred, (3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. 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, (4) no Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such deposit), (5) the Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a Default under this Indenture or a default under any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound (other than any such Default or default resulting solely from the borrowing of funds to be applied to such deposit). (6) the Issuer shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by it with the intent of preferring the Holders over any other creditors of the Issuer or with the intent of defeating, hindering, delaying or defrauding any other of its creditors, and -84- (7) the Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the conditions provided for in, in the case of the Officers' Certificate, clauses (1) through (6), as applicable, and, in the case of the Opinion of Counsel, clauses (2), if applicable, and/or (3) and (5) of this Section 8.03 have been complied with. SECTION 8.04. Application of Trust Money. The Trustee or Paying Agent shall hold in trust U.S. Legal Tender and U.S. Government Obligations deposited with it pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of the principal of and the interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender and U.S. Government Obligations, except as it may agree with the Issuer. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender and U.S. Government Obligations deposited pursuant to Section 8.03 or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the Issuer's request any U.S. Legal Tender and U.S. Government Obligations held by it as provided in Section 8.03 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.05. Repayment to the Issuer. The Trustee and the Paying Agent shall pay to the Issuer upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Issuer cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Issuer. After payment to the Issuer, Holders entitled to such money must look to the Issuer for payment as general creditors unless an applicable law designates another Person. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender and U.S. Government Obligations in accordance with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, or if the funds deposited with the Trustee to effect -85- Covenant Defeasance are insufficient to pay the principal of, and interest on, the Notes when due, the Issuer's obligations under this Indenture, and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender and U.S. Government Obligations in accordance with this Article Eight; provided that if the Issuer has made any payment of interest on, or principal of, any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender and U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. (a) Subject to Section 9.03, the Issuer, the Guarantors and the Trustee, together, may amend or supplement this Indenture, the Notes or the Note Guarantees without notice to or consent of any Holder: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Issuer's or a Guarantor's obligations to the Holders of the Notes in the case of a merger, consolidation or sale of all or substantially all of the assets, in accordance with Article Five; (4) to release any Guarantor from any of its obligations under its Note Guarantee or this Indenture (to the extent permitted by this Indenture); (5) to make any change that would not materially adversely affect the rights of any Holder; or (6) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; provided that the Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. (a) Subject to Sections 6.07 and 9.03, the Issuer, the Guarantors and the Trustee, together, with the written consent of the Holder or Holders of a majority in aggregate principal amount of the outstanding Notes may amend or supplement this Indenture, the Notes or the -86- Note Guarantees, without notice to any other Holders. Subject to Sections 6.07 and 9.03, the Holder or Holders of a majority in aggregate principal amount of the outstanding Notes may waive compliance with any provision of this Indenture, the Notes or the Note Guarantees without notice to any other Holders; (b) Notwithstanding Section 9.02(a), without the consent of each Holder affected, no amendment or waiver may: (1) reduce, or change the maturity, of the principal of any Note; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce any premium payable upon optional redemption of the Notes, or change the date on, or the circumstances upon, which any Notes are subject to redemption (other than provisions of Section 4.09 and Section 4.13, except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected); (4) make any Note payable in money or currency other than that stated in the Notes; (5) modify or change any provision of this Indenture or the related definitions affecting the subordination of the Notes or any Note Guarantee in a manner that adversely affects the Holders; (6) reduce the percentage of Holders necessary to consent to an amendment or waiver to this Indenture or the Notes; (7) waive a default in the payment of principal of or premium or interest on any Notes (except a rescission of acceleration of the Notes by the Holders thereof as provided in this Indenture and a waiver of the payment default that resulted from such acceleration); (8) impair the rights of Holders to receive payments of principal of or interest on the Notes on or after the due date therefor or to institute suit for the enforcement of any payment on the Notes; or (9) release any Guarantor which is a Significant Subsidiary from any of its obligations under its Note Guarantee or this Indenture, except as permitted by this Indenture; or (10) make any change in these amendment and waiver provisions. -87- (c) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver but it shall be sufficient if such consent approves the substance thereof. (d) A consent to any amendment, supplement or waiver under this Indenture by any Holder given in connection with an exchange (in the case of an exchange offer) or a tender (in the case of a tender offer) of such Holder's Notes will not be rendered invalid by such tender or exchange. (e) After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. SECTION 9.03. Effect on Senior Debt. No amendment of, or supplement or waiver to, this Indenture shall adversely affect the rights of any holder of Senior Debt or Guarantor Senior Debt under Article Ten and Section 11.02 and the defined terms as used therein without the consent of such holder or its Representative. SECTION 9.04. Compliance with the Trust Indenture Act. From the date on which this Indenture is qualified under the Trust Indenture Act, every amendment, waiver or supplement of this Indenture, the Notes or the Note Guarantees shall comply with the Trust Indenture Act as then in effect. SECTION 9.05. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of his Note by notice to the Trustee or the Issuer received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for -88- more than 90 days after such record date. The Issuer shall inform the Trustee in writing of the fixed record date if applicable. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (1) through (10) of Section 9.02(b), in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of, and interest on, a Note, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.06. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Issuer may require the Holder of the Note to deliver it to the Trustee. The Issuer shall provide the Trustee with an appropriate notation on the Note about the changed terms and cause the Trustee to return it to the Holder at the Issuer's expense. Alternatively, if the Issuer or the Trustee so determines, the Issuer in exchange for the Note shall issue, and the Trustee shall authenticate, a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.07. Trustee To Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and constitutes legal, valid and binding obligations of the Issuer enforceable in accordance with its terms. Such Opinion of Counsel shall be at the expense of the Issuer. ARTICLE TEN SUBORDINATION OF NOTES SECTION 10.01. Notes Subordinated to Senior Debt. Anything herein to the contrary notwithstanding, each of the Issuer, for itself and its successors, and each Holder, by his or her acceptance of Notes, agrees that the payment of all Obligations owing to the Holders in respect of the Notes is subordinated, to the extent and in the manner provided in this Article Ten, to the prior payment in full of all Senior Debt in cash or cash equivalents, whether outstanding on the Issue Date or thereafter incurred. Notwithstanding anything in this Article 10 to the contrary, payments and distributions (A) of Permitted Junior -89- Securities and (B) made relating to the Notes from the trust established pursuant to Article Eight shall not be so subordinated in right of payment, so long as, with respect to (B), (i) the conditions specified in Article Eight (without any waiver or modification of the requirement that the deposits pursuant thereto do not conflict with the terms of the Credit Facilities or any other Senior Debt) are satisfied on the date of any deposit pursuant to said trust and (ii) such payments and distributions did not violate the provisions of this Article Ten or Section 11.02 of this Indenture when made. This Article Ten shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 10.02. Suspension of Payment When Senior Debt Is in Default. (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or fees with respect to, any Senior Debt (a "PAYMENT DEFAULT"), then no payment or distribution of any kind or character shall be made by the Issuer with respect to any Obligations on or relating to the Notes or to acquire any of the Notes for cash or assets or otherwise. (b) If any other event of default (other than a Payment Default) occurs and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a "NON-PAYMENT DEFAULT") and if the Representative for the respective issue of Designated Senior Debt gives written notice of the Non-Payment Default to the Trustee stating that such notice is a payment blockage notice (a "PAYMENT BLOCKAGE NOTICE"), then during the period (the "PAYMENT BLOCKAGE PERIOD") beginning upon the delivery of such Payment Blockage Notice and ending on the earliest of (1) the date on which all such nonpayment defaults are cured or waived, (2) 179 days after the date on which the applicable Payment Blockage Notice is received or (3) the date on which the Trustee receives notice from the Representative for such Designated Senior Debt rescinding the Payment Blockage Notice (unless in each case the maturity of any Designated Senior Debt has been accelerated), the Issuer shall not (x) make any payment of any kind or character with respect to any Obligations on or with respect to the Notes or (y) acquire any of the Notes for cash or assets or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 179 days from the date the applicable Payment Blockage Notice is received by the Trustee and (y) no new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. For all purposes of this Section 10.02(b), no Non-Payment Default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such Non-Payment Default -90- shall have been cured or waived for a period of not less than 90 consecutive days. Any subsequent action, or any breach of any financial covenants for a period ending after the date of commencement of such Payment Blockage Period that, in either case, would give rise to a Non-Payment Default pursuant to any provisions under which a Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 10.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts outstanding on the Senior Debt, if any, received from the holders of the Senior Debt (or their Representatives). Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of the Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or cash equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes. SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of the Issuer. (a) Upon any payment or distribution of assets of the Issuer of any kind or character, whether in cash, assets or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, assignment for the benefit of creditors or marshaling of assets and liabilities of the Issuer or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Issuer or its assets, whether voluntary or involuntary, all Obligations due or to become due on all Senior Debt shall first be paid in full in cash or cash equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on or relating to the Notes, or for the acquisition of any of the Notes for cash or assets or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, assets or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Issuer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until -91- all such Senior Debt has been paid in full in cash or cash equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Issuer, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be for purpose of this Article 10 deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of the Issuer's obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or cash equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Article Ten, with any turnover of payments as otherwise calculated pursuant to this Article Ten to be made as if no such diminution had occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, assets or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or cash equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Issuer with, or the merger of the Issuer with or into, another Person or the liquidation or dissolution of the Issuer following the conveyance or transfer of all or substantially all of its assets, to another Person upon the terms and conditions provided in Article Five hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other Person shall, as a part of such consolidation, merger, conveyance or transfer, assume the Issuer's obligations hereunder in accordance with Article Five hereof. SECTION 10.04. Payments May Be Made on Notes. Nothing contained in this Article Ten or elsewhere in this Indenture shall prevent (i) the Issuer, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of, and interest on, the -92- Notes, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of, and interest on, the Notes to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Responsible Officer of the Trustee shall have actually received the written notice provided for in the first sentence of Section 10.02(b) or in Section 10.07 (provided that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Section 10.02 and/or 10.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 10.02 and Section 10.03). Notwithstanding anything to the contrary contained in this Article Ten or elsewhere in this Indenture, payments and distributions from the funds deposited pursuant to Article Eight will be permitted to be made and will not be subject to the provisions of this Article Ten so long as such funds were deposited in accordance with the provisions of Article Eight and did not violate the provisions of this Article Ten when such funds were so deposited. The Issuer shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Issuer, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt. Subject to the payment in full of all Senior Debt in cash or cash equivalents, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, assets or securities of the Issuer applicable to the Senior Debt until the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Issuer, or by or on behalf of the Holders by virtue of this Article Ten, which otherwise would have been made to the Holders shall, as between the Issuer and the Holders, be deemed to be a payment by the Issuer to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. SECTION 10.06. Obligations of the Issuer Unconditional. Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Issuer, and the Holders, the obligation of the Issuer, which is absolute and unconditional, to pay to the Holders the principal of, and any interest on, the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Issuer other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Note or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, of the holders of Senior Debt in respect of cash, assets or securities of the Issuer received upon the exercise of any such remedy. -93- SECTION 10.07. Notice to Trustee. The Issuer shall give prompt written notice to the Trustee of any fact known to the Issuer which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Issuer, or from a holder of Senior Debt or a Representative therefor and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of any notice pursuant to this Section 10.07 to establish that such notice has been given by a holder of Senior Debt (or a Representative thereof). In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the satisfaction of the Trustee as to the amounts of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Issuer referred to in this Article Ten, the Trustee, subject to the provisions of Article Seven hereof, and the Holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders of the Notes, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. SECTION 10.09. Trustee's Relation to Senior Debt. The Trustee and any agent of the Issuer or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. -94- With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt. Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may be made and the notice may be given to their Representative, if any. SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders of Senior Debt. No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Issuer with the terms of this Indenture, regardless of any knowledge thereof, which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Notes and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Notes to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Issuer and any other Person. SECTION 10.11. Holders Authorize Trustee To Effectuate Subordination of Notes. Each Holder of the Notes by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders of the Notes, the subordination provided in this Article Ten, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Issuer (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Issuer, the filing of a claim for the unpaid balance of its Notes and accrued interest in the form required in those proceedings. -95- If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize, consent to, accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.12. This Article Ten Not To Prevent Events of Default. The failure to make a payment on account of principal of, or interest on, the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. SECTION 10.13. Trustee's Compensation Not Prejudiced. Nothing in this Article Ten will apply to amounts due to the Trustee (other than payments of Obligations owing to Holders in respect of the Notes) pursuant to other Sections of this Indenture. ARTICLE ELEVEN NOTE GUARANTEE SECTION 11.01. Guarantee. Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the -96- absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives, to the extent permitted by applicable law, diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenant that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. SECTION 11.02. Subordination of Note Guarantee. The Obligations of each Guarantor under its Note Guarantee pursuant to this Article 11 shall be subordinated to the Guarantor Senior Debt of such Guarantor on the same basis as the Notes are subordinated to Senior Debt of the Issuer. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article Ten hereof. SECTION 11.03. Limitation on Guarantor Liability. Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any -97- collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Guarantor under this Article Eleven, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Each Subsidiary Guarantor that makes a payment for distribution under its Note Guarantee is entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the adjusted net assets of each Subsidiary Guarantor. SECTION 11.04. Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by an Officer. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. SECTION 11.05. Release of a Subsidiary Guarantor. A Subsidiary Guarantor shall be released from its obligations under its Note Guarantee and its obligations under this Indenture and the Registration Rights Agreement: (1) in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Equity Interests of such Subsidiary Guarantor then held by the Issuer and the Restricted Subsidiaries; or (2) if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of this Indenture, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively. The Trustee shall execute an appropriate instrument prepared by the Issuer evidencing the release of a Subsidiary Guarantor from its obligations under its Note Guarantee and this Indenture upon receipt of a request by the Issuer or such Subsidiary Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel certifying as to the compliance with this -98- Section 11.05; provided, however, that the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers' Certificates of the Issuer. Nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Issuer (in which case such Guarantor shall no longer be a Guarantor) or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Issuer or another Guarantor. ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the Trust Indenture Act, such required or deemed provision shall control. SECTION 12.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by nationally recognized overnight courier service, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Issuer or a Guarantor: c/o Communications & Power Industries, Inc. 811 Hansen Way Palo Alto, CA 94303 Attention: Joel A. Littman Telephone: (650) 846-2900 Facsimile: (650) 846-3276 if to the Trustee: BNY Western Trust Company 700 S. Flower Street, Suite 500 Los Angeles, CA 90017 Attention: Corporate Trust Department Telephone: (213) 630-6447 Facsimile: (213) 630-6210 -99- Each of the Issuer and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Issuer and the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when replied to; when receipt is acknowledged, if telecopied; five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee); and next Business Day if by nationally recognized overnight courier service. Any notice or communication mailed to a Holder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 12.03. Communications by Holders with Other Holders. Holders may communicate pursuant to Trust Indenture Act Section 312(b) with other Holders with respect to their rights under this Indenture, the Notes or the Note Guarantees. The Issuer, the Trustee, the Registrar and any other Person shall have the protection of Trust Indenture Act Section 312(c). SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed or effected by the Issuer, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; -100- (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with or satisfied; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 12.06. Rules by Paying Agent or Registrar. The Paying Agent or Registrar may make reasonable rules and set reasonable requirements for their functions. SECTION 12.07. Legal Holidays. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day. SECTION 12.08. Governing Law. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 12.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Issuer or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. No Recourse Against Others. No director, officer, employee, incorporator, stockholder, member or manager of the Issuer or any Guarantor shall have any liability for any obligations of the Issuer under the Notes or this Indenture or of any Guarantor under its Note Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. Such waiver and release are part of the consideration for issuance of the Notes. -101- SECTION 12.11. Successors. All agreements of the Issuer and the Guarantors in this Indenture, the Notes and the Note Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 12.13. Severability. To the extent permitted by applicable law, in case any one or more of the provisions in this Indenture, in the Notes or in the Note Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. -102- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the date first written above. COMMUNICATIONS & POWER INDUSTRIES, INC., as Issuer By:_____________________________________ Name: Title: CPI ACQUISITION CORP., as Guarantor By:_____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION, as Guarantor By:_____________________________________ Name: Title: CPI SUBSIDIARY HOLDINGS INC., as Guarantor By:_____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES INTERNATIONAL INC., as Guarantor By:_____________________________________ Name: Title: S-1 COMMUNICATIONS & POWER INDUSTRIES ASIA INC., as Guarantor By:_____________________________________ Name: Title: S-2 BNY WESTERN TRUST COMPANY, as Trustee By:_____________________________________ Name: Title: S-3 EXHIBIT A [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] COMMUNICATIONS & POWER INDUSTRIES, INC. 8% Senior Subordinated Notes 2012 CUSIP No. No. $ COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation (the "ISSUER"), for value received promise to pay to ____________ or its registered assigns, the principal sum of [or such other amount as is provided in a schedule attached hereto](a) on February 1, 2012. Interest Payment Dates: February 1 and August 1, commencing August 1, 2004. Record Dates: January 15 and July 15. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. - -------------------------------- (a) This language should be included only if the Note is issued in global form. A-1 IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officer. Dated: COMMUNICATIONS & POWER INDUSTRIES, INC., as Issuer By:_____________________________________ Name: Title: A-2 [FORM OF] TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 8% Senior Subordinated Notes due 2012 described in the within-mentioned Indenture. Dated: BNY WESTERN TRUST COMPANY, as Trustee By:_____________________________________ Authorized Signatory A-3 (Reverse of Note) 8% Senior Subordinated Notes due 2012 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. SECTION 1. Interest. Communications & Power Industries, Inc., a Delaware corporation (the "ISSUER") promises to pay interest on the principal amount of this Note at 8% per annum from January 23, 2004 until maturity. The Issuer will pay interest semi-annually on February 1 and August 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"), commencing August 1, 2004. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand to the extent lawful at the interest rate applicable to the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2. Method of Payment. The Issuer will pay interest on the Notes to the Persons who are registered Holders of Notes at the close of business on the January 15 or July 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be issued in denominations of $1,000 and integral multiples thereof. The Issuer shall pay principal, premium, if any, and interest on the Notes in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts ("U.S. LEGAL TENDER"). Principal, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose except that, at the option of the Issuer, the payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that for Holders of at least $5.0 million in principal amount of the Notes that have given wire transfer instructions to the Issuer at least ten Business Days prior to the applicable payment date, the Issuer will make all payments of principal, premium and interest by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Issuer, the Issuer's office or agency in New York will be the office of the Trustee maintained for such purpose. SECTION 3. Paying Agent and Registrar. Initially, BNY Western Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to any Holder. Except as provided in the Indenture, the Issuer or any of their Subsidiaries may act in any such capacity. SECTION 4. Indenture and Subordination. The Issuer issued the Notes under an Indenture dated as of January 23, 2004 ("INDENTURE") by and among the Issuer, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made A-4 part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TRUST INDENTURE ACT"). The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of such terms. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Senior Debt. SECTION 5. Optional Redemption. Except as set forth in Section 6 hereof, the Notes will not be redeemable at the Issuer's option prior to February 1, 2008. On or after February 1, 2008, the Notes will be subject to redemption at any time at the option of the Issuer, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- ~~2008.......................................... 104% 2009.......................................... 102% 2010 and thereafter........................... 100%~~
SECTION 6. Optional Redemption With Proceeds From Equity Offerings or Upon a Change of Control. (a) At any time prior to February 1, 2007, the Issuer may redeem up to 35% of the aggregate principal amount of Notes with the net cash proceeds of one or more Qualified Equity Offerings at a redemption price equal to 108% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the Redemption Date; provided that (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption and (ii) such redemption shall occur within 90 days of the date of the closing of any such Qualified Equity Offering. (b) At any time on or prior to February 1, 2008, the Notes may also be redeemed or purchased (by the Issuer or any other Person), in whole but not in part, at the Issuer's option, upon the occurrence of a Change of Control, at a price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, the date of redemption or purchase (a "CHANGE OF CONTROL REDEMPTION DATE") (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Such redemption or purchase may be made upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the Change of Control Redemption Date (but in no event more than 180 days after the occurrence of such Change of Control). The Issuer may provide in such notice that payment of such price and performance of the Issuer's obligations with respect to such redemption or purchase may be performed by another Person. Any such notice may be given prior to the occurrence of the related Change of Control, and any such redemption, purchase or notice may, at the Issuer's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of the related Change of Control. A-5 SECTION 7. Notice of Redemption. Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. SECTION 8. Mandatory Redemption. For the avoidance of doubt, an offer to purchase pursuant to Section 8 hereof shall not be deemed a redemption. The Issuer shall not be required to make mandatory redemption payments with respect to the Notes. SECTION 9. Repurchase at Option of Holder. Upon the occurrence of a Change of Control, and subject to certain conditions set forth in the Indenture, the Issuer will be required to offer to purchase all of the outstanding Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase. The Issuer is, subject to certain conditions and exceptions, obligated to make an offer to purchase Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, thereon to the date of repurchase, with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. SECTION 10. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer and the Registrar are not required to transfer or exchange any Note selected for redemption. Also, the Issuer and the Registrar are not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. SECTION 11. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. SECTION 12. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture and the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture and the Notes to, among other things, cure any ambiguity, defect or inconsistency in the Indenture, provide for uncertificated Notes in addition to certificated Notes, comply with any requirements of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act, or make any change that does not materially adversely affect the rights of any Holder of a Note. A-6 SECTION 13. Defaults and Remedies. If a Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes generally may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of a Default arising from certain events of bankruptcy or insolvency as set forth in the Indenture, with respect to the Issuer, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal or interest including an accelerated payment or the failure to make a payment on the Change of Control Payment Date or the Net Proceeds Payment Date pursuant to a Net Proceeds Offer) or a Default in complying with the provisions of Article Five of the Indenture if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in the payment of interest on, or the principal of, or the premium on, the Notes. SECTION 14. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Issuer and its Restricted Subsidiaries to make restricted payments, to incur indebtedness, to create liens, to sell assets, to permit restrictions on dividends and other payments by Restricted Subsidiaries of the Issuer, to consolidate, merge or sell all or substantially all of its assets or to engage in transactions with affiliates. The limitations are subject to a number of important qualifications and exceptions. The Issuer must annually report to the Trustee on compliance with such limitations and other provisions in the Indenture. SECTION 15. No Recourse Against Others. No director, officer, employee, incorporator, stockholder, member or manager of the Issuer or any Guarantor shall have any liability for any obligations of the Issuer under the Notes or the Indenture, or of any Guarantor under its Note Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 16. Note Guarantees. This Note will be entitled to the benefits of certain Note Guarantees made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. SECTION 17. Trustee Dealings with the Issuer. Subject to certain terms, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer, their Subsidiaries or their respective Affiliates as if it were not the Trustee. SECTION 18. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. A-7 SECTION 19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). SECTION 20. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. Pursuant to, but subject to the exceptions in, the Registration Rights Agreement, the Issuer and the Guarantors will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for an 8% Senior Subordinated Note due 2012 of the Issuer which shall have been registered under the Securities Act, in like principal amount and having terms identical in all material respects to this Note (except that such note shall not be entitled to Additional Interest and shall not contain terms with respect to transfer restrictions). The Holders shall be entitled to receive certain Additional Interest in the event such exchange offer is not consummated or the Notes are not offered for resale and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement.(a) SECTION 21. CUSIP and ISIN Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP and ISIN numbers to be printed on the Notes and the Trustee may use CUSIP or ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. SECTION 22. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. - ----------------------- (a) This Section not to appear on Exchange Notes or Private Exchange Notes or Additional Notes unless required by the terms of such Additional Notes. A-8 ASSIGNMENT FORM I or we assign and transfer this Note to ________________________________________________________________________________ ________________________________________________________________________________ (Print or type name, address and zip code of assignee or transferee) ________________________________________________________________________________ (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint _______________________________________ agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him. Dated: _________________ Signed: __________________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: ___________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) In connection with any transfer of this Note occurring prior to the date which is the date following the second anniversary of the original issuance of this Note, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and is making the transfer pursuant to one of the following: [Check One] (1) ___ to the Issuer or a subsidiary thereof; or (2) ___ to a person who the transferor reasonably believes is a "qualified institutional buyer" pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"); or (3) ___ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) ___ outside the United States to a non-"U.S. person" as defined in Rule 902 of Regulation S under the Securities Act in compliance with Rule 904 of Regulation S under the Securities Act; or (5) ___ pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or (6) ___ pursuant to an effective registration statement under the Securities Act. and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Issuer as defined in Rule 144 under the Securities Act (an "Affiliate"): [ ] The transferee is an Affiliate of the Issuer. Unless one of the foregoing items (1) through (6) is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item (3), (4) or (5) is checked, the Issuer or the Trustee may require, prior to registering any such transfer of the Notes, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Issuer has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. If none of the foregoing items (1) through (6) are checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied. Dated: _________________ Signed: __________________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee:____________________________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. -2- Dated:__________________________ ______________________________________ NOTICE: To be executed by an executive officer -3- OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.09 or Section 4.13 of the Indenture, check the appropriate box: Section 4.09 [ ] Section 4.13 [ ] If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.09 or Section 4.13 of the Indenture, state the amount (in denominations of $1,000 and integral multiples thereof): $___________ Dated: _________________ Signed: _________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: _______________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) -4- -5- SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(a) The following exchanges of a part of this Global Note for an interest in another Global Note or for a Physical Note, or exchanges of a part of another Global Note or Physical Note for an interest in this Global Note, have been made:
Principal Amount of Signature of Amount of decrease in Amount of increase in this Global Note authorized officer of Principal Amount of Principal Amount of following such decrease Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian - ---------------- ---------------- ---------------- ------------- ---------
- --------------------------- (a) This schedule should be included only if the Note is issued in global form. EXHIBIT B FORM OF LEGENDS Each Global Note and Physical Note that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the face thereof until after the second anniversary of the Issue Date, unless otherwise agreed by the Issuer and the Holder thereof or if such legend is no longer required by Section 2.16(f) of the Indenture: THE SECURITY (OR ITS PREDECESSOR) EVIDENCED BY THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S. SECURITIES ACT OF 1933, AND THE SECURITY EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED BY THIS CERTIFICATE (1) BY ITS ACQUISITION OF THE SECURITY REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, AND (2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE ISSUER AND THE GUARANTORS THAT (X) THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(A) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, (C) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN ACCREDITED INVESTOR (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS PURCHASING AT LEAST $250,000 OF NOTES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN INSTITUTIONAL ACCREDITED INVESTOR (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (2) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES OR (3) UNDER AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE B-1 SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED BY THIS CERTIFICATE OF THE RESALE RESTRICTIONS DESCRIBED IN (X) ABOVE. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY OR IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. Each Global Note authenticated and delivered hereunder shall also bear the following legend: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS B-2 OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE. Each Temporary Regulation S Global Note shall also bear the following legend: "THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW. "NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE." B-3 EXHIBIT C Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Institutional Accredited Investors [ ], [ ] BNY Western Trust Company 700 S. Flower Street, Suite 500 Los Angeles, CA 90017 T: (213) 630-6447 F: (213) 630-6210 Attention: Corporate Trust Department Ladies and Gentlemen: In connection with our proposed purchase of 8% Senior Subordinated Corporation Notes due 2012 (the "NOTES") of COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation (the "ISSUER"), we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"), and all applicable state securities laws. 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered, sold, pledged or otherwise transferred except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell, offer, pledge or otherwise transfer any Notes, we will do so only (i) to the Issuer or any of its subsidiaries, (ii) inside the United States in a transaction meeting the requirements of Rule 144A under the Securities Act to a person who we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that is purchasing at least $250,000 of Notes for its own account or for the account of an institutional accredited investor and who, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee), (iv) outside the United States to a person that is not a U.S. person (as defined in Rule 902 under the Securities Act) in accordance with Regulation S promulgated under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 C-1 under the Securities Act (if available) or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 3. We are not acquiring the Notes for or on behalf of, and will not transfer the Notes to, any employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any plan, individual retirement accounts or other arrangements subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or provisions under any federal, state, local, or non-U.S. or other laws or regulations that are similar to such provisions of ERISA of the Code or any entity whose underlying assets are considered to include "plan assets" of such plans, accounts or arrangements, except as permitted in the sections entitled "Notice to investors" and "Certain ERISA considerations" of the Offering Memorandum. 4. We understand that, on any proposed resale of any Notes, we will be required to furnish to the Trustee and the Issuer such certification, legal opinions and other information as the Trustee and the Issuer may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 6. We are acquiring the Notes purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. C-2 You, as Trustee, the Issuer, counsel for the Issuer and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ______________________________________ Name: Title: C-3 EXHIBIT D Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S [ ], [ ] BNY Western Trust Company 700 S. Flower Street, Suite 500 Los Angeles, CA 90017 T: (213) 630-6447 F: (213) 630-6210 Attention: Corporate Trust Department Re: Communications & Power Industries, Inc. (the "Issuer") 8% Senior Subordinated Notes due 2012 (the "Notes") Ladies and Gentlemen: In connection with our proposed sale of $[ ] aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. You, as Trustee, the Issuer, counsel for the Issuer and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested D-1 party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ______________________________________ Authorized Signatory D-2 EXHIBIT E FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS OF TEMPORARY REGULATION S GLOBAL NOTE ___________________,_______ BNY Western Trust Company 700 S. Flower Street, Suite 500 Los Angeles, CA 90017 T: (213) 630-6447 F: (213) 630-6210 Attention: Corporate Trust Department Re: Communications & Power Industries, Inc. (the "Issuer") 8% Senior Subordinated Notes due 2012 (the "Notes") Dear Sirs: This letter relates to U.S. $ ______________ principal amount of Notes represented by a certificate (the "LEGENDED CERTIFICATE") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section 2.16(c) of the Indenture (the "INDENTURE") dated as of January 23, 2004 relating to the Notes, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States (or to an Initial Purchaser (as defined in the Indenture)) to whom the Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. You, as Trustee, the Issuer, counsel for the Issuer and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this letter have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ______________________________________ Authorized Signatory E-1 EXHIBIT F NOTE GUARANTEE For value received, each of the undersigned (including any successor Person under the Indenture) hereby unconditionally guarantees, jointly and severally, to the extent set forth in the Indenture (as defined below) to the Holder of this Note the payment of principal, premium, if any, and interest on this Note in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note when due, if lawful, and, to the extent permitted by law, the payment or performance of all other obligations of the Issuer under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, the Indenture, including Article Eleven thereof, and this Note Guarantee. This Note Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Note Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of January 23, 2004, among Communications & Power Industries, Inc., a Delaware corporation (the "Issuer"), the Guarantors named therein and BNY Western Trust Company, as trustee (the "Trustee"), as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Note Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee and all of the other provisions of the Indenture to which this Note Guarantee relates. No director, officer, employee, incorporator, stockholder, member or manager of any Guarantor, as such, shall have any liability for any obligations of such Guarantors under such Guarantors' Note Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligation or its creation. This Note Guarantee is subordinated in right of payment, in the manner and to the extent set forth in Article Eleven of the Indenture, to the prior payment in full in cash or cash equivalents of all Guarantor Senior Debt of the Guarantors, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. THIS NOTE GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note Guarantee is subject to release upon the terms set forth in the Indenture. F-1 IN WITNESS WHEREOF, each Guarantor has caused its Note Guarantee to be duly executed. Date: [ ] By: ______________________________________ Name: Title: F-2 EX-4.2 5 f96399exv4w2.txt EXHIBIT 4.2 EXHIBIT 4.2 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of January 23, 2004 By and Among COMMUNICATIONS & POWER INDUSTRIES, INC. the GUARANTORS named herein and UBS SECURITIES LLC and BEAR, STEARNS & CO. INC. WACHOVIA CAPITAL MARKETS, LLC, as Initial Purchasers 8% Senior Subordinated Notes due 2012 ================================================================================ TABLE OF CONTENTS
Page ---- Section 1. Definitions................................................................................. 1 Section 2. Exchange Offer.............................................................................. 4 Section 3. Shelf Registration.......................................................................... 7 Section 4. Additional Interest......................................................................... 8 Section 5. Registration Procedures..................................................................... 9 Section 6. Registration Expenses....................................................................... 17 Section 7. Indemnification............................................................................. 18 Section 8. Rules 144 and 144A.......................................................................... 21 Section 9. Underwritten Registrations.................................................................. 21 Section 10. Miscellaneous............................................................................... 21 (a) No Inconsistent Agreements.................................................................. 21 (b) Adjustments Affecting Registrable Notes..................................................... 21 (c) Amendments and Waivers...................................................................... 21 (d) Notices..................................................................................... 22 (e) Guarantors.................................................................................. 23 (f) Successors and Assigns...................................................................... 23 (g) Counterparts................................................................................ 23 (h) Headings.................................................................................... 23 (i) Governing Law............................................................................... 23 (j) Severability................................................................................ 23 (k) Securities Held by the Issuers or Their Affiliates.......................................... 23 (l) Third-Party Beneficiaries................................................................... 23 (m) Entire Agreement............................................................................ 24
-i- REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is dated as of January 23, 2004, by and among COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation (the "Company"), and each of the Guarantors (as defined herein) (the Company and the Guarantors are referred to collectively herein as the "Issuers"), on the one hand, and UBS SECURITIES LLC (the "Representative") and BEAR, STEARNS & CO. INC. and WACHOVIA CAPITAL MARKETS, LLC (together with the Representative, the "Initial Purchasers"), on the other hand. This Agreement is entered into in connection with the Purchase Agreement, dated as of January 15, 2004, by and among the Issuers and the Initial Purchasers (the "Purchase Agreement"), relating to the offering of $125,000,000 aggregate principal amount of 8% Senior Subordinated Notes due 2012 of the Company (including the guarantees thereof by the Guarantors, the "Notes"). The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: Section 1. Definitions As used in this Agreement, the following terms shall have the following meanings: "action" shall have the meaning set forth in Section 7(c) hereof. "Additional Interest" shall have the meaning set forth in Section 4(a) hereof. "Advice" shall have the meaning set forth in Section 5 hereof. "Additional Interest Payment Date" shall have the meaning set forth in Section 4(b) hereof. "Agreement" shall have the meaning set forth in the first introductory paragraph hereto. "Applicable Period" shall have the meaning set forth in Section 2(b) hereof. "Board of Directors" shall have the meaning set forth in Section 5 hereof. "Business Day" shall mean a day that is not a Legal Holiday. "Company" shall have the meaning set forth in the introductory paragraph hereto and shall also include the Company's successors and assigns. "Commission" shall mean the Securities and Exchange Commission. "day" shall mean a calendar day. -2- "Delay Period" shall have the meaning set forth in Section 5 hereof. "Effectiveness Period" shall have the meaning set forth in Section 3(b) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Notes" shall have the meaning set forth in Section 2(a) hereof. "Exchange Offer" shall have the meaning set forth in Section 2(a) hereof. "Exchange Offer Registration Statement" shall have the meaning set forth in Section 2(a) hereof. "Guarantors" means each of the Guarantors under the Indenture. "Holder" shall mean any holder of a Registrable Note or Registrable Notes. "Indenture" shall mean the Indenture, dated as of January 23, 2004, by and among the Issuers and Trustee, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. "Initial Purchasers" shall have the meaning set forth in the first introductory paragraph hereof. "Inspectors" shall have the meaning set forth in Section 5(m) hereof. "Issue Date" shall mean January 23, 2004, the date of original issuance of the Notes. "Issuers" shall have the meaning set forth in the first introductory paragraph hereto. "Legal Holiday" shall mean a Saturday, a Sunday or a day on which banking institutions in New York are authorized or required by law to close. "Losses" shall have the meaning set forth in Section 7(a) hereof. "NASD"shall mean the National Association of Securities Dealers, Inc. "Notes" shall have the meaning set forth in the second introductory paragraph hereto. "Participant" shall have the meaning set forth in Section 7(a) hereof. "Participating Broker-Dealer" shall have the meaning set forth in Section 2(b) hereof. "Person" shall mean an individual, corporation, partnership, joint venture association, joint stock company, trust, unincorporated limited liability company, government or any agency or political subdivision thereof or any other entity. -3- "Private Exchange" shall have the meaning set forth in Section 2(b) hereof. "Private Exchange Notes" shall have the meaning set forth in Section 2(b) hereof. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Purchase Agreement" shall have the meaning set forth in the second introductory paragraph hereof. "Records" shall have the meaning set forth in Section 5(m) hereof. "Registrable Notes" shall mean each Note upon its original issuance and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, in each case until (i) a Registration Statement covering such Note, Exchange Note or Private Exchange Note has been declared effective by the Commission and such Note, Exchange Note or such Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes that may be resold without restriction under federal securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange Note has been sold in compliance with Rule 144 or is salable pursuant to Rule 144(k). "Registration Default" shall have the meaning set forth in Section 4(a) hereof. "Registration Statement" shall mean any appropriate registration statement of the Issuers covering any of the Registrable Notes filed with the Commission under the Securities Act, and all amendments and supplements to any 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. "Representative" shall have the meaning set forth in the introductory paragraph hereto. "Requesting Participating Broker-Dealer" shall have the meaning set forth in Section 2(b) hereof. -4- "Rule 144" shall mean Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission. "Rule 144A" shall mean Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission. "Rule 415" shall mean Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Shelf Filing Event" shall have the meaning set forth in Section 2(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 3(a) hereof. "TIA" shall mean the Trust Indenture Act of 1939, as amended. "Trustee" shall mean the trustee under the Indenture and, if the Exchange Notes and Private Exchange Notes are not governed by the Indenture, the trustee under the indenture governing such Exchange Notes and Private Exchange Notes. "underwritten registration" or "underwritten offering" shall mean a registration in which securities of the Issuers are sold to an underwriter for reoffering to the public. Section 2. Exchange Offer (a) Unless the Exchange Offer would violate applicable law or interpretation of the staff of the Commission, the Issuers shall (i) file a registration statement (the "Exchange Offer Registration Statement") with the Commission on an appropriate registration form with respect to a registered offer (the "Exchange Offer") to, subject to the Holders that participate complying with the immediately following paragraph, exchange any and all of the Registrable Notes for a like aggregate principal amount of notes (including the guarantees with respect thereto, the "Exchange Notes") that have provisions that are identical in all material respects to the Notes (except that the Exchange Notes shall not contain restrictive legends, terms with respect to transfer restrictions or Additional Interest upon a Registration Default), (ii) use their reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act and (iii) use their reasonable efforts to consummate the Exchange Offer within 210 days after the Issue Date. Upon the Exchange Offer Registration Statement being declared effective by the Commission, the Issuers will offer the Exchange Notes in exchange for surrender of the Notes. The Issuers shall keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to Holders. -5- Each Holder that participates in the Exchange Offer will be required to represent to the Issuers in writing that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act, (iii) it is not an affiliate of the Company or any Guarantor, as defined by Rule 405 of the Securities Act, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes and (v) if such Holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making or other trading activities, it will deliver a prospectus in connection with any resale of such Exchange Notes. (b) The Issuers and the Initial Purchasers acknowledge that the staff of the Commission has taken the position that any broker-dealer that elects to exchange Notes that were acquired by such broker-dealer for its own account as a result of market-making or other trading activities for Exchange Notes in the Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (other than a resale of an unsold allotment resulting from the original offering of the Notes). The Issuers and the Initial Purchasers also acknowledge that the staff of the Commission has taken the position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Notes, without naming the Participating Broker-Dealers or specifying the amount of Exchange Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligations under the Securities Act in connection with resales of Exchange Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. In light of the foregoing, if requested by a Participating Broker-Dealer (a "Requesting Participating Broker-Dealer"), the Issuers agree to use their reasonable efforts to keep the Exchange Offer Registration Statement continuously effective for a period necessary to comply with applicable law in connection with such resales but in no event more than 180 days after the date on which the Exchange Registration Statement is declared effective, or such longer period if extended pursuant to any Delay Period in accordance with the last paragraph of Section 5 hereof (such period, the "Applicable Period"), or such earlier date as each Requesting Participating Broker-Dealer shall have notified the Company in writing that such Requesting Participating Broker-Dealer has resold all Exchange Notes acquired by it in the Exchange Offer. The Issuers shall include a plan of distribution in such Exchange Offer Registration Statement that meets the requirements set forth in the preceding paragraph. If, prior to consummation of the Exchange Offer, any Initial Purchaser holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or if any Holder is not entitled to participate in the Exchange Offer, the Issuers upon the request of any Initial Purchaser or any such Holder, as the case may be, shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver -6- to the Initial Purchasers or any such Holder, as the case may be, in exchange (the "Private Exchange") for such Notes held by such Initial Purchaser or any such Holder a like principal amount of notes (the "Private Exchange Notes") of the Issuers that are identical in all material respects to the Exchange Notes except that the Private Exchange Notes may be subject to restrictions on transfer and bear a legend to such effect. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes (if permitted by the CUSIP Service Bureau). Upon consummation of the Exchange Offer in accordance with this Section 2, the Issuers shall have no further registration obligations other than the Issuers' continuing registration obligations with respect to (i) Private Exchange Notes, (ii) Exchange Notes held by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which clause (c)(iv) of this Section 2 applies. In connection with the Exchange Offer, the Issuers shall: (1) mail or cause to be mailed to each Holder entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall: (1) accept for exchange all Notes validly tendered and not validly withdrawn by the Holders pursuant to the Exchange Offer and the Private Exchange, if any; (2) deliver or cause to be delivered to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each such Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Registrable Notes of such Holder so accepted for exchange. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the Commission, (ii) no action or proceeding -7- shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Company deems necessary for the consummation of the Exchange Offer or Private Exchange. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture (in either case, with such changes as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA and shall provide that (a) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (b) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. (c) In the event that (i) any changes in applicable law or the applicable interpretations of the staff of the Commission do not permit the Issuers to effect the Exchange Offer, (ii) for any other reason the Exchange Offer is not consummated within 210 days of the Issue Date, (iii) any Holder notifies the Company prior to the 20th day following consummation of the Exchange Offer that it is prohibited by law or the applicable interpretations of the staff of the Commission from participating in the Exchange Offer, (iv) in the case of any Holder who participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of any Issuer within the meaning of the Securities Act) or (v) any Initial Purchaser so requests with respect to Notes or Private Exchange Notes that have, or that are reasonably likely to be determined to have, the status of unsold allotments in an initial distribution (each such event referred to in clauses (i) through (v) of this sentence, a "Shelf Filing Event"), then the Issuers shall file a Shelf Registration pursuant to Section 3 hereof. Section 3. Shelf Registration If at any time a Shelf Filing Event shall occur, then: (a) Shelf Registration. The Issuers shall file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Shelf Registration"). The Shelf Registration shall be on an appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration. (b) The Issuers shall use their reasonable efforts (x) to cause the Shelf Registration to be declared effective under the Securities Act on or prior to the later of (A) the 210th day after -8- the Issue Date and (B) the 150th day after the occurrence of the applicable Shelf Filing Event and (y) to keep the Shelf Registration continuously effective under the Securities Act for the time period referred to in Rule 144(k) under the Securities Act, subject to extension pursuant to the penultimate paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter period ending when all Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration; provided, however, that (i) the Effectiveness Period in respect of the Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein and (ii) the Company may suspend the effectiveness of the Shelf Registration by written notice to the Holders solely (A) as a result of the filing of a post-effective amendment to the Shelf Registration to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (B) to the extent and for so long as permitted by the penultimate paragraph of Section 5. (c) Supplements and Amendments. The Issuers agree to supplement or make amendments to the Shelf Registration as and when required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration or by the Securities Act or rules and regulations thereunder for shelf registration, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. Section 4. Additional Interest (a) The Issuers and the Initial Purchasers agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers agree that if: (i) the Exchange Offer is not consummated on or prior to the 210th day following the Issue Date, or, if that day is not a Business Day, the next day that is a Business Day; or (ii) the Shelf Registration is required to be filed but is not declared effective within the time period specified in Section 3(b)(x), or is declared effective by such date but thereafter ceases to be effective or usable (unless the Shelf Registration ceases to be effective or usable as specifically permitted by the penultimate paragraph of Section 5 hereof), (each such event referred to in clauses (i) and (ii) a "Registration Default"), additional interest in the form of additional cash interest ("Additional Interest") will accrue on the Registrable Notes required to be registered on a Shelf Registration Statement. The rate of Additional Interest will be 0.25% per annum for the first 90-day period immediately following the occurrence of a Registration Default, increasing by an additional 0.25% per annum with respect to each subsequent 90-day period up to a maximum amount of Additional Interest of 1.00% per annum, from and including the date on which any such Registration Default shall occur to, but excluding, the earlier of (1) the date on which all Registration Defaults have been cured or (2) the date on which such Registrable Note ceases to be a Registrable Note or otherwise become freely transferable by Holders thereof (including, without -9- limitation, pursuant to an effective Shelf Registration Statement), other than affiliates of the Issuers, without further registration under the Securities Act. If, after the cure of all Registration Defaults then in effect, there is a subsequent Registration Default, the rate of Additional Interest for such subsequent Registration Default shall initially be 0.25% regardless of the rate in effect with respect to any prior Registration Default at the time of cure of such Registration Default and shall increase in the manner and be subject to the maximum Additional Interest rate contained in the preceding sentence. Notwithstanding the foregoing, (1) the amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is pending and (2) a Holder of Registrable Notes that is not entitled to the benefits of the Shelf Registration (e.g., such Holder has not elected to include information as required by this Agreement) shall not be entitled to Additional Interest with respect to a Registration Default that pertains to the Shelf Registration. (b) So long as Notes remain outstanding, the Company shall notify the Trustee within five Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid. Any amounts of Additional Interest due pursuant to clauses (a)(i) or (a)(ii) of this Section 4 will be payable in cash semi-annually on each February 1 and August 1 (each a "Additional Interest Payment Date"), commencing with the first such date occurring after any such Additional Interest commences to accrue, to Holders to whom regular interest is payable on such Additional Interest Payment Date with respect to Notes that are Registrable Notes. The amount of Additional Interest for each Registrable Note will be determined by multiplying the applicable rate of Additional Interest by the aggregate principal amount of such Registrable Note outstanding on the Additional Interest Payment Date following such Registration Default in the case of the first such payment of Additional Interest with respect to a Registration Default (and thereafter at the next succeeding Additional Interest Payment Date until the cure of such Registration Default), and multiplying the product of the foregoing by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. Section 5. Registration Procedures In connection with the filing of any Registration Statement pursuant to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder, the Issuers shall: (a) Prepare and file with the Commission the Registration Statement or Registration Statements prescribed by Section 2 or 3 hereof, and use their reasonable efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or -10- each such Participating Broker-Dealer, as the case may be, their counsel (if requested by any such person) and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five Business Days prior to such filing). (b) Prepare and file with the Commission such amendments and post-effective amendments to each Shelf Registration or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus, in each case, in accordance with the intended methods of distribution set forth in such Registration Statement or Prospectus, as so amended or supplemented. (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Company has received written notice that such Broker-Dealer will be a Participating Broker-Dealer in the applicable Exchange Offer, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel (if such counsel is known to the Issuers) and the managing underwriters, if any, as promptly as possible, and, if requested by any such Person, confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(l) hereof cease to be true and correct in all material respects, (iv) of the receipt by any of the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any -11- condition or any information becoming known to any Issuer that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) of the Company's determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their reasonable efforts other than during a Delay Period pursuant to the penultimate paragraph of this Section 5, to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes, as the case may be, for sale in any jurisdiction, and, if any such order is issued, to use their reasonable efforts to obtain the withdrawal of any such order at the earliest practicable moment. (e) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period and if reasonably requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or any Participating Broker-Dealer, as the case may be, (i) promptly incorporate in such Registration Statement or Prospectus a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders or any Participating Broker-Dealer, as the case may be (based upon advice of counsel), determine is reasonably required to be included therein and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; provided, however, that the Issuers shall not be required to take any action hereunder that would, in the reasonable opinion of counsel to the Issuers, violate applicable laws. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, who so requests, their counsel (if requested by any such person) and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or -12- Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, their respective counsel (if requested) and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use, in the manner described in such Prospectus or any amendment or supplement thereto and in accordance with applicable law, of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or Exchange Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their reasonable efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes or Exchange Notes, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request; provided, however, that where Exchange Notes or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause the Issuers' counsel to file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of such Exchange Notes or Registrable Notes covered by the applicable Registration Statement; provided, however, that no Issuer shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to -13- be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Holders may request at least two Business Days prior to any sale of such Registrable Notes. (j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) and the penultimate paragraph of this Section 5) file with the Commission, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case may be. (l) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, (i) to the extent possible, make such representations and warranties to the underwriter or underwriters (and to any Holder that has advised the Company that such Holder may have a "due diligence" defense under Section 11 of the Securities Act), and covenants with, the underwriters with respect to the business of the Issuers and their subsidiaries (including any acquired business, properties or entity, if applicable), and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) use their reasonable efforts to obtain the written opinions of counsel to the Issuers in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters (and to any Initial Purchaser selling in such offering that has advised the Company that such Initial Purchaser may have a "due diligence" defense under Section 11 of the Securities Act) covering the matters customarily covered in opinions requested in underwritten offerings; (iii) use their reasonable efforts to obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent -14- certified public accountants of the Issuers (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 or incorporated by reference in the Registration Statement), addressed to each of the underwriters (and to any Initial Purchaser selling in such offering that has advised the Company that such Initial Purchaser may have a "due diligence" defense under Section 11 of the Securities Act), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section; provided that the Issuers shall not be required to provide indemnification to any underwriter with respect to information relating to such underwriter furnished in writing to the Company by or on behalf of such underwriter expressly for inclusion in such Registration Statement. (m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or by any underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all pertinent financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. Each Inspector shall agree in writing that it will keep the Records confidential and that it will not disclose, or use in connection with any market transactions in violation of any applicable securities laws, any Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is necessary or advisable in the opinion of counsel for an Inspector in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or the Purchase Agreement, or any transactions contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the information in such Records has been made generally available to the public; provided, however, that (i) each Inspector shall agree to use reasonable efforts to provide notice to the Company of the potential disclosure of any information by such Inspector pursuant to clause (i), (ii) or (iii) of this sentence to permit the Issuers to obtain a protective order (or waive the provisions of this paragraph (m)) and (ii) each such Inspector shall take -15- such actions as are reasonably necessary to protect the confidentiality of such information to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (n) Provide a Trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the Trustee under any such indenture and the Holders of the Registrable Notes or Exchange Notes, as applicable, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their reasonable efforts to cause such Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner. (o) Comply with all applicable rules and regulations of the Commission and make generally available to the Company's securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes or Exchange Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods consistent with the requirements of Rule 158. (p) Upon the request of the Trustee, upon consummation of the Exchange Offer or a Private Exchange, use their reasonable efforts to obtain an opinion of counsel to the Issuers, in a form reasonably acceptable to the Trustee, addressed to the Trustee, that the Exchange Notes or Private Exchange Notes, as the case may be, and the related indenture constitute legal, valid and binding obligations of the Issuers, enforceable against the Issuers in accordance with its respective terms, subject to customary exceptions and qualifications. (q) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; provided that in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (r) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the NASD. -16- (s) Use their reasonable efforts to take all other steps reasonably necessary to effect the registration of the Exchange Notes and/or Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes or Exchange Notes as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Notes or Exchange Notes as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request and in the event of such an exclusion, the Issuers shall have no further obligation under this Agreement (including, without limitation, the obligations under Section 4) with respect to such seller or any subsequent Holder of such Registrable Notes. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make any information previously furnished to the Company by such seller not materially misleading. If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company or the Guarantors, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company or the Guarantors, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the applicable Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes that, upon the Company providing notice to such Holder or Participating Broker-Dealer, as the case may be, (x) of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, or (y) that the Board of Directors of the Company (the "Board of Directors") has resolved that the Company has a bona fide business purpose for doing so, then, upon providing such notice (which shall refer to this penultimate paragraph of this Section 5), the Issuers may delay the filing or the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration (if not then filed or effective, as applicable) and shall not be required to maintain the effectiveness thereof or amend or supplement the Exchange Offer Registration Statement or the Shelf Registration, in all cases, for a period (a "Delay Period") expiring upon the earlier to occur of (i) in the case of the immediately preceding clause (x), such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto or (ii) in the case of the immediately preceding clause (y), the date which is the earlier of (A) the date on which such business purpose ceases to interfere with the Issuers' obligations to file or maintain the effectiveness of any such Registration Statement pursuant to this Agreement or (B) 90 days after the Company notifies the Holders of such determination by the Board of Directors. There shall not be more than 90 days of Delay Periods during any 12-month period. The maximum -17- length of the Applicable Period set forth in Section 2(b) shall be extended by a number of days equal to the number of days during any Delay Period. Any Delay Period will not alter the obligations of the Issuers to pay Additional Interest under the circumstances set forth in Section 4 hereof. Each Holder or Participating Broker-Dealer, by its acceptance of any Registrable Note, agrees that during any Delay Period, each Holder or Participating Broker-Dealer will discontinue disposition of such Notes or Exchange Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be. Section 6. Registration Expenses All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers (other than any underwriting discounts or commissions) shall be borne by the Issuers, whether or not the Exchange Offer Registration Statement or the Shelf Registration is filed or becomes effective or the Exchange Offer is consummated, including, without limitation, (i) all registration and filing fees (including, without limitation, reasonable fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions as provided in Section 5(h) hereof, in the case of a Shelf Registration or in the case of Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, or by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers and the reasonable fees and disbursements of one special counsel for all of the sellers of Registrable Notes (exclusive of any counsel retained pursuant to Section 7 hereof) selected by the Holders of a majority in aggregate principal amount of Notes, Exchange Notes and Private Exchange Notes being registered and reasonably satisfactory to the Issuers, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(l)(iii) hereof (including, without limitation, the expenses of any "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Issuers desire such insurance, (vii) fees and expenses of all other Persons retained by any of the Issuers, (viii) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (ix) the expense of any annual audit, (x) any required fees and expenses incurred in connection with any filing required to be made with the NASD and (xi) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. Notwithstanding the foregoing or anything to the contrary, each Holder shall pay all underwriting discounts and commissions of any underwriters and transfer taxes, if any, with respect to any Registrable Notes sold by or on behalf of it. -18- Section 7. Indemnification (a) The Issuers, jointly and severally, agree to indemnify and hold harmless each Holder of Registrable Notes selling Notes during the Effectiveness Period and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, each Person, if any, who controls any such Person within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, the agents, employees, officers and directors of each Holder and each such Participating Broker-Dealer and the agents, partners, members, employees, officers, and directors of any such controlling Person (each, a "Participant") from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including, but not limited to, reasonable attorneys' fees and any and all reasonable expenses whatsoever actually incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all reasonable amounts paid in settlement of any claim or litigation) (collectively, "Losses") to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (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 any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, provided that (i) the foregoing indemnity shall not be available to any Participant insofar as such Losses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to such Participant's related Holder furnished to the Company in writing by or on behalf of such Holder expressly for use therein, and (ii) the foregoing indemnity shall not inure to the benefit of any Participant from whose related Holder the Person asserting such Losses purchased Registrable Notes if (x) such Holder failed to send or give a copy of the Prospectus (as amended or supplemented if such amendment or supplement was furnished to such Holder prior to the written confirmation of such sale) to such Person with or prior to the written confirmation of such sale and (y) the untrue statement or omission or alleged untrue statement or omission was completely corrected in the Prospectus (as amended or supplemented if amended or supplemented as aforesaid) and such Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission that was the subject matter of such Losses. This indemnity agreement will be in addition to any liability that the Issuers may otherwise have, including, but not limited to, liability under this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless each Issuer, each Person, if any, who controls any Issuer within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and each of their respective agents, partners, members, employees, officers and directors and the agents, partners, members, employees, officers and directors of any such controlling person from and against any Losses to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (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 any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the -19- statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information relating to such Participant furnished in writing to the Company by or on behalf of such Participant expressly for use therein. This indemnity agreement will be in addition to any liability that such Participant may otherwise have, including, but not limited to liability under this Agreement. (c) Promptly after receipt by an indemnified party under subsection 7(a) or 7(b) above of notice of the commencement of any action, suit or proceeding (collectively, an "action"), such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement of such action (but the failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability that it may have under this Section 7 except to the extent that it has been prejudiced in any material respect by such failure). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement of such action, the indemnifying party will be entitled to participate in such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense of such action with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such action, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) the named parties to such action (including any impleaded parties) include such indemnified party and the indemnifying party or parties (or such indemnifying parties have assumed the defense of such action), and such indemnified party or parties shall have reasonably concluded, after consultation with counsel, that there may be defenses available to it or them that are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying party or parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such reasonable fees and expenses of counsel shall be borne by the indemnifying parties. In no event shall the indemnifying party be liable for the reasonable fees and expenses of more than one counsel (together with appropriate local counsel) at any time for all indemnified parties in connection with any one action or separate but substantially similar or related actions arising in the same jurisdiction out of the same general allegations or circumstances. Any such separate firm for the Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes sold by all such Participants and shall be reasonably acceptable to the Company. An indemnifying party shall not be liable for any settlement of any claim or action effected without its prior written consent, which consent may not be unreasonably withheld. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. -20- (d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 7 is for any reason held to be unavailable from the indemnifying party for any Losses referred to therein, or is insufficient to hold harmless a party indemnified under this Section 7 for any Losses referred to therein, each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such aggregate Losses (i) in such proportion as is appropriate to reflect the relative benefits received by each indemnifying party, on the one hand, and each indemnified party, on the other hand, from the sale of the Notes to the Initial Purchasers or the resale of the Registrable Notes by such Holder, as applicable, or (ii) if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each indemnified party, on the one hand, and each indemnifying party, on the other hand, in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Issuers, on the one hand, and each Participant, on the other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the sale of the Notes to the Initial Purchasers (net of discounts and commissions but before deducting expenses) received by the Issuers are to (y) the total net profit received by such Participant in connection with the sale of the Registrable Notes. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or such Participant and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 7, (i) in no case shall any Participant be required to contribute any amount in excess of the amount by which the net profit received by such Participant in connection with the sale of the Registrable Notes exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made against another party or parties under this Section 7, notify in writing such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise, except to the extent that it has been prejudiced in any material respect by such failure; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under this Section 7 for purposes of indemnification. Anything in this section to the contrary notwithstanding, no party shall be liable for contribution with respect to any action or claim settled without its written consent, provided, however, that such written consent was not unreasonably withheld. -21- Section 8. [Intentionally Omitted] Section 9. Underwritten Registrations If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registration hereunder if such Holder does not (a) agree to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Section 10. Miscellaneous (a) No Inconsistent Agreements. The Issuers have not, as of the date hereof, and shall not, after the date of this Agreement, enter into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not conflict with and are not inconsistent with, in any material respect, the rights granted to the holders of any of the Issuers' other issued and outstanding securities under any such agreements. The Issuers have not entered and will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement. (b) Adjustments Affecting Registrable Notes. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given except pursuant to a written agreement duly signed and delivered by (I) the Company (on behalf of all Issuers) and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented except pursuant to a written agreement duly signed and delivered by the Issuers and each Holder and each Participating Broker-Dealer (including any Person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification, waiver or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise -22- the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture. (ii) if to any Issuer, to it c/o Communications & Power Industries, Inc., 811 Hansen Way, Palo Alto, CA 94303 Fax: 650-846-3276 Attention: Chief Financial Officer with a copy to: The Cypress Group L.L.C., 65 East 55th Street, 28th Floor New York, NY 10022 Fax: 212-705-0196 Attention: Lynn Horn (iii) if to the Initial Purchasers, at the address as follows: UBS Securities LLC 677 Washington Blvd. Stamford, Connecticut 06901 Fax number: (203) 719-0680 Attention: High Yield Syndicate Department All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by the recipient's telecopier machine, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. -23- (e) Guarantors. So long as any Registrable Notes remain outstanding, the Issuers shall cause each Person that becomes a guarantor of the Notes under the Indenture to execute and deliver a counterpart to this Agreement which subjects such Person to the provisions of this Agreement as a Guarantor. Each of such Guarantors agrees to join the Issuers in all of their undertakings hereunder to effect the Exchange Offer for the Exchange Notes and the filing of any Shelf Registration as required hereunder. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; provided, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes; provided, further, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (j) Severability. To the extent permitted by applicable law, if any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (k) Securities Held by the Issuers or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Issuers or any of their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (l) Third-Party Beneficiaries. Holders and beneficial owners of Registrable Notes and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. No other Person is intended to be, or shall be construed as, a third-party beneficiary of this Agreement. -24- (m) Entire Agreement. This Agreement is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Initial Purchasers on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof are merged herein and replaced hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMMUNICATIONS & POWER INDUSTRIES, INC. By: _____________________________________ Name: Title: CPI ACQUISITION CORP. By: _____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION By: _____________________________________ Name: Title: CPI SUBSIDIARY HOLDINGS INC. By: _____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES INTERNATIONAL INC. By: _____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES ASIA INC. By: _____________________________________ Name: Title: Confirmed and accepted as of the date first above written: UBS SECURITIES LLC BEAR, STEARNS & CO. INC. WACHOVIA CAPITAL MARKETS, LLC By: UBS SECURITIES LLC as Representative of the several Initial Purchasers By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: EX-10.1 6 f96399exv10w1.txt EXHIBIT 10.1 EXHIBIT 10.1 ================================================================================ CREDIT AGREEMENT DATED AS OF JANUARY 23, 2004 AMONG COMMUNICATIONS & POWER INDUSTRIES, INC., AS BORROWER, COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION, AS A GUARANTOR, THE OTHER GUARANTORS PARTY HERETO, THE LENDERS PARTY HERETO, AND UBS SECURITIES LLC AND BEAR, STEARNS & CO. INC., AS JOINT LEAD ARRANGERS AND BOOKRUNNERS, AND UBS AG, STAMFORD BRANCH, AS ADMINISTRATIVE AGENT, COLLATERAL AGENT AND ISSUING BANK, UBS LOAN FINANCE LLC, AS SWINGLINE LENDER, BEAR STEARNS CORPORATE LENDING INC., AS SYNDICATION AGENT, WACHOVIA BANK, NATIONAL ASSOCIATION, AS DOCUMENTATION AGENT, AND WACHOVIA CAPITAL MARKETS, LLC, AS CO-ARRANGER Cahill Gordon & Reindel LLP 80 Pine Street New York, NY 10005 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms............................................................................... 2 SECTION 1.02. Classification of Loans and Borrowings...................................................... 31 SECTION 1.03. Terms Generally............................................................................. 31 SECTION 1.04. Accounting Terms; GAAP...................................................................... 31 ARTICLE II THE CREDITS SECTION 2.01. Commitments................................................................................. 32 SECTION 2.02. Loans....................................................................................... 32 SECTION 2.03. Borrowing Procedure......................................................................... 34 SECTION 2.04. Evidence of Debt; Repayment of Loans........................................................ 34 SECTION 2.05. Fees........................................................................................ 35 SECTION 2.06. Interest on Loans........................................................................... 36 SECTION 2.07. Termination and Reduction of Commitments.................................................... 37 SECTION 2.08. Interest Elections.......................................................................... 37 SECTION 2.09. Amortization of Term Borrowings............................................................. 38 SECTION 2.10. Optional and Mandatory Prepayments of Loans................................................. 38 SECTION 2.11. Alternate Rate of Interest.................................................................. 42 SECTION 2.12. Increased Costs............................................................................. 42 SECTION 2.13. Breakage Payments........................................................................... 43 SECTION 2.14. Payments Generally; Pro Rata Treatment; Sharing of Setoffs.................................. 43 SECTION 2.15. Taxes....................................................................................... 45 SECTION 2.16. Mitigation Obligations; Replacement of Lenders.............................................. 46 SECTION 2.17. Swingline Loans............................................................................. 47 SECTION 2.18. Letters of Credit........................................................................... 48 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers........................................................................ 52 SECTION 3.02. Authorization; Enforceability............................................................... 53 SECTION 3.03. Governmental Approvals; No Conflicts........................................................ 53 SECTION 3.04. Financial Statements........................................................................ 53 SECTION 3.05. Properties.................................................................................. 53 SECTION 3.06. Equity Interests and Subsidiaries........................................................... 54 SECTION 3.07. Litigation; Compliance with Laws............................................................ 54 SECTION 3.08. Agreements.................................................................................. 55 SECTION 3.09. Federal Reserve Regulations................................................................. 55 SECTION 3.10. Investment Company Act; Public Utility Holding Company Act.................................. 55 SECTION 3.11. Use of Proceeds............................................................................. 55
-i-
Page ---- SECTION 3.12. Taxes....................................................................................... 55 SECTION 3.13. No Material Misstatements................................................................... 56 SECTION 3.14. Labor Matters............................................................................... 56 SECTION 3.15. Solvency.................................................................................... 56 SECTION 3.16. Employee Benefit Plans...................................................................... 56 SECTION 3.17. Environmental Matters....................................................................... 57 SECTION 3.18. Insurance................................................................................... 58 SECTION 3.19. Security Documents.......................................................................... 58 SECTION 3.20. Acquisition Documents; Representations and Warranties in Agreement.......................... 59 SECTION 3.21. Representations, Warranties and Agreements of Holdings and Parent........................... 59 SECTION 3.22. Anti-Terrorism Law.......................................................................... 59 SECTION 3.23. Bribery..................................................................................... 60 SECTION 3.24. Subordination of Senior Subordinated Notes.................................................. 60 ARTICLE IV CONDITIONS OF LENDING SECTION 4.01. All Credit Events........................................................................... 60 SECTION 4.02. First Credit Event.......................................................................... 61 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements, Reports, etc.......................................................... 67 SECTION 5.02. Litigation and Other Notices................................................................ 68 SECTION 5.03. Existence; Businesses and Properties........................................................ 69 SECTION 5.04. Insurance................................................................................... 69 SECTION 5.05. Obligations and Taxes....................................................................... 69 SECTION 5.06. Employee Benefits........................................................................... 70 SECTION 5.07. Maintaining Records; Access to Properties and Inspections................................... 70 SECTION 5.08. Use of Proceeds............................................................................. 70 SECTION 5.09. Compliance with Environmental Laws; Environmental Reports................................... 70 SECTION 5.10. [Reserved].................................................................................. 71 SECTION 5.11. Additional Collateral; Additional Guarantors................................................ 71 SECTION 5.12. Security Interests; Further Assurances...................................................... 73 SECTION 5.13. Redemption Notes............................................................................ 74 SECTION 5.14. Post-Closing Matters........................................................................ 74 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness................................................................................ 75 SECTION 6.02. Liens....................................................................................... 76 SECTION 6.03. Investment, Loan and Advances............................................................... 78 SECTION 6.04. Mergers, Consolidations, Sales of Assets and Acquisitions................................... 80 SECTION 6.05. Dividends................................................................................... 81 SECTION 6.06. Transactions with Affiliates................................................................ 82 SECTION 6.07. Financial Covenants......................................................................... 83
-ii-
Page ---- SECTION 6.08. Prepayments of Other Indebtedness; Modifications of Certificate of Incorporation, Other Constitutive Documents or By-Laws and Certain Other Agreements, etc...................... 85 SECTION 6.09. Limitation on Certain Restrictions on Subsidiaries.......................................... 85 SECTION 6.10. Limitation on Issuance of Capital Stock..................................................... 86 SECTION 6.11. Limitation on Creation of Subsidiaries...................................................... 86 SECTION 6.12. Business.................................................................................... 86 SECTION 6.13. Limitation on Accounting Changes............................................................ 86 SECTION 6.14. Fiscal Year................................................................................. 86 SECTION 6.15. Sale and Leaseback Transactions............................................................. 86 SECTION 6.16. Anti-Terrorism Law; Anti-Money Laundering................................................... 87 ARTICLE VII GUARANTEE SECTION 7.01. The Guarantee............................................................................... 87 SECTION 7.02. Obligations Unconditional................................................................... 87 SECTION 7.03. Reinstatement............................................................................... 88 SECTION 7.04. Subrogation; Subordination.................................................................. 89 SECTION 7.05. Remedies.................................................................................... 89 SECTION 7.06. Instrument for the Payment of Money......................................................... 89 SECTION 7.07. General Limitation on Guarantee Obligations................................................. 89 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01. Events of Default........................................................................... 90 ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS SECTION 9.01. Collateral Account.......................................................................... 92 SECTION 9.02. Proceeds of Casualty Events................................................................. 93 SECTION 9.03. Application of Proceeds..................................................................... 93 ARTICLE X THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT SECTION 10.01. Appointment................................................................................. 94 SECTION 10.02. Agent in Its Individual Capacity............................................................ 94 SECTION 10.03. Exculpatory Provisions...................................................................... 94 SECTION 10.04. Reliance by Agent........................................................................... 95 SECTION 10.05. Delegation of Duties........................................................................ 95 SECTION 10.06. Successor Agent............................................................................. 95 SECTION 10.07. Non-Reliance on Agent and Other Lenders..................................................... 95 SECTION 10.08. No Other Administrative Agent............................................................... 96 SECTION 10.09. Indemnification............................................................................. 96
-iii-
Page ---- ARTICLE XI MISCELLANEOUS SECTION 11.01. Notices..................................................................................... 96 SECTION 11.02. Waivers; Amendment.......................................................................... 97 SECTION 11.03. Expenses; Indemnity......................................................................... 99 SECTION 11.04. Successors and Assigns...................................................................... 100 SECTION 11.05. Survival of Agreement....................................................................... 102 SECTION 11.06. Counterparts; Integration; Effectiveness.................................................... 103 SECTION 11.07. Severability................................................................................ 103 SECTION 11.08. Right of Setoff............................................................................. 103 SECTION 11.09. Governing Law; Jurisdiction; Consent to Service of Process.................................. 103 SECTION 11.10. WAIVER OF JURY TRIAL........................................................................ 104 SECTION 11.11. Headings.................................................................................... 104 SECTION 11.12. Confidentiality............................................................................. 104 SECTION 11.13. Interest Rate Limitation.................................................................... 105 SECTION 11.14. Lender Addendum............................................................................. 105 SECTION 11.15. Administrative Agent Consent to Defeasance.................................................. 105
ANNEXES Annex I Amortization Table SCHEDULES Schedule 1.01(a) Mortgaged Properties Schedule 1.01(b) Refinancing Indebtedness To Be Repaid Schedule 1.01(c) Subsidiary Guarantors Schedule 3.03 Governmental Approvals; No Conflicts Schedule 3.05(b) Real Properties Schedule 3.05(c) Intellectual Property Schedule 3.06(a) Subsidiaries Schedule 3.08 Material Agreements Schedule 3.18 Insurance Schedule 3.20 Acquisition Documents Schedule 4.02(o)(vi) Landlord Access Agreements EXHIBITS Exhibit A Form of Landlord Access Agreement Exhibit B Form of Administrative Questionnaire Exhibit C Form of Assignment and Acceptance Exhibit D Form of Borrowing Request Exhibit E Form of Interest Election Request Exhibit F Form of Joinder Agreement Exhibit G Form of Lender Addendum Exhibit H Form of Mortgage Exhibit I-1 Form of Term Note Exhibit I-2 Form of Revolving Note -iv- Exhibit I-3 Form of Swingline Note Exhibit J-1 Form of Perfection Certificate Exhibit J-2 Form of Perfection Certificate Supplement Exhibit K Form of Security Agreement Exhibit L Form of Exemption Certificate Exhibit M Form of Solvency Certificate Exhibit N Form of Intercompany Note -v- CREDIT AGREEMENT CREDIT AGREEMENT (this "AGREEMENT") dated as of January 23, 2004, among COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation ("BORROWER"), COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION, a Delaware corporation ("HOLDINGS"), CPI ACQUISITION CORP., a Delaware corporation ("PARENT"), the Subsidiary Guarantors (such term and each other capitalized term used but not defined herein having the meaning given it in Article I), the Lenders, UBS SECURITIES LLC and BEAR, STEARNS & CO. INC., as joint lead arrangers and bookrunners (in such capacity, "JOINT LEAD ARRANGERS"), UBS LOAN FINANCE LLC, as swingline lender (in such capacity, "SWINGLINE LENDER"), UBS AG, STAMFORD BRANCH, as administrative agent (in such capacity, "ADMINISTRATIVE AGENT") for the Lenders, collateral agent (in such capacity, "COLLATERAL AGENT") for the Secured Parties and as issuing bank (in such capacity, "ISSUING BANK"), BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent (in such capacity, "SYNDICATION AGENT"), WACHOVIA BANK, NATIONAL ASSOCIATION, as Documentation Agent (in such capacity, "DOCUMENTATION AGENT") and WACHOVIA CAPITAL MARKETS, LLC, as co-arranger (in such capacity, "CO-ARRANGER"). W I T N E S S E T H : WHEREAS, Holdings, Parent and CPI Merger Sub Corp. ("MERGER SUB") have entered into that certain agreement and plan of merger with Green Equity Investors II, L.P. ("GEI"), dated as of November 17, 2003, as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof (the "MERGER AGREEMENT") to effect the merger (the "MERGER") of Merger Sub with and into Holdings, with Holdings as the surviving corporation; WHEREAS, Borrower has requested the Lenders to extend credit in the form of Term Loans on the Closing Date, in an aggregate principal amount of $90.0 million, and Revolving Loans at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $40.0 million, which Revolving Loans may not be drawn on the Closing Date other than to fund up to $4.0 million of working capital of Borrower and its Subsidiaries; WHEREAS, Borrower has requested the Swingline Lender to extend credit, at any time and from time to time prior to the Revolving Maturity Date, in the form of Swingline Loans, in an aggregate amount at any time outstanding of up to $5.0 million; WHEREAS, Borrower has requested the Issuing Bank to issue letters of credit, in an aggregate face amount at any time outstanding not in excess of $15.0 million, to support payment obligations incurred in the ordinary course of business by Borrower and its Subsidiaries; WHEREAS, the proceeds of the Loans are to be used in accordance with Section 3.11. NOW, THEREFORE, the Lenders are willing to extend such credit to Borrower and the Issuing Bank is willing to issue letters of credit for the account of Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any ABR Term Loan or ABR Revolving Loan. "ABR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ABR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "AC AMOUNT" shall have the meaning assigned to such term in the definition of "Permitted Acquisition." "ACCESS AGREEMENT" shall mean an Access Agreement substantially in the form of Exhibit A. "ACQUIRED BUSINESS" shall mean Holdings and its subsidiaries. "ACQUIRED INDEBTEDNESS" shall mean (1) with respect to any person that becomes a Subsidiary after the Closing Date as a result of a Permitted Acquisition, Indebtedness of such person and its subsidiaries existing at the time such person becomes a Subsidiary that was not incurred in connection with, or in contemplation of, such Permitted Acquisition and (2) with respect to Borrower or any Subsidiary, any Indebtedness of a person (other than Borrower or a Subsidiary) existing at the time such person is merged with or into Borrower or a Subsidiary in connection with a Permitted Acquisition, or Indebtedness expressly assumed by Borrower or any Subsidiary in connection with a Permitted Acquisition, which Indebtedness was not, in any case, incurred by such other person in connection with, or in contemplation of, such Permitted Acquisition. "ACQUISITION CONSIDERATION" shall mean the purchase consideration for any Permitted Acquisition and all other payments by Borrower or any of its Subsidiaries in exchange for or as part of any Permitted Acquisition, whether paid in cash, by assumption of Indebtedness, or by exchange of assets other than Qualified Stock of Parent and whether payable at or prior to the consummation of such Permitted Acquisition or deferred for payment at any future time, and includes Borrower's reasonable estimate of any and all payments that will be required to be made and that represent the purchase price and any assumptions of Indebtedness, "earn-outs" and other agreements to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any person or business. "ACQUISITION DOCUMENTS" shall mean the collective reference to the Merger Agreement, Voting and Indemnification Agreement and the Escrow Agreement. -2- "ADJUSTED LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, (a) an interest rate per annum (rounded upward, if necessary, to the next 1/100 of 1%) determined by the Administrative Agent to be equal to the LIBOR Rate for such Eurodollar Borrowing in effect for such Interest Period divided by (b) 1 minus the Statutory Reserves (if any) for such Eurodollar Borrowing for such Interest Period. "ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in the preamble hereto. "ADMINISTRATIVE AGENT FEES" shall have the meaning assigned to such term in Section 2.05(b). "ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire in the form of Exhibit B, or such other form as may be supplied from time to time by the Administrative Agent. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; provided, however, that, for purposes of Section 6.06, the term "Affiliate" shall also include any person that directly or indirectly owns more than 10% of the aggregate voting Equity Interests of the person specified or that is an executive officer or director of the person specified. "AGENTS" shall mean the Arrangers, Syndication Agent, Documentation Agent, Administrative Agent and Collateral Agent. "AGREEMENT" shall have the meaning assigned to such term in the preamble hereto. "ANTI-TERRORISM LAWS" shall have the meaning assigned to such term in Section 3.22. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upward, if necessary, to the next 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "APPLICABLE MARGIN" shall mean, for any day, with respect to any Loan, the applicable percentage set forth below: -3-
Applicable Percentage - Applicable Percentage Leverage Ratio Revolving Loans Term Loans - ----------------------------------------------------------------------------------------- Eurodollar ABR Eurodollar ABR - ----------------------------------------------------------------------------------------- Level I 3.00% 2.00% 3.00% 2.00% >3.5: 1.0 - ----------------------------------------------------------------------------------------- Level II 2.75% 1.75% 2.75% 1.75% < or = 3.5:1.0 - -----------------------------------------------------------------------------------------
Each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective with respect to all Loans and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.01(a) or (b) and Section 5.01(d), respectively, indicating such change until the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, (a) from the Closing Date to the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.01(a) or (b) and 5.01(d) for the first fiscal quarter ending at least six months after the Closing Date, the Leverage Ratio shall be deemed to be in Level I for purposes of determining the Applicable Margin and (b) at any time during which Borrower has failed to deliver the financial statements and certificates required by Section 5.01(a) or (b) and Section 5.01(d), the Leverage Ratio shall be deemed to be in Level I for purposes of determining the Applicable Margin. "ARRANGERS" shall mean the Joint Lead Arrangers and the Co-Arranger. "ASSET SALE" shall mean (a) any conveyance, sale, lease, assignment, transfer or other disposition (including by way of merger or consolidation and including any sale and leaseback transaction) of any property (including stock of subsidiaries by the holder thereof) by any of the Group Companies to any person other than any Loan Party and (b) any issuance or sale by any Subsidiary of its Equity Interests to any person (other than to a Loan Party). "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit C, or such other form as shall be approved by the Administrative Agent. "AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to such term in Section 3.04(a). "BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as now constituted or hereafter amended. "BAILEE LETTER" shall have the meaning assigned to such term in the Security Agreement. "BEAR STEARNS" shall mean Bear Stearns Corporate Lending Inc. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "BOARD OF DIRECTORS" shall mean, with respect to any person, the board of directors (or similar governing body) of such person. -4- "BORROWER" shall have the meaning assigned to such term in the preamble hereto. "BORROWING" shall mean (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan. "BORROWING REQUEST" shall mean a request by Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit D, or such other form as shall be approved by the Administrative Agent. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day on which banks in New York City or Stamford, CT are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "CAPITAL EXPENDITURES" shall mean, with respect to any person, for any period, the aggregate cash expenditures made during that period for property, plant or equipment as reflected in the consolidated balance sheet of such person and its Consolidated Subsidiaries, in conformity with GAAP, but excluding expenditures made in connection with the replacement, substitution or restoration of property (a) to the extent financed from insurance proceeds paid on account of the loss of or damage to the property being replaced or restored, (b) with awards of compensation arising from the taking by eminent domain or condemnation of the property being replaced or (c) with regard to equipment that is purchased simultaneously with the trade-in of existing equipment, fixed assets or improvements, the credit granted by the seller of such equipment for the trade-in of such equipment, fixed assets or improvements; provided that Capital Expenditures shall not in any event include the Acquisition Consideration paid in connection with Permitted Acquisitions or up to $20.0 million of expenditures in connection with the sale, remediation or restoration work concerning the San Carlos Facility. "CAPITAL LEASE OBLIGATIONS" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CASH EQUIVALENTS" shall mean, as to any person: (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person; (b) time deposits and certificates of deposit of any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any State thereof or the District of Columbia having, capital and surplus aggregating in excess of $1.0 billion with maturities of not more than one year from the date of acquisition by such person; (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above; (d) commercial paper issued by any person incorporated in the United States rated at least A-1 or the equivalent thereof by Standard & Poor's Rating Service or at least P-1 or the equivalent thereof by Moody's Investors Service, Inc., and in each case maturing not more than one year after the date of acquisition by such person; (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above; and (f) demand deposit accounts maintained in the ordinary course of business. -5- "CASUALTY EVENT" shall mean, with respect to any property (including Real Property) of any person, any loss of title with respect to such property or any loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, such property for which such person or any of its subsidiaries receives insurance proceeds or proceeds of a condemnation award or other compensation; provided, however, no such event shall constitute a Casualty Event if such proceeds or other compensation in respect thereof is less than $500,000. "Casualty Event" shall include but not be limited to any taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any person or any part thereof by any Governmental Authority, civil or military. "CERCLA" shall have the meaning assigned thereto in the definition of "Environmental Law". A "CHANGE IN CONTROL" shall be deemed to have occurred if: (a) Holdings shall at any time cease to own 100% of the capital stock of Borrower or Parent shall at any time cease to own 100% of the capital stock of Holdings (other than as a result of a merger permitted by Section 6.04(k)); (b) prior to an IPO, the Permitted Holders cease to own, or to have the power to vote or direct the voting of, Voting Stock representing more than 50% of the voting power of the total outstanding Voting Stock of Parent; (c) following an IPO, either (i) the Permitted Holders shall fail to own, or to have the power to vote or direct the voting of, Voting Stock representing at least 30% of the voting power of the total outstanding Voting Stock of Parent or (ii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock representing more than 30% of the voting power of the total outstanding Voting Stock of Parent; or (d) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Parent (together with any new directors whose election to such Board of Directors or whose nomination for election by the stockholder of Parent was approved by a vote of at least 51% of the directors of Parent 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 the Board of Directors of Parent, provided that this clause (d) shall not apply when the Permitted Holders own sufficient Voting Stock to elect a majority of directors to the Board of Directors. "CHANGE IN LAW" shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or Issuing Bank (or for purposes of Section 2.12(b), by any lending office of such Lender or by such Lender's or Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "CHARGES" shall have the meaning assigned to such term in Section 11.13. "CLASS", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Term Loan Commitment or Swingline Commitment. -6- "CLOSING DATE" shall mean the date of the initial Credit Event hereunder. "CLOSING DATE INTERCOMPANY LOAN" shall mean a loan from Borrower to Holdings made from the proceeds of borrowings made hereunder on the Closing Date for the sole purpose of funding a portion of the consideration for the Merger not funded by the Equity Financing and to pay fees, commissions and expenses in connection with the Transactions. "CO-ARRANGER" shall have the meaning assigned to such term in the preamble hereto. "COLLATERAL" shall mean all of the Security Agreement Collateral, the Mortgaged Real Property and all other property of whatever kind and nature pledged as collateral under any Security Document. "COLLATERAL ACCOUNT" shall mean a collateral account or sub-account in the form of a deposit account established and maintained by the Collateral Agent for the benefit of the Secured Parties, in accordance with the provisions of Section 9.01. "COLLATERAL AGENT" shall have the meaning assigned to such term in the preamble hereto. "COLLATERAL DOCUMENTS" shall mean the Security Documents, the Perfection Certificate and all UCC or other financing statements or instruments of perfection required by this Agreement or any Security Document to be filed with respect to the security interests in property and fixtures created pursuant to the Security Documents. "COMMERCIAL LETTER OF CREDIT" means any letter of credit issued for the account of Borrower for the benefit of Borrower or any of its Subsidiaries, for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Borrower or any of its Subsidiaries. "COMMITMENT" shall mean, with respect to any Lender, such Lender's Revolving Commitment, Term Loan Commitment and Swingline Commitment. "COMMITMENT FEE" shall have the meaning assigned to such term in Section 2.05(a). "COMMITMENT LETTER" shall mean the Commitment Letter, dated January 12, 2004, among Parent, UBS Loan Finance LLC, UBS Securities LLC, Bear Stearns Corporate Lending Inc., Bear Stearns & Co. Inc., Wachovia Bank, National Association and Wachovia Capital Markets, LLC. "COMPANIES" shall mean Borrower and the Subsidiaries; and "COMPANY" shall mean any one of them. "CONFIDENTIAL INFORMATION MEMORANDUM" shall mean that certain confidential information memorandum dated as of January 2004. "CONSOLIDATED COMPANIES" shall mean Borrower and its Consolidated Subsidiaries. "CONSOLIDATED CURRENT ASSETS" shall mean, with respect to any person as at any date of determination, the total assets of such person and its Consolidated Subsidiaries which may properly be classified as current assets on a consolidated balance sheet of such person and its Consolidated Subsidiaries in accordance with GAAP, excluding cash and Cash Equivalents. -7- "CONSOLIDATED CURRENT LIABILITIES" shall mean, with respect to any person as at any date of determination, the total liabilities of such person and its Consolidated Subsidiaries which may properly be classified as current liabilities (other than (a) the current portion of any Loans and Capital Lease Obligations and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Loans to the extent otherwise included therein) on a consolidated balance sheet of such person and its Consolidated Subsidiaries in accordance with GAAP. "CONSOLIDATED EBITDA" shall mean, for any period, Consolidated Net Income for such period, adjusted, without duplication and in each case only to the extent included in determining Consolidated Net Income (and with respect to the portion of Consolidated Net Income attributable to any Subsidiary that is not a Guarantor only if a corresponding amount would be permitted at the date of determination to be distributed to Borrower by such 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 Subsidiary or its stockholders), by (x) adding thereto (i) the amount of Consolidated Interest Expense, (ii) provision for taxes, (iii) amortization, (iv) depreciation, (v) extraordinary losses, (vi) fees and expenses incurred in connection with the Transactions, the sale, remediation or relocation work at the San Carlos Facility or any Permitted Acquisition, (vii) non-cash compensation expense, (viii), non-cash impairment charges and (ix) all other non-recurring items reducing the Consolidated Net Income for such period; provided that the aggregate amount of all non-recurring cash items added back for such period shall not exceed $10.0 million; provided, further, that an item will not be considered "non-recurring" if the nature of such item is such that it is reasonably likely to recur within two years or there was a similar item within the prior two years, and (y) subtracting (i) dividends paid by Borrower pursuant to Section 6.05(c), (ii) the aggregate amount of all extraordinary gains and all non-cash items and (iii) the aggregate amount of all non-recurring cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period. To the extent that the Merger, any Asset Sale or any Permitted Acquisition (or any similar transaction or transactions which require a waiver or a consent of the Required Lenders pursuant to Section 6.04) has occurred during the relevant period, Consolidated EBITDA shall be determined for the respective period on a Pro Forma Basis for such occurrence (other than for the purposes of calculating Excess Cash Flow). Notwithstanding the foregoing, Consolidated EBITDA (i) for the third fiscal quarter of 2003 shall be $15.2 million, (ii) for the fourth fiscal quarter of 2003 shall be $12.1 million and (iii) for the first fiscal quarter of 2004 shall be $13.8 million, subject, in each case, to adjustment pursuant to the preceding sentence. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" shall mean, for any Test Period, the ratio of (a) Consolidated EBITDA for such period less the sum of (i) Capital Expenditures paid in cash during such period, (ii) income taxes that have been paid in cash during such period (net of cash indemnification amounts received from third parties); provided that if a Tax Event has occurred, the amount of the taxes paid in connection with a Tax Event shall be allocated to the period or periods to which such taxes relate (provided, that if any such amounts paid would be allocated to a period prior to the fiscal quarter ended January 2, 2004, then such amounts shall be allocated pro rata amongst the period or periods to which such taxes relate from and including the fiscal quarter ended January 2, 2004) and (iii) any income taxes allocated to such Test Period pursuant to the immediately preceding clause (ii), to (b) the sum of (i) cash Consolidated Interest Expense for such period and (ii) the principal amount of all regularly scheduled amortization payments on all Indebtedness (including the principal component of all Capital Lease Obligations) of Borrower and its Subsidiaries for such period (as determined on the first day of the respective period). To the extent that the Merger, any Asset Sale or any Permitted Acquisition (or any similar transaction or transactions which require a waiver or a consent of the Required Lenders pursuant to -8- Section 6.04) has occurred during the relevant Test Period, the Consolidated Fixed Charge Coverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrence. "CONSOLIDATED INDEBTEDNESS" shall mean, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness (but including in any event the then outstanding principal amount of all Loans, all Capital Lease Obligations and all drawn letters of credit) of Borrower and its Consolidated Subsidiaries on a consolidated basis as determined in accordance with GAAP minus the aggregate stated balance sheet amount of cash and Cash Equivalents held by Borrower and its Consolidated Subsidiaries on a consolidated basis as determined in accordance with GAAP. "CONSOLIDATED INTEREST COVERAGE RATIO" shall mean, for any Test Period, the ratio of (x) Consolidated EBITDA for such Test Period to (y) Consolidated Interest Expense for such Test Period. To the extent that the Merger, any Asset Sale or any Permitted Acquisition (or any similar transaction or transactions which require a waiver or a consent of the Required Lenders pursuant to Section 6.04) has occurred during the relevant Test Period, the Consolidated Interest Coverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrence. "CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, the excess of (a) the sum, without duplication, of (i) the total consolidated cash interest expense of Borrower and its Consolidated Subsidiaries for such period determined in accordance with GAAP, (ii) the portion of Capital Lease Obligations of Borrower and its Consolidated Subsidiaries representing the interest factor for such period, (iii) all interest paid with respect to discontinued operations, and (iv) all accrued but unpaid interest on any Indebtedness of any other person guaranteed by Borrower or any of its Subsidiaries, minus (b) the total consolidated interest income of Borrower and its Consolidated Subsidiaries for such period determined in accordance with GAAP. "CONSOLIDATED NET INCOME" shall mean, for any period, the consolidated net after tax income of Borrower and its Consolidated Subsidiaries determined in accordance with GAAP, but excluding in any event net earnings or loss of any other person (other than a Subsidiary) in which Borrower or any Consolidated Subsidiary has an ownership interest, except (in the case of any such net earnings) to the extent such net earnings shall have actually been received by Borrower or such Consolidated Subsidiary in the form of cash distributions. "CONSOLIDATED SUBSIDIARIES" shall mean, as to any person, all subsidiaries of such person which are consolidated with such person for financial reporting purposes in accordance with GAAP. "CONTESTED COLLATERAL LIEN CONDITIONS" shall mean, with respect to any Permitted Lien of the type described in clauses (a) and (b) of Section 6.02, the following conditions: (a) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any material portion of the Collateral on account of such Lien; (b) the appropriate Credit Party shall maintain, to the extent it deems necessary, cash reserves in an amount sufficient to pay and discharge such Lien and the reasonable estimate of all interest and penalties related thereto; and (c) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Security Documents. -9- "CONTINGENT OBLIGATION" shall mean, as to any person, any obligation of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including without limitation, any obligation of such person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (d) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business and any product warranties for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith. "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. "CONTROL AGREEMENT" shall have the meaning assigned to such term in the Security Agreement. "CREDIT EVENT" shall have the meaning assigned to such term in Section 4.01. "CREDIT PARTIES" shall mean Borrower and the Guarantors. "DEBT ISSUANCE" shall mean the incurrence by Parent, Holdings, Borrower or any Subsidiary of any Indebtedness after the Closing Date (other than as permitted by Section 6.01). "DEFAULT" shall mean any event or condition which is, or upon notice, lapse of time or both would constitute, an Event of Default. "DEFEASANCE ACTIVITIES" shall have the meaning assigned to such term in Section 4.02(e). "DISQUALIFIED CAPITAL STOCK" shall mean any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to 90 days following the Term Loan Maturity Date, (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interests referred to in (a) above, in each case at any time on or prior to 90 days following the Term Loan Maturity Date, or (c) contains any repurchase obligation which comes into effect prior to payment in full of all amounts hereunder. -10- "DIVIDEND" with respect to any person shall mean that such person has declared or paid a dividend or returned any equity capital to its stockholders or made any other distribution, payment or delivery of property (other than common stock of such person) or cash to its stockholders as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any shares of any class of its capital stock outstanding on or after the Closing Date (or any options or warrants issued by such person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of such person outstanding on or after the Closing Date (or any options or warrants issued by such person with respect to its capital stock). "DOLLARS" or "$" shall mean lawful money of the United States of America. "ECF PERCENTAGE" shall mean, with respect to any fiscal year, the applicable percentage set forth below across from the applicable Leverage Ratio as of the last day of such fiscal year:
Leverage Ratio Applicable Percentage - -------------- --------------------- ~~> 3.5:1.0 75% < or = 3.5:1.0 and > 2.75:1.0 50% < or = 2.75:1.0 25%~~
"ENVIRONMENT" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna or as otherwise defined in any Environmental Law. "ENVIRONMENTAL CLAIM" shall mean any written accusation, allegation, notice of violation, investigation or potential liability claim, demand, order, directive, cost recovery action or other cause of action by any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Response action costs, property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties, restrictions or modification of operations or equipment, resulting from or based upon (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases), (b) exposure to any Hazardous Material, (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "ENVIRONMENTAL LAW" shall mean any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, or the common law relating in any way to the environment (including, without limitation preservation or reclamation of natural resources), the management, Release or threatened Release of any Hazardous Material or to public or occupational health and safety matters to the extent involving exposure to Hazardous Materials, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections 9601 et seq. (collectively "CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 et seq., the Clean Air Act of 1970, as amended, 42 U.S.C. Sections 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. Sections 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Sections 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. -11- Sections 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Sections 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Sections 5101 et seq., and any similar or implementing state, local or foreign law, and all amendments to or regulations promulgated under, any of the foregoing. "ENVIRONMENTAL PERMIT" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. "EQUITY FINANCING" shall mean (i) the common equity investments in Parent by the Equity Investors and (ii) the Rollover Equity, which together shall be in an amount not less than $100.0 million (which amount may be reduced, to the extent that the amount of fees, commissions and expenses in connection with the Transactions is less than $17.5 million, by the amount of such deficiency). "EQUITY INTEREST" shall mean, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or non-voting), of capital of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership, whether outstanding on the date hereof or issued after the Closing Date. "EQUITY INVESTORS" shall mean Affiliates of Sponsor or such Affiliates and one more other investors reasonably satisfactory to the Arrangers. "EQUITY ISSUANCE" shall mean, without duplication, (i) any issuance or sale by Parent after the Closing Date of (x) any Equity Interests (including any Equity Interests issued upon exercise of any warrant or option) or any warrants or options to purchase Equity Interests or (y) any other security or instrument representing an Equity Interest (or the right to obtain any Equity Interest) in the issuing or selling person or (ii) any capital contribution to Parent; provided, however, that an Equity Issuance shall not include (a) any such sale or issuance by Parent to directors, officers or employees of any Group Company of its Equity Interests or any warrants or options to purchase its Equity Interests (including such Equity Interests issued upon exercise of any warrant or option but excluding any Disqualified Capital Stock) in an aggregate amount of up to 15.0% of the outstanding Equity Interests of Parent on the date hereof, (b) any issuance or sale by Parent to Sponsor or the Equity Investors, (c) any capital contribution by Sponsor, or any Equity Investor to Parent or (d) any issuance or sale by Parent of its Equity Interests to the extent the proceeds thereof are contemporaneously applied to fund Permitted Acquisitions or to fund Investments permitted by Section 6.03(m). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) that, together with Borrower, is treated as a single employer under Section 414(b) or (c) of the Tax Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Tax Code, is treated as a single employer under Section 414(m) or (o) of the Tax Code. "ERISA EVENT" shall mean (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Tax Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Tax Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; -12- (c) the filing pursuant to Section 412(d) of the Tax Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Company or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the incurrence by any Company or any of its ERISA Affiliates of any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (g) the receipt by any Company or its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Plan which could result in the imposition of a lien or the posting of a bond or other security; and (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Tax Code or Section 406 of ERISA) which could result in liability to any Company. "ESCROW AGREEMENT" shall mean the Escrow Agreement, dated as of January 23, 2004, in substantially the form attached as Exhibit B to the Merger Agreement. "ESCROW PROCEEDS" shall mean cash amounts received by any Group Company under the Escrow Agreement or any other escrow agreements entered into under the Merger Agreement; provided, however, that Escrow Proceeds shall not include such cash amounts relating to (i) indemnification of amounts actually paid by any Group Company to persons other than any Group Company or (ii) working capital adjustments. "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar Loans. "EURODOLLAR LOAN" shall mean any Eurodollar Revolving Loan or Eurodollar Term Loan. "EURODOLLAR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Article II. "EURODOLLAR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Article II. "EVENT OF DEFAULT" shall have the meaning assigned to such term in Article VIII. "EXCESS CASH FLOW" shall mean, for any fiscal year of Borrower, the sum, without duplication, of (a) Consolidated EBITDA for such fiscal year provided that, to the extent otherwise included in such calculation, such calculation shall exclude all unrealized gains and unrealized losses; plus (b) the difference, if positive, of the amount of Net Working Capital at the end of the prior fiscal year over the amount of Net Working Capital at the end of such fiscal year; minus (c) the absolute value of the difference, if negative, of the amount of Net Working Capital at the end of the prior fiscal year over the amount of Net Working Capital at the end of such fiscal year; minus -13- (d) the amount of non-recurring cash items reducing Consolidated Net Income; minus (e) the amount of any cash income taxes paid or payable by Borrower and its Consolidated Subsidiaries with respect to such fiscal year; minus (f) cash interest, commitment fees, Letter of Credit fees and other fees associated with or paid pursuant to any Loan Document or any other Indebtedness paid by Borrower and its Consolidated Subsidiaries during such fiscal year and fees and expenses paid with respect to the sale, remediation or relocation work concerning the San Carlos Facility; minus (g) Capital Expenditures made in cash in accordance with Section 6.07(d), cash payments in respect of Acquisition Consideration and cash Investments made in accordance with Section 6.03, in each case, during such fiscal year and to the extent funded from Internally Generated Funds; minus (h) permanent repayments of Indebtedness (other than any optional prepayment of the Loans) made by Borrower and its Consolidated Subsidiaries during such fiscal year but only to the extent such repayments do not occur in connection with a refinancing of all or any portion of the Loans; minus (i) extraordinary cash losses from the sale of assets during such fiscal year and not included in Consolidated EBITDA; provided that, to the extent otherwise included therein, the Net Cash Proceeds of Asset Sales and Casualty Events shall be excluded from the calculation of Excess Cash Flow. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXCLUDED TAXES" shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income, branch profits or franchise taxes imposed on (or measured by) its net income by the jurisdiction under the laws of which such recipient is organized or in which its principal office or applicable lending office is located and (b) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.16), any U.S. withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.15(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.15(a) (it being understood and agreed, for the avoidance of doubt, that any U.S. withholding tax imposed on a Foreign Lender as a result of a Change in Law or regulation or interpretation thereof occurring after the time such Foreign Lender became a party to this Agreement shall not be an Excluded Tax). "EXECUTIVE ORDER" shall have the meaning assigned to such term in Section 3.22. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the -14- quotations for the day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "FEE LETTER" shall mean the confidential Fee Letter, dated January 12, 2004, among the Parent, UBS Loan Finance LLC, UBS Securities LLC, Bear Stearns Corporate Lending Inc., Bear, Stearns & Co. Inc., Wachovia Bank, National Association and Wachovia Capital Markets, LLC. "FEES" shall mean the Commitment Fees, the Administrative Agent Fees, the LC Participation Fees and the Fronting Fees. "FINANCIAL OFFICER" of any person shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of such person. "FOOTHILL LOAN AGREEMENT" shall mean the Loan and Security Agreement, dated as of December 15, 2000, by and among Borrower, as borrower, the other obligors named therein, the lenders signatory thereto and Foothill Capital Corporation, as arranger and administrative agent, as amended. "FOREIGN LENDER" shall mean any Lender that is not a United States person within the meaning of Section 7701(a)(30) of the Tax Code. "FOREIGN PLAN" shall mean any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by any Company with respect to employees employed outside the United States. "FOREIGN SUBSIDIARY" shall mean a Subsidiary that is organized under the laws of a jurisdiction other than the United States or any state thereof or the District of Columbia. "FRONTING FEE" shall have the meaning assigned to such term in Section 2.05(c). "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis. "GEI" has the meaning assigned to such term in the recitals hereto. "GOVERNMENTAL AUTHORITY" shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "GOVERNMENTAL REAL PROPERTY DISCLOSURE REQUIREMENTS" shall mean any Requirement of Law of any Governmental Authority requiring notification of the buyer, mortgagee or assignee of Real Property, or notification, registration or filing to or with any Governmental Authority, prior to the sale, mortgage or assignment of any Real Property or transfer of control of an establishment, of the actual or threatened presence or release into the environment, or the use, disposal or handling of Hazardous Material on, at, under or near the Real Property to be sold, mortgaged or assigned or the establishment for which control is to be transferred. "GROUP COMPANIES" shall mean Parent, Holdings and the Companies; and "GROUP COMPANY" shall mean any one of them. "GUARANTEED OBLIGATIONS" shall have the meaning assigned to such term in Section 7.01. -15- "GUARANTEES" shall mean the guarantees issued pursuant to Article VII by the Guarantors. "GUARANTORS" shall mean Holdings, Parent and the Subsidiary Guarantors. "HAZARDOUS MATERIALS" shall mean all pollutants, contaminants, chemicals, wastes, substances and constituents including without limitation petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBS") or PCB-containing materials or equipment, radon gas, infectious or medical wastes which are regulated pursuant to, or can give rise to liability under, any Environmental Law. "HEDGING AGREEMENT" means any Interest Rate Protection Agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "HOLDINGS" shall have the meaning assigned to such term in the preamble hereto. "INDEBTEDNESS" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money; (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such person upon which interest charges are customarily paid or accrued; (d) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable incurred in the ordinary course of business); (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person in an amount not to exceed the fair market value of such property, whether or not the obligations secured thereby have been assumed; (g) all Capital Lease Obligations, Purchase Money Obligations and synthetic lease obligations of such person; (h) all obligations of such person in respect of Hedging Agreements; provided that the amount of Indebtedness of the type referred to in this clause (h) of any person shall be zero unless and until such Indebtedness shall be terminated, in which case the amount of such Indebtedness shall be the then termination payment due thereunder by such person; (i) all obligations of such person as an account party in respect of drawn letters of credit, letters of guaranty and bankers' acceptances; and (j) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such person is not liable therefor. Notwithstanding the foregoing, until the earlier of (x) March 31, 2007 and (y) the termination of the San Carlos Agreement, "Indebtedness" shall not include indebtedness of Borrower of up to $20.0 million aggregate principal amount at any time outstanding arising in connection with the sale, remediation or relocation work concerning the San Carlos Facility; provided that such indebtedness shall constitute "Indebtedness" if, at any time, neither Borrower nor Holdings is permitted, pursuant to the terms of the San Carlos Agreement, to convey the San Carlos Facility to satisfy such indebtedness in full. "INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes. "INDEMNITEE" shall have the meaning assigned to such term in Section 11.03(b). "INDENTURE" shall have the meaning assigned to such term in Section 11.15. -16- "INITIAL LENDERS" shall mean UBS Loan Finance LLC, Bear Stearns and Wachovia, each, as a Lender. "INTELLECTUAL PROPERTY" shall have the meaning assigned to such term in Section 3.05(c). "INTERCOMPANY NOTE" shall mean a promissory note substantially in the form of Exhibit N. "INTEREST ELECTION REQUEST" means a request by Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.08(b), substantially in the form of Exhibit E. "INTEREST PAYMENT DATE" shall mean (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December to occur during the period that such Loan is outstanding and the final maturity date of such Loan, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid. "INTEREST PERIOD" shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months and, if available to all relevant Lenders, nine or twelve months thereafter, as Borrower may elect; provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes of this definition, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing; provided, however, that an Interest Period shall be limited to seven days to the extent required under Section 2.03(e) hereof. "INTEREST RATE PROTECTION AGREEMENT" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or similar agreement or arrangement designed to protect Borrower or the Subsidiaries against fluctuations in interest rates and not entered into for speculation. "INTERNALLY GENERATED FUNDS" shall mean funds not constituting the proceeds of any Loan, Debt Issuance, Equity Issuance, Asset Sale, insurance recovery or Indebtedness (in each case without regard to the exclusions from the definition thereof). "INVESTMENTS" shall have the meaning assigned to such term in Section 6.03. "IPO" means an underwritten public offering of Equity Interests of Parent pursuant to a registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act. -17- "ISSUING BANK" shall mean, as the context may require, (a) UBS AG, Stamford Branch, with respect to Letters of Credit issued by it; (b) any other Lender that may become an Issuing Bank pursuant to Section 2.18(i), with respect to Letters of Credit issued by such Lender; or (c) collectively, all of the foregoing. "JOINDER AGREEMENT" shall mean that certain joinder agreement substantially in the form of Exhibit F. "JOINT LEAD ARRANGERS" shall have the meaning assigned to such term in the preamble hereto. "JUNIOR PREFERRED STOCK" shall mean the Series A 14% Junior Preferred Stock of Borrower. "LANDLORD ACCESS AGREEMENT" shall mean a Landlord Access Agreement, substantially in the form of Exhibit A, or such other form as may reasonably be acceptable to the Collateral Agent. "LATEST BALANCE SHEET" shall have the meaning assigned to such term in the Merger Agreement. "LC COMMITMENT" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.18. "LC DISBURSEMENT" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit. "LC EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all LC Disbursements that have not yet been reimbursed at such time. The LC Exposure of any Revolving Lender at any time shall mean its Pro Rata Percentage of the aggregate LC Exposure at such time. "LC PARTICIPATION FEE" shall have the meaning assigned to such term in Section 2.05(c). "LC SUB-ACCOUNT" shall have the meaning assigned to such term in Section 9.01(d). "LENDER ADDENDUM" shall mean with respect to any Lender on the Closing Date, a lender addendum in the form of Exhibit G, to be executed and delivered by such Lender on the Closing Date as provided in Section 11.14. "LENDERS" shall mean (a) the financial institutions that have become a party hereto pursuant to a Lender Addendum (other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. Unless the context clearly indicates otherwise, the term "Lenders" shall include the Swingline Lender. "LENDER AFFILIATE" means with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in commercial loans and is managed or advised by (i) the same investment advisor as such Lender or by an Affiliate of such advisor or (ii) any Lender or an Affiliate of any Lender. -18- "LETTER OF CREDIT" shall means any (i) Standby Letter of Credit and (ii) Commercial Letter of Credit, in each case, issued or to be issued by an Issuing Bank for the account of Borrower pursuant to Section 2.18. "LEVERAGE RATIO" shall mean, at any date of determination, the ratio of Consolidated Indebtedness on such date to Consolidated EBITDA for the Test Period then most recently ended. "LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period therefor, the rate per annum determined by the Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for deposits in dollars with a term comparable to such Interest Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 a.m., London, England time, on the second full Business Day preceding the first day of such Interest Period; provided, however, that (i) if no comparable term for an Interest Period is available, the LIBOR Rate shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such Interest Period and (ii) if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "LIBOR Rate" shall mean, with respect to each day during each Interest Period pertaining to Eurodollar Borrowings comprising part of the same Borrowing, the rate per annum equal to the rate at which the Administrative Agent is offered deposits in dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of such Eurodollar Borrowing to be outstanding during such Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market). "LIEN" shall mean, with respect to any property, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge, assignment, hypothecation or security interest, in each of the foregoing cases whether voluntary or imposed by law, and any agreement to give any of the foregoing; (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such property; and (c) in the case of securities (other than securities representing an interest in a joint venture), any purchase option, call or similar right of a third party with respect to such securities. "LOAN DOCUMENTS" shall mean this Agreement, the Notes (if any) and the Security Documents. "LOAN PARTIES" shall mean Borrower and the Subsidiary Guarantors. "LOANS" shall mean the loans made by the Lenders to Borrower pursuant to this Agreement. "MARGIN STOCK" shall have the meaning assigned to such term in Regulation U. "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse effect on the business, property, results of operations or condition, financial or otherwise, of Borrower and the Subsidiaries, taken as a whole; (b) material impairment of the ability of the Loan Parties to perform any of their obligations under any Loan Document; or (c) material impairment of the rights of or benefits or remedies available to the Lenders or the Collateral Agent under any Loan Document. -19- "MAXIMUM RATE" shall have the meaning assigned to such term in Section 11.13. "MERGER" shall have the meaning assigned to such term in the recitals hereto. "MERGER AGREEMENT" shall have the meaning assigned to such term in the recitals hereto. "MERGER SUB" shall have the meaning assigned to such term in the recitals hereto. "MORTGAGE" shall mean an agreement, including, but not limited to, a mortgage, deed of trust or any other document, creating and evidencing a Lien on a Mortgaged Real Property, which shall be in substantially the form of Exhibit H, with such schedules and including such provisions as shall be necessary to conform such document to applicable or local law or as shall be customary under local law, as the same may at any time be amended in accordance with the terms thereof and hereof. "MORTGAGED REAL PROPERTY" shall mean (a) each Real Property identified on Schedule 1.01(a) hereto and (b) each Real Property, if any, which shall be subject to a Mortgage delivered after the Closing Date pursuant to Section 5.11(c). "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (a) to which any Company or any ERISA Affiliate is then making or has an obligation to make contributions; (b) to which any Company or any ERISA Affiliate has within the preceding five plan years made contributions; or (c) with respect to which any Company could incur liability. "NET CASH PROCEEDS" shall mean: (a) with respect to any Asset Sale, the cash proceeds received by any Group Company (including cash proceeds subsequently received (as and when received by any Group Company) in respect of noncash consideration initially received) net of (i) selling expenses (including reasonable brokers' fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes and Borrower's good faith estimate of other taxes paid or payable in connection with such sale); (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds); (iii) Borrower's good faith estimate of payments required to be made with respect to unassumed liabilities relating to the assets sold; (iv) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money which is secured by a senior Lien on the asset sold in such Asset Sale and which is repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); and (v) with respect to the San Carlos Facility and without duplication of the amounts in clause (i) through (iv) above, Borrower's good faith estimate of the amount of payments arising in connection with the remediation, demolition or relocation work concerning the San Carlos Facility pursuant to the San Carlos Agreement; (b) with respect to any Debt Issuance, Preferred Stock Issuance or Equity Issuance, the cash proceeds thereof, net of customary fees, commissions, costs and other expenses incurred in connection therewith; and (c) with respect to any Casualty Event, the cash insurance proceeds, condemnation awards and other compensation received in respect thereof, net of all reasonable costs and -20- expenses incurred in connection with the collection of such proceeds, awards or other compensation in respect of such Casualty Event. "NET WORKING CAPITAL" shall mean, at any time, Consolidated Current Assets at such time minus Consolidated Current Liabilities at such time. "NON-GUARANTOR SUBSIDIARY" shall mean each Subsidiary that is not a Subsidiary Guarantor. "NOTES" shall mean any notes evidencing the Term Loans, Revolving Loans or Swingline Loans issued pursuant to this Agreement, if any, substantially in the form of Exhibits I-1, I-2 or I-3. "OBLIGATIONS" shall mean (a) obligations of the Credit Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Credit Parties under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Credit Parties under this Agreement and the other Loan Documents, (b) the due and punctual payment of all obligations of the Credit Parties under each Hedging Agreement in respect of the Loans entered into with any counterparty that was a Lender or Affiliate of a Lender at the time such Hedging Agreement was entered into and (c) the due and punctual payment of all obligations in respect of overdrafts and related liabilities owed to any Lender, any Affiliate of a Lender, the Administrative Agent or the Collateral Agent arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds. "OFFICERS' CERTIFICATE" shall mean, as applied to any corporation, a certificate executed on behalf of such corporation by its Chairman of the Board (if an officer), its Chief Executive Officer, its President or one of its Vice Presidents (or an equivalent officer) or by its Chief Financial Officer, Vice President-Finance or its Treasurer (or an equivalent officer) or any Assistant Treasurer, each in his or her official (and not individual) capacity. "OTHER TAXES" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "OVERDRAFT OBLIGATIONS" shall mean the Obligations described in clause (c) of the definition of "Obligations." "PARENT" shall have the meaning assigned to such term in the preamble hereto. "PARTICIPANT" shall have the meaning assigned to such term in Section 11.04(e). "PAYING AGENT" shall mean J.P. Morgan Trust Company, National Association, as paying agent under the Paying Agent Agreement. -21- "PAYING AGENT AGREEMENT" shall mean the Paying Agent Agreement dated as of the Closing Date between Borrower and the Paying Agent. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "PERFECTION CERTIFICATE" shall mean a certificate in the form of Exhibit J-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise. "PERFECTION CERTIFICATE SUPPLEMENT" shall mean a certificate supplement in the form of Exhibit J-2 or any other form approved by the Collateral Agent. "PERMITTED ACQUISITION" shall mean, with respect to Borrower or any Subsidiary Guarantor, any transaction or series of related transactions for the direct or indirect (a) acquisition of all or a portion of the property of any other person, or of any business segment or division of any other person; (b) acquisition of any brand, patent, trademark or trade name; (c) acquisition of a majority of the Equity Interests of any other person (to the extent such acquisition causes such person to become a subsidiary of the acquiror), or otherwise causing any other person to become a subsidiary of such person; or (d) merger or consolidation or any other combination with any other person, if each of the following conditions are met: (i) no Default then exists or would result therefrom; (ii) on a Pro Forma Basis after giving effect to such acquisition, Borrower shall be in compliance with all covenants set forth in Section 6.07 as of the most recent Test Period (assuming, for purposes of Section 6.07, that such acquisition, and all other Permitted Acquisitions consummated since the first day of the relevant Test Period for each of the financial covenants set forth in Section 6.07 ending on or prior to the date of such acquisition, had occurred on the first day of such relevant Test Period); (iii) the acquired person shall be engaged in a business in which Borrower and the Subsidiaries are permitted to engage and the property acquired in connection with any such acquisition shall be made subject to the Lien of the Security Documents to the extent required under the Loan Documents and shall be free and clear of any Liens, other than Permitted Liens; (iv) the board of directors or other similar governing body of the acquired person shall not have indicated publicly its opposition to the consummation of such acquisition; (v) with respect to any acquisition involving Acquisition Consideration of more than $10.0 million, Borrower shall have provided the Administrative Agent and the Lenders with (A) historical financial statements for the last three fiscal years of the person or business to be acquired (audited if available, and if such Acquisition Consideration is more than $20.0 million, audited if available without undue cost or delay) and unaudited financial statements thereof for the most recent interim period which are available, (B) reasonably detailed projections for the succeeding five years pertaining to the person or business to be acquired, (C) copies of all material documentation pertaining to such acquisition, and (D) all such other information and data relating to such acquisition or the person or business to be acquired as may be reasonably requested by the Administrative Agent or the Required Lenders; -22- (vi) Borrower shall have delivered to the Agents and the Lenders an Officers' Certificate certifying that (A) such acquisition complies with this definition (which shall have attached thereto reasonably detailed backup data and calculations showing such compliance), and (B) such acquisition could not reasonably be expected to result in a Material Adverse Effect; (vii) the Acquisition Consideration for such acquisition shall not exceed $40.0 million unless (i) the first $15.0 million of such Acquisition Consideration in excess of $40.0 million is funded with the proceeds of Equity Interests of Parent and (ii) at least 50% of such Acquisition Consideration in excess of $55.0 million is funded with the proceeds of Equity Interests of Parent, and the aggregate amount of the Acquisition Consideration for all Permitted Acquisitions since the Closing Date shall not exceed $75.0 million plus an additional $75.0 million (to be decreased in an amount equal to the amount of Investments made by Borrower and the Subsidiaries pursuant to Section 6.03(m) in excess of $25.0 million (such adjusted amount, the "AC AMOUNT")), to the extent such additional AC Amount is funded with the proceeds from issuances of Equity Interests of Parent; provided that any Equity Interests constituting all or a portion of such Acquisition Consideration shall not have a cash dividend requirement on or prior to the Term Loan Maturity Date; and (viii) the fees and expenses in connection with such acquisition shall be reasonable; provided that in the case of any acquisition involving Acquisition Consideration of more than $10.0 million, the fees and expenses in connection with such acquisition shall be reasonably acceptable to the Administrative Agent. "PERMITTED HOLDERS" shall mean, collectively, The Cypress Group L.L.C., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side L.L.C. (or any vehicle formed pursuant to the governing agreements of such vehicles to invest with or in lieu of such vehicles) (together "CMBP II"), any new investment funds sponsored or managed by Cypress Advisors Inc. or an affiliate thereof and any new partnership or other vehicle created to co-invest with CMBP II or such new investment fund sponsored or managed by Cypress Advisors Inc. or an affiliate thereof; provided that with respect to any such new investment fund, partnership or other vehicle, The Cypress Group L.L.C., Cypress Associates II LLC or another entity controlled by employees of Cypress Advisors Inc. is the general partner or similar managing entity of such new investment fund, partnership or other vehicle. "PERMITTED LIENS" shall have the meaning assigned to such term in Section 6.02. "PERSON" shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership or government, or any agency or political subdivision thereof. "PLAN" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Tax Code or Section 302 of ERISA, and in respect of which Borrower or any of its ERISA Affiliates is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PREFERRED STOCK" means, with respect to any person, any and all preferred or preference Equity Interests (however designated) of such person whether now outstanding or issued after the Closing Date. -23- "PREFERRED STOCK ISSUANCE" shall mean any issuance or sale by any Group Company after the Closing Date of Preferred Stock. "PRIME RATE" shall mean, for any day, a rate per annum that is equal to the corporate base rate of interest established by the Administrative Agent from time to time; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. The corporate base rate is not necessarily the lowest rate charged by the Administrative Agent to its customers. "PRIOR LIEN" shall have the meaning ascribed thereto in the applicable Mortgage. "PROCEEDING" shall mean, with respect to any person, any (a) insolvency, bankruptcy, receivership, reorganization, readjustment, composition or other similar proceeding relating to such person or its property or creditors in such capacity, (b) proceeding for any liquidation, dissolution or other winding-up of such person, voluntary or involuntary, whether or not involving insolvency or proceedings under the Bankruptcy Code, whether partial or complete and whether by operation of law or otherwise, (c) assignment for the benefit of creditors of such person or (d) other marshalling of the assets of such person. "PRO FORMA BASIS" shall mean, as to any person, for any events as described in clauses (ii) and (iii) below which occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if same had occurred at the beginning of such period of calculation, and (i) for purposes of the foregoing calculation, each transaction giving rise to the need to calculate the pro forma effect to any of the following events shall be assumed to have occurred on the first day of the four consecutive fiscal quarter period most recently ended for which financial statements are required by Section 5.01 to have been delivered (the "REFERENCE PERIOD"); (ii) in making any determination of Consolidated EBITDA, pro forma effect shall be given to the Merger, any Asset Sale or any Permitted Acquisition (or any similar transaction or transactions which require a waiver or consent of the Required Lenders pursuant to Section 6.04), in each case which occurred during the Reference Period (or, in the case of determinations made pursuant to the definition of Permitted Acquisition contained herein, occurring during the Reference Period or thereafter and through and including the date upon which the respective Permitted Acquisition is consummated) as if the Merger, such Asset Disposition, such Permitted Acquisition or other transaction, as the case may be, occurred on the first day of the Reference Period; and (iii) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes and not to finance any acquisition) incurred or permanently repaid during the Reference Period (or, in the case of determinations made pursuant to the definition of Permitted Acquisition contained herein, occurring during the Reference Period or thereafter and through and including the date upon which the respective Permitted Acquisition is consummated) shall be deemed to have been incurred or repaid at the beginning of such period and (y) Consolidated Interest Expense of such person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in preceding clause (x), bearing floating interest rates shall be computed on a pro forma basis as if the rates which would have -24- been in effect during the period for which pro forma effect is being given had been actually in effect during such periods. Pro forma calculations made pursuant to this definition of "Pro Forma Basis" shall be made on a basis consistent with Regulation S-X under the Exchange Act or on another basis reasonably acceptable to the Administrative Agent. "PRO FORMA FINANCIAL STATEMENTS" shall have the meaning assigned to such term in Section 3.04(b). "PRO RATA PERCENTAGE" of any Revolving Lender at any time shall mean the percentage of the total Revolving Commitment represented by such Lender's Revolving Commitment. "PROPERTY" shall mean any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any person and whether now in existence or owned or hereafter entered into or acquired. "PUBLIC DEBT SECURITIES" shall mean the Borrower's senior subordinated notes due 2005 issued under the Indenture. "PURCHASE MONEY OBLIGATION" shall mean, for any person, the obligations of such person in respect of Indebtedness incurred for the purpose of financing all or any part of the purchase price of any property (including Equity Interests of any person) or the cost of installation, construction or improvement of any property or assets and any refinancing thereof; provided, however, that such Indebtedness is incurred within 90 days after such acquisition of such property by such person. "QUALIFIED CAPITAL STOCK" of any person shall mean any Equity Interest of such person that is not Disqualified Capital Stock. "REAL PROPERTY" shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned, leased or operated by any person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof. "REFINANCING" shall mean (a) the repayment in full and the termination of any commitment to make extensions of credit under all of the outstanding Indebtedness of Holdings and Borrower and their respective subsidiaries listed on Schedule 1.01(b), including, without limitation, the Defeasance Activities and (b) the redemption of all of the Junior Preferred Stock and the Senior Preferred Stock in accordance with the restated certificate of incorporation of Borrower, in each case in accordance with the terms of Section 4.02(e). "REGISTER" shall have the meaning assigned to such term in Section 11.04(c). "REGULATION D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. -25- "REGULATION U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "RELATED HEDGING OBLIGATIONS" shall mean the obligations described in clause (b) of the definition of "Obligations" "RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing or emanating of any Hazardous Material in, into, onto or through the environment. "REQUIRED LENDERS" shall mean, at any time, Lenders having Loans, LC Exposure and unused Revolving and Term Loan Commitments representing at least a majority of the sum of all Loans outstanding, LC Exposure and unused Revolving and Term Loan Commitments at such time. "REQUIREMENTS OF LAW" shall mean, collectively, any and all requirements of any Governmental Authority including any and all laws, ordinances, rules, regulations or similar statutes or case law. "RESPONSE" shall mean (a) "response" as such term is defined in CERCLA, 42 U.S.C. Section 9601(25), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material; or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above. "RESPONSIBLE OFFICER" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other officer or similar official thereof with responsibility for the administration of the obligations of such corporation in respect of this Agreement and, except with respect to Section 5.06 hereto, "Responsible Officer" shall include any "Treasury Manager," "Treasury Analyst" or similar employee or official of such corporation. "REVOLVING AVAILABILITY PERIOD" shall mean the period following the Closing Date to but excluding the earlier of the Business Day preceding the Revolving Maturity Date and the date of termination of the Revolving Commitments. "REVOLVING BORROWING" shall mean a Borrowing comprised of Revolving Loans. "REVOLVING COMMITMENT" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder as set forth on Schedule I to the Lender Addendum executed and delivered by such Lender, or in the Assignment and Acceptance pursuant to which such Lender assumed its Revolving Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.04. The aggregate amount of the Lenders' Revolving Commitments on the Closing Date is $40.0 million. "REVOLVING EXPOSURE" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate -26- amount at such time of such Lender's LC Exposure, plus the aggregate amount at such time of such Lender's Swingline Exposure. "REVOLVING LENDER" shall mean a Lender with a Revolving Commitment. "REVOLVING LOANS" shall mean the Revolving Loans made by the Lenders to Borrower pursuant to Section 2.01(b). "REVOLVING MATURITY DATE" shall mean the sixth anniversary of the Closing Date. "ROLLOVER EQUITY" shall mean the Equity Interests in Holdings exchanged for Equity Interests in Parent by management of the Acquired Business. "SALE AND LEASEBACK TRANSACTION" shall mean the sale and leaseback transaction between Borrower and Holdings relating to the San Carlos Facility. "SAN CARLOS FACILITY" means the Holdings' San Carlos, California facility located at 301 Industrial Road. "SAN CARLOS AGREEMENT" shall mean the Agreement of Purchase and Sale, dated as of February 7, 2003, among Holdings and Palo Alto Medical Foundation and amendments thereto for the sale of the San Carlos Facility or any other similar agreement as amended, supplemented or replaced; provided that any replacement agreement shall be substantially the same terms as the replaced agreement. "SECURED PARTIES" shall mean, collectively, the Agents, each Lender, each person holding Related Hedging Obligations (in its capacity as such) and each person holding Overdraft Obligations. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SECURITY AGREEMENT" shall mean a Security Agreement substantially in the form of Exhibit K among the Credit Parties and the Collateral Agent for the benefit of the Secured Parties, as the same may be amended in accordance with the terms thereof and hereof, or such other agreements reasonably acceptable to Collateral Agent as shall be necessary to comply with applicable Requirements of Law and effective to grant to Collateral Agent (on behalf of the Secured Parties) a perfected first priority security interest in the Security Agreement Collateral covered thereby, subject only to Permitted Liens. "SECURITY AGREEMENT COLLATERAL" shall have the meaning set forth in any Security Agreement delivered on the Closing Date or thereafter pursuant to Section 5.11. "SECURITY DOCUMENTS" shall mean the Security Agreement, the Mortgages and each other security document or pledge agreement required by applicable local law to grant a valid, perfected security interest in any property acquired or developed and any other document or instrument utilized to pledge as collateral for the Obligations any property of whatever kind or nature. "SENIOR PREFERRED STOCK" shall mean the Series B 14% Senior Redeemable Exchangeable Cumulative Preferred Stock of Borrower. "SENIOR SUBORDINATED NOTE AGREEMENT" shall mean any indenture, note purchase agreement or other agreement pursuant to which the Senior Subordinated Notes are issued as in effect on the date hereof and thereafter amended from time to time subject to the requirements of this Agreement. -27- "SENIOR SUBORDINATED NOTE DOCUMENTS" shall mean the Senior Subordinated Notes, the Senior Subordinated Note Agreement, the Senior Subordinated Note Guarantees and all other documents executed and delivered with respect to the Senior Subordinated Notes or the Senior Subordinated Note Agreement. "SENIOR SUBORDINATED NOTE GUARANTEES" shall mean the guarantees of Parent, Holdings and the Subsidiary Guarantors pursuant to the Senior Subordinated Note Agreement. "SENIOR SUBORDINATED NOTES" shall mean Borrower's 8% Senior Subordinated Notes due 2012 issued pursuant to the Senior Subordinated Note Agreement and any registered notes issued by Borrower in exchange for, and as contemplated by, such notes with substantially identical terms as the notes. "SPONSOR" shall mean The Cypress Group L.L.C. "STANDBY LETTER OF CREDIT" means any standby letter of credit or similar instrument issued for the purpose of supporting (a) workers' compensation liabilities of Borrower or any Subsidiary, (b) the obligations of third-party insurers of Borrower or any Subsidiary arising by virtue of the laws of any jurisdiction requiring third-party insurers to obtain such letters of credit, or (c) performance, payment, deposit or surety obligations of Borrower or any Subsidiary if required by law or governmental rule or regulation or in accordance with custom and practice in the industry. "STATUTORY RESERVES" shall mean, for any Interest Period for any Eurodollar Borrowing, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the United States Federal Reserve System in New York City with deposits exceeding one billion dollars against "Eurodollar liabilities" (as such term is used in Regulation D). Eurodollar Borrowings shall be deemed to constitute Eurodollar liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any Lender under Regulation D. "SUBORDINATED INDEBTEDNESS" shall mean any Indebtedness of a Group Company that is subordinated in right of payment to any other Indebtedness of such Group Company, including the Senior Subordinated Notes and the Senior Subordinated Note Guarantees "SUBSIDIARY" shall mean, with respect to any person (the "PARENT") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by (x) the parent or one or more subsidiaries of the parent or (y) by the parent and one or more subsidiaries of the parent. "SUBSIDIARY" means any subsidiary of Borrower. "SUBSIDIARY GUARANTOR" shall mean each Subsidiary listed on Schedule 1.01(c), and each other Subsidiary that is or becomes a party to this Agreement pursuant to Section 5.11, other than a Foreign Subsidiary. -28- "SUPERMAJORITY LENDERS" shall mean at any time, Lenders having Loans, LC Exposure and unused Revolving and Term Loan Commitments representing at least 66 2/3% of the sum of all Loans outstanding, LC Exposure and unused Revolving and Term Loan Commitments at such time. "SURVEY" shall mean a survey of any Mortgaged Real Property (and all improvements thereon) which is (a) (i) prepared by a surveyor or engineer licensed to perform surveys in the state where such Mortgaged Real Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Mortgaged Real Property or any easement, right of way or other interest in the Mortgaged Real Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Real Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement, right of way or other interest in the Mortgaged Real Property, (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) relating to such Mortgaged Real Property and issue the endorsements requested by the Collateral Agent under Section 4.02(p) or 5.11(c) or (b) otherwise acceptable to the Collateral Agent. "SWINGLINE COMMITMENT" shall mean the commitment of the Swingline Lender to make loans pursuant to Section 2.17, as the same may be reduced from time to time pursuant to Section 2.07 or Section 2.17. "SWINGLINE EXPOSURE" shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Revolving Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time. "SWINGLINE LENDER" shall have the meaning assigned to such term in the preamble hereto. "SWINGLINE LOAN" shall mean any loan made by the Swingline Lender pursuant to Section 2.17. "SYNDICATION AGENT" shall have the meaning assigned to such term in the preamble hereto. "TAX CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. "TAX EVENT" shall mean the payment of any income taxes on account of a judgment resulting from a tax audit that would cause a violation of Section 6.07(c) if all of such tax payment is included within a single Test Period for purposes of calculating Consolidated Fixed Charge Coverage Ratio. "TAX RETURN" shall mean all returns, statements, filings, attachments and other documents or certifications required to be filed in respect of Taxes. "TAX SHARING AGREEMENTS" shall mean all tax sharing, tax allocation and other similar agreements entered into by Parent, Holdings or any subsidiary of Holdings. -29- "TAXES" shall mean any and all present or future taxes, duties, levies, fees, imposts, deductions, charges or withholdings, whether computed on a separate, consolidated, unitary, combined or other basis and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing. "TERM BORROWING" shall mean a Borrowing comprised of Term Loans. "TERM LOAN COMMITMENT" shall mean with respect to each Lender, the commitment, if any, of such Lender to make a Term Loan hereunder on the Closing Date in the amount set forth on Schedule I to the Lender Addendum executed and delivered by such Lender, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Term Loan Commitment, as applicable, as such commitment may be (a) terminated or reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.04. The initial aggregate amount of the Lenders' Term Loan Commitments is $90.0 million. "TERM LOAN MATURITY DATE" shall mean the date that is six months following the six-year anniversary of the Closing Date. "TERM LOAN REPAYMENT DATE" shall have the meaning assigned to such term in Section 2.09(a). "TERM LOANS" shall mean the term loans made by the Lenders to Borrower pursuant to Section 2.01(a). Each Term Loan shall be either an ABR Term Loan or a Eurodollar Term Loan. "TEST PERIOD" shall mean, at any time, the four consecutive fiscal quarters of Borrower then last ended (in each case taken as one accounting period) for which financial statements have been or are required to be delivered to the Administrative Agent pursuant to Section 5.01(a) or (b). "TITLE COMPANY" shall mean any title insurance company as shall be retained by Borrower and reasonably acceptable to the Administrative Agent. "TITLE POLICY" shall have the meaning assigned to such term in Section 4.02(p)(ii). "TRANSACTION DOCUMENTS" shall mean any and all agreements and other material documents entered into or delivered in connection with the Transactions, including but not limited to the Acquisition Documents, the Loan Documents, the Senior Subordinated Note Documents and the Equity Financing documents. "TRANSACTIONS" shall mean, collectively, the transactions to occur pursuant to the Transaction Documents, including (a) the consummation of the Merger; (b) the execution and delivery of the Loan Documents and the initial borrowings hereunder; (c) the making of the Closing Date Intercompany Loan; (d) the Equity Financing; (e) the Refinancing; (f) the exchange of the Rollover Equity and (g) the payment of all fees and expenses to be paid in connection with the foregoing. "TYPE", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOR Rate or the Alternate Base Rate. "UCC" shall mean the Uniform Commercial Code as in effect in the applicable state or jurisdiction. -30- "VOTING AND INDEMNIFICATION AGREEMENT" shall mean the Voting and Indemnification Agreement, dated as of November 17, 2003, in substantially the form attached as Exhibit A to the Merger Agreement. "VOTING STOCK" shall mean any class or classes of capital stock of Parent pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of Parent. "WACHOVIA" shall mean Wachovia Bank, National Association. "WELLS FARGO LOAN AGREEMENT" shall mean the Loan Agreement, dated as of December 22, 2000, by and between Holdings and Wells Fargo Bank National Association, as amended. "WHOLLY OWNED SUBSIDIARY" shall mean, as to any person, (a) any corporation 100% of whose capital stock (other than directors' qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest at such time. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "REVOLVING LOAN") or by Type (e.g., a "EURODOLLAR LOAN") or by Class and Type (e.g., a "EURODOLLAR REVOLVING LOAN"). Borrowings also may be classified and referred to by Class (e.g., a "REVOLVING BORROWING", "TERM BORROWING") or by Type (e.g., a "EURODOLLAR BORROWING") or by Class and Type (e.g., a "EURODOLLAR REVOLVING BORROWING"). SECTION 1.03. TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be followed by the phrase "WITHOUT LIMITATION". The word "WILL" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any person shall be construed to include such person's successors and assigns, (c) the words "HEREIN", "HEREOF' and "HEREUNDER", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, and (f) the words "ASSET" and "PROPERTY" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP as in effect from time to time and all terms of an accounting or financial nature shall be construed in accordance with GAAP as in effect on the date hereof, subject to the following sentence. -31- If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and Borrower, the Administrative Agent or the Required Lenders shall so request, the Administrative Agent, the Lenders and Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to approval of Required Lenders); provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein. Notwithstanding anything in this Agreement to the contrary, prior to the unwinding of the Sale and Leaseback Transaction, the financial definitions used herein which are calculated on a "consolidated" basis, shall be calculated on a consolidated basis for Holdings and its Consolidated Subsidiaries. ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly: (a) to make a Term Loan to Borrower on the Closing Date in a principal amount not to exceed its Term Loan Commitment; and (b) to make Revolving Loans to Borrower, at any time and from time to time on or after the Closing Date, and until the earlier of the second Business Day preceding the Revolving Maturity Date and the termination of the Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment; provided, however, that Revolving Loans made on the Closing Date shall not exceed $4.0 million. Amounts paid or prepaid in respect of Term Loans may not be reborrowed. Within the limits set forth in clause (b) above and subject to the terms, conditions and limitations set forth herein, Borrower may borrow, pay or prepay and reborrow Revolving Loans. SECTION 2.02. LOANS. (a) Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to Section 2.02(f), Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $250,000 and not less than $1.0 million or (ii) equal to the remaining available balance of the applicable Commitments. (b) Subject to Sections 2.11 and 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan, so long as such option does not result in increased costs to Borrower; provided that any exercise of such option shall not affect the obligation of Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that Borrower shall not be entitled to request any Borrowing that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. -32- (c) Except with respect to Loans made pursuant to Section 2.02(f), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 11:00 a.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account as directed by Borrower in the applicable Borrowing Request maintained with the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above, and the Administrative Agent may, in reliance upon such assumption, make available to Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (e) Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing constituting Revolving Loans or Term Loans if the Interest Period requested with respect thereto would end after the Revolving Maturity Date or the Term Loan Maturity Date, as the case may be. (f) If the Issuing Bank shall not have received from Borrower the payment required to be made by Section 2.18(e) within the time specified in such Section, the Issuing Bank will promptly notify the Administrative Agent of the LC Disbursement and the Administrative Agent will promptly notify each Revolving Lender of such LC Disbursement and its Pro Rata Percentage thereof. Each Revolving Lender shall pay by wire transfer of immediately available funds to the Administrative Agent on such date (or, if such Revolving Lender shall have received such notice later than 12:00 (noon), New York City time, on any day, not later than 11:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Lender's Pro Rata Percentage of such LC Disbursement (it being understood that such amount shall be deemed to constitute an ABR Revolving Loan of such Lender, and such payment shall be deemed to have reduced the LC Exposure), and the Administrative Agent will promptly pay to the Issuing Bank amounts so received by it from the Revolving Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from Borrower pursuant to Section 2.18(e) prior to the time that any Revolving Lender makes any payment pursuant to this paragraph (f); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made such payments and to the Issuing Bank, as their interests may appear. If any Revolving Lender shall not have made its Pro Rata Percentage of such LC Disbursement available to the Administrative Agent as provided above, such Lender and Borrower severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph (f) to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of Borrower, a rate per annum equal to the interest rate applicable to Revolving Loans pursuant to Section 2.06(a), and -33- (ii) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate. SECTION 2.03. BORROWING PROCEDURE. To request a Revolving Borrowing or Term Borrowing, Borrower shall notify the Administrative Agent of such request by telephone (promptly confirmed by telecopy) (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.18(e) may be given not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (a) whether the requested Borrowing is to be a Revolving Borrowing or a Term Borrowing; (b) the aggregate amount of such Borrowing; (c) the date of such Borrowing, which shall be a Business Day; (d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (e) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; provided that until the earlier of (i) the date which is 30 days after the Closing Date and (ii) the date on which a successful syndication of the Loans and Commitments shall have been declared by the Joint Lead Arrangers, Borrower shall only be permitted to request an Interest Period of seven days; and (f) the location and number of Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.02. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month's duration (subject to the proviso of clause (e) above). Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. EVIDENCE OF DEBT; REPAYMENT OF LOANS. (a) Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender holding Term Loans, the principal amount of each Term Loan of such Lender as provided in Section 2.09, (ii) to the Administrative Agent for the account of each Revolving Lender, the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date and (iii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least five Business Days after such Swingline Loan is made; provided that on each date that a -34- Revolving Borrowing is made, Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type and Class thereof and the Interest Period applicable thereto; (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder; and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of Borrower to repay the Loans in accordance with their terms. (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 11.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.05. FEES. (a) COMMITMENT FEE. Borrower agrees to pay to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December in each year and on each date on which any Commitment of such Lender shall expire or be terminated as provided herein, a commitment fee (a "COMMITMENT FEE") equal to 0.50% per annum on the average daily unused amount of the Revolving Commitment of such Lender during the preceding quarter (or other period commencing with the Closing Date or ending with the Revolving Maturity Date or the date on which the Revolving Commitment of such Lender shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall commence to accrue on the Closing Date and shall cease to accrue on the date on which the Revolving Commitment of such Lender shall expire or be terminated as provided herein. (b) ADMINISTRATIVE AGENT FEES. Borrower agrees to pay to the Administrative Agent, for its own account, the agency fees set forth in the Fee Letter or such other fees payable in the amounts and at the times separately agreed upon between Borrower and the Administrative Agent (the "ADMINISTRATIVE AGENT FEES"). (c) LC AND FRONTING FEES. Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee ("LC PARTICIPATION FEE") with respect to its participations in Letters of Credit, which shall accrue at a rate equal to the Applicable Margin from time to time used to determine the interest rate on Eurodollar Revolving Loans pursuant to Section 2.06 on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to -35- unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee ("FRONTING FEE"), which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. LC Participation Fees and Fronting Fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Closing Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All LC Participation Fees and Fronting Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Fronting Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances (absent manifest error). SECTION 2.06. INTEREST ON LOANS. (a) Subject to the provisions of Section 2.06(c), the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin in effect from time to time. (b) Subject to the provisions of Section 2.06(c), the Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin in effect from time to time. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of any overdue principal of or interest on any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a -36- year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBOR Rate shall be determined by the Administrative Agent in accordance with the provisions of this Agreement and such determination shall be conclusive absent manifest error. SECTION 2.07. TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Term Loan Commitments shall automatically terminate on the Closing Date. The Revolving Commitments, the Swingline Commitment and the LC Commitment shall automatically terminate on the Revolving Maturity Date. (b) Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $250,000 and not less than $1.0 million and (ii) the Revolving Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10 or Section 2.01, as applicable, the sum of the Revolving Exposures would exceed the aggregate amount of Revolving Commitments. (c) Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section shall be irrevocable. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.08. INTEREST ELECTIONS. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if Borrower were requesting a Revolving Borrowing or Term Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request substantially in the form of Exhibit E. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); -37- (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period"; provided that until the earlier of (i) the date which is 30 days after the Closing Date and (ii) the date on which a successful syndication of the Loans and Commitments shall have been declared by the Joint Lead Arrangers, Borrower shall be permitted to request an Interest Period of seven days only. If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month's duration (subject to the proviso in clause (iv) above). (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If an Interest Election Request with respect to a Eurodollar Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies Borrower, then, after the occurrence and during the continuance of such Event of Default, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.09. AMORTIZATION OF TERM BORROWINGS. (a) Borrower shall pay to the Administrative Agent, for the account of the Lenders, on the dates set forth on Annex I, or if any such date is not a Business Day, on the next preceding Business Day (each such date being a "TERM LOAN REPAYMENT DATE"), a principal amount of the Term Loans (as adjusted from time to time pursuant to Sections 2.09(b) and 2.10) equal to the amount set forth on Annex I for such date, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment. (b) To the extent not previously paid, all Term Loans shall be due and payable on the Term Loan Maturity Date. SECTION 2.10. OPTIONAL AND MANDATORY PREPAYMENTS OF LOANS. (a) OPTIONAL PREPAYMENTS. Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, subject to the requirements of this Section; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $1.0 million. (b) REVOLVING LOAN PREPAYMENTS. In the event of any termination of all the Revolving Commitments, Borrower shall, on the date of such termination, repay or prepay all its outstanding -38- Revolving Borrowings and all outstanding Swingline Loans and replace all outstanding Letters of Credit and/or deposit an amount equal to the LC Exposure in the LC Sub-Account. In the event of any partial reduction of the Revolving Commitments, then (i) at or prior to the effective date of such reduction, the Administrative Agent shall notify Borrower and the Revolving Lenders of the sum of the Revolving Exposures after giving effect thereto and (ii) if the sum of the Revolving Exposures would exceed the aggregate amount of Revolving Commitments after giving effect to such reduction or termination, then Borrower shall, on the date of such reduction or termination, repay or prepay Revolving Borrowings or Swingline Loans (or a combination thereof) and/or replace or cash collateralize outstanding Letters of Credit in an amount sufficient to eliminate such excess. (c) ASSET SALES. Not later than five Business Days following the receipt of any Net Cash Proceeds of any Asset Sale, Borrower shall apply 100% of the Net Cash Proceeds received with respect thereto to make prepayments in accordance with Sections 2.10(i) and (j); provided that: (i) no such prepayment shall be required with respect to (A) any Asset Sale permitted by Section 6.04(b)(ii), (b)(iii), (d), (e), (h), (i) or (j), (B) the disposition of assets subject to a condemnation or eminent domain proceeding or insurance settlement to the extent it does not constitute a Casualty Event, or (C) Asset Sales for fair market value resulting in no more than $1.0 million in Net Cash Proceeds per Asset Sale (or series of related Asset Sales) and less than $3.0 million in Net Cash Proceeds in any fiscal year; and (ii) so long as no Default shall then exist or would arise therefrom and the aggregate of such Net Cash Proceeds of Asset Sales shall not exceed $20.0 million in any fiscal year of Borrower, such proceeds shall not be required to be so applied on such date to the extent that Borrower shall have delivered a certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds shall be used (x) to purchase replacement assets or fixed or capital assets used or usable in the business of Borrower and the Subsidiaries, (y) to repair such assets or (z) to acquire 100% of the Equity Interests of any person that owns such replacement or other such assets no later than 360 days following the date of such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended); provided, however, that if all or any portion of such Net Cash Proceeds not required to be applied to make prepayments as a result of this clause (ii) shall not be so reinvested as set forth in clauses (x), (y) and (z) within such 360-day period, such unused portion shall be applied on the last day of such period as a mandatory prepayment as provided in this Section 2.10(c). (d) DEBT OR PREFERRED STOCK ISSUANCE. Upon any Debt Issuance or any Preferred Stock Issuance after the Closing Date, Borrower shall make prepayments in accordance with Sections 2.10(i) and (j) in an aggregate principal amount equal to 100% of the Net Cash Proceeds of such Debt Issuance or Preferred Stock Issuance. (e) EQUITY ISSUANCE. Upon any Equity Issuance (other than a Preferred Stock Issuance) after the Closing Date, Borrower shall make prepayments in accordance with Sections 2.10(i) and (j) in an aggregate principal amount equal to 50% of the Net Cash Proceeds of such Equity Issuance; provided that if the Leverage Ratio after giving pro forma effect to such prepayment as of the most recently ended Test Period after the first anniversary of the Closing Date for which financial statements are available is less than 1.25 to 1.0, no such prepayment shall be required. (f) CASUALTY EVENTS. Not later than five Business Days following the receipt of any Net Cash Proceeds from a Casualty Event, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to make prepayments in accordance with Sections 2.10(i) and (j); provided, however, that: -39- (i) so long as no Default or Event of Default then exists or would arise therefrom, the Net Cash Proceeds thereof shall not be required to be so applied on such date to the extent that Borrower has delivered an Officers' Certificate to the Collateral Agent on or prior to such date stating that such proceeds shall be used (A) to fund the acquisition or repair of property or the acquisition of 100% of the Equity Interests of any person that owns property used or usable in the business of Borrower and the Subsidiaries or (B) to repair, replace or restore the property in accordance with the provisions of this Agreement and the applicable Security Document in respect of which such Casualty Event has occurred; provided that, in each case, the actions described in clauses (A) and (B) above are commenced by Borrower within 360 days following the date of the receipt of such Net Cash Proceeds and are diligently pursued to satisfactory completion to the extent practicable in the good faith estimate of Borrower, (ii) to the extent such Casualty Event affects any of the Collateral, all property acquired to effect any repair, replacement or restoration of such Collateral shall be made subject to the Lien of the Security Documents in accordance with the provisions of Section 5.11, (iii) all such Net Cash Proceeds in excess of $10.0 million in the aggregate for all such Casualty Events shall be held in the Collateral Account and released therefrom only in accordance with the terms of Article IX, and (iv) if all or any portion of such Net Cash Proceeds shall not be so applied within such 360-day period, such unused portion shall be applied on the last day of such period as a mandatory prepayment as provided in this Section 2.10(f). (g) EXCESS CASH FLOW. No later than the earlier of (i) 90 days after the end of each fiscal year of Borrower, commencing with the fiscal year ending October 1, 2004, and (ii) the date on which the financial statements with respect to such period are delivered pursuant to Section 5.01(a), Borrower shall make prepayments in accordance with Sections 2.10(i) and (j) in an aggregate principal amount equal to the ECF Percentage of Excess Cash Flow for the fiscal year then ended; provided that if the Borrower makes any optional prepayment of Loans during any fiscal year with funds which would otherwise constitute "Excess Cash Flow" for such fiscal year (all such payments, the "ECF OPTIONAL PREPAYMENTS"), no deduction for such ECF Optional Prepayments shall be made in calculating Excess Cash Flow for such fiscal year (Excess Cash Flow without such deduction is herein referred to as "GROSS EXCESS CASH FLOW"). If the ECF Optional Prepayments for such fiscal year equal or exceed the ECF Percentage of Gross Excess Cash Flow for such fiscal year, no prepayment shall be required pursuant to this Section 2.10(g) for such fiscal year. To the extent that the ECF Optional Prepayments for such fiscal year are less than the ECF Percentage of Gross Excess Cash Flow for such fiscal year (such difference, the "EXCESS CASH FLOW SHORTFALL"), subject to the proviso of the first sentence of this Section 2.10(g), the Borrower shall be required only to prepay an amount equal to such Excess Cash Flow Shortfall in respect of such fiscal year pursuant to this Section 2.10(g). (h) ESCROW PROCEEDS. No later than five Business Days following the receipt of any Escrow Proceeds, Borrower shall apply an amount equal to 100% of such Escrow Proceeds to make prepayments in accordance with Sections 2.10(i) and (j). (i) APPLICATION OF PREPAYMENTS. (i) Optional prepayments in respect of Term Loans under this Agreement and mandatory prepayments pursuant to Section 2.10(d) or (e) shall be applied first to reduce remaining scheduled installments of principal due in respect of outstanding Term Loans under Section 2.09 in direct order of maturity up to but not including the first scheduled installment due after the date that is 12 months following the date of such prepayment. After application of prepayments pursuant to the first sentence of this paragraph (i)(i) and to the extent there are mandatory prepayment -40- amounts remaining after such application, such excess prepayments shall be applied (x) first, to reduce outstanding Term Loans pro rata against the remaining scheduled installments of principal due in respect of the Term Loans under Section 2.09 up to but not including the September 30, 2009 scheduled installment and (y) second, to the scheduled installment amounts on and after September 30, 2009, in direct order of maturity. Mandatory prepayments pursuant to Sections 2.10(c), (f), (g) or (h) shall be applied (x) first, to reduce outstanding Term Loans pro rata against the remaining scheduled installments of principal due in respect of the Term Loans under Section 2.09, up to but not including the September 30, 2009 scheduled installment and (y) second, to the scheduled installment amounts on and after September 30, 2009, in direct order of maturity. (ii) After application of prepayments pursuant to paragraph (i)(i) and to the extent there are mandatory prepayment amounts remaining after such application (x) in the case of a mandatory prepayment pursuant to Section 2.10(d), (e), (g), or (h), Borrower shall first, repay outstanding Revolving Loans in an amount equal to such excess and second, the Revolving Commitments shall be reduced (but not to below $20.0 million) ratably among the Revolving Lenders in accordance with their applicable Revolving Commitments in an aggregate amount equal to the excess remaining after such repayment of Revolving Loans or (y) in the case of a mandatory prepayment pursuant to Section 2.10(c) or (f), the Revolving Commitments shall be reduced (but not to below $20.0 million) ratably among the Revolving Lenders in accordance with their applicable Revolving Commitments in an aggregate amount equal to such excess, provided, in either case, Borrower shall comply with Section 2.10(b). Any remaining prepayment amounts after the application pursuant to the first sentence of this paragraph (i)(ii) may be retained by Borrower. (iii) Amounts to be applied pursuant to this Section 2.10 to the prepayment of Term Loans and Revolving Loans shall be applied, as applicable, first to reduce outstanding ABR Term Loans and ABR Revolving Loans, respectively. Any amounts remaining after each such application shall be applied to prepay Eurodollar Term Loans or Eurodollar Revolving Loans, as applicable. Notwithstanding the foregoing, if the amount of any prepayment of Loans required under this Section 2.10 shall be in excess of the amount of the ABR Loans at the time outstanding, only the portion of the amount of such prepayment as is equal to the amount of such outstanding ABR Loans shall be immediately prepaid and, at the election of Borrower, the balance of such required prepayment shall be either (i) deposited in the Collateral Account and applied to the prepayment of Eurodollar Loans on the last day of the then next-expiring Interest Period for Eurodollar Loans (with all interest accruing thereon for the account of Borrower) or (ii) prepaid immediately, together with any amounts owing to the Lenders under Section 2.13. Notwithstanding any such deposit in the Collateral Account, interest shall continue to accrue on such Loans until prepayment. (j) NOTICE OF PREPAYMENT. Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a -41- mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.06. SECTION 2.11. ALTERNATE RATE OF INTEREST. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBOR Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.12. INCREASED COSTS. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBOR Rate) or the Issuing Bank; or (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional -42- amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the basis for its claim and the calculation of the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided, further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.13. BREAKAGE PAYMENTS. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to Section 2.16, then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBOR Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth the basis for its claim and the calculation of any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.14. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS. (a) Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.12, 2.13 or 2.15, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at -43- 677 Washington Boulevard, Stamford, Connecticut, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.12, 2.13, 2.15 and 11.03 shall be made directly to the persons entitled thereto and payments pursuant to other Loan Documents shall be made to the persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that Borrower will not make such payment, the Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. -44- (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.02(f), 2.14(d), 2.17(d), 2.18(d) or 11.03(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.15. TAXES. (a) Any and all payments by or on account of any obligation of Borrower hereunder or under any other Loan Document shall be made without setoff, counterclaim or other defense and free and clear of and without deduction or withholding for any and all Indemnified Taxes; provided that if Borrower shall be required by law to deduct any Indemnified Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) Borrower shall make such deductions or withholdings and (iii) Borrower shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law. (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the basis for its claim and the calculation of the amount of such payment or liability delivered to Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower (with a copy to the Administrative Agent), on or before the date it becomes a party to this Agreement (or in the case of any Participant, on or before such Participant purchases the related participation), such properly completed and executed documentation prescribed by applicable law or reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate. Each Foreign Lender either (1) (i) agrees to furnish either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN (or successor form) and (ii) agrees (for the benefit of Borrower and the Administrative Agent), to the extent it may lawfully do so at such times, upon reasonable request by Borrower or the Administrative Agent, to provide a new Form W-8ECI or Form W-8BEN (or successor form) upon the expiration or obsolescence of any previously delivered form to reconfirm any complete exemption from, or any entitlement to a reduction in, U.S. federal withholding tax with respect to any interest payment hereunder or (2) in the case of any such Foreign Lender that is not a "bank" within the -45- meaning of Section 881(c)(3)(A) of the Tax Code, (i) agrees to furnish either (a) an exemption certificate substantially in the form of Exhibit L and two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (or successor form) or (b) an Internal Revenue Form W-8ECI (or successor form), certifying (in each case) to such Foreign Lender's legal entitlement to an exemption or reduction from U.S. federal withholding tax with respect to all interest payments hereunder and (ii) agrees (for the benefit of Borrower and the Administrative Agent) to the extent it may lawfully do so at such times, upon reasonable request by Borrower or the Administrative Agent, to provide a new Form W-8BEN or W-8ECI (or successor form) upon the expiration or obsolescence of any previously delivered form to reconfirm any complete exemption from, or any entitlement to a reduction in, U.S. federal withholding tax with respect to any interest payment hereunder. (f) If the Administrative Agent or a Lender (or an assignee) receives a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by Borrower or with respect to which Borrower has paid additional amounts pursuant to this Section 2.15, it shall pay over such refund to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Borrower under this Section 2.15 with respect to the Indemnified Taxes or the Other Taxes giving rise to such refund), net of all out-of-pocket expenses (including, without limitation, any Taxes imposed on such refund to the extent in excess of any tax benefit actually realized in connection with the payments of the tax giving rise to such refund) of the Administrative Agent or such Lender (or assignee) and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that Borrower, upon the request of the Administrative Agent or such Lender (or assignee), agrees to repay the amount paid over to Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender (or assignee) in the event the Administrative Agent or such Lender (or assignee) is required to repay such refund to such Governmental Authority. Nothing contained in this Section 2.15(f) shall require the Administrative Agent or any Lender (or assignee) to make available its tax returns or any other information which it deems confidential to Borrower or any other person. SECTION 2.16. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) MITIGATION OF OBLIGATIONS. If any Lender requests compensation under Section 2.12, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable in the future pursuant to Section 2.12 or 2.15, as the case may be, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous in any material respect to such Lender. Borrower hereby agrees to pay all reasonable out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) REPLACEMENT OF LENDERS. If (1) any Lender requests compensation under Section 2.12, (2) Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, (3) any Lender defaults in its obligation to fund Loans hereunder or (4) Borrower elects to replace a Lender in accordance with Section 11.02(c), then Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.04), all of its interests, rights and obligations under this Agreement to an assignee selected by Borrower that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the -46- Issuing Bank and Swingline Lender) if the assignee is not another Lender, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees, prepayment premiums and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments (other than a de minimis amount). A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply. SECTION 2.17. SWINGLINE LOANS. (a) SWINGLINE COMMITMENT. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $5.0 million or (ii) the sum of the total Revolving Exposures exceeding the total Revolving Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, Borrower may borrow, prepay and reborrow Swingline Loans. (b) SWINGLINE LOANS. To request a Swingline Loan, Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from Borrower. The Swingline Lender shall make each Swingline Loan available to Borrower by means of a credit to the general deposit account of Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.18(e), by remittance to the Issuing Bank) by 5:00 p.m., New York City time, on the requested date of such Swingline Loan. Borrower shall not request a Swingline Loan if at the time of and immediately after giving effect to such request a Default has occurred and is continuing. Swingline Loans shall be made in minimum amounts of $250,000 and integral multiples of $50,000 above such amount. (c) PREPAYMENT. Borrower shall have the right at any time and from time to time to prepay any Swingline Loan, in whole or in part, upon giving written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Swingline Lender and to the Administrative Agent before 2:00 p.m., New York City time, on the date of prepayment at the Swingline Lender's address for notices specified in the Swingline Lender's Administrative Questionnaire, and such prepayments shall be made to the Swingline Lender by 3:00 p.m., New York City time, on such date of prepayment. All principal payments of Swingline Loans shall be accompanied by accrued interest on the principal amount being repaid to the date of payment. (d) PARTICIPATIONS. The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Day require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Pro Rata Percentage of such -47- Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (provided that such payment shall not cause such Lender's Revolving Exposure to exceed such Lender's Revolving Commitment). Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.02(f) with respect to Loans made by such Lender (and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders) and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from Borrower (or other party on behalf of Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve Borrower of any default in the payment thereof. SECTION 2.18. LETTERS OF CREDIT. (a) GENERAL. Subject to the terms and conditions set forth herein, Borrower may request the issuance of Letters of Credit for its own account or the account of a Subsidiary in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period (provided that Borrower shall be a co-applicant, and shall be jointly and severally liable, with respect to each Letter of Credit issued for the account of or in favor of a Subsidiary). In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by Borrower to, or entered into by Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), Borrower shall hand deliver or telecopy (or transmit by electronic communication if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (at least three Business Days in advance of the requested date of issuance, amendment, renewal or extension, or such shorter period as is acceptable to such respective Issuing Bank) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit, Borrower shall be deemed to represent and warrant that), after giving effect to such -48- issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed $15.0 million and (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments. (c) EXPIRATION DATE. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (1) in the case of a Standby Letter of Credit, unless otherwise consented to by the Issuing Bank in its sole discretion, (x) (i) the date one year after the date of the issuance of such Standby Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) or (ii) such later date as requested by Borrower in the relevant application and (y) the date that is five days prior to the Revolving Maturity Date and (2) in the case of a Commercial Letter of Credit, (x) the date that is 180 days after the date of issuance of such Commercial Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (y) the date that is five days prior to the Revolving Maturity Date. (d) PARTICIPATIONS. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Pro Rata Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) REIMBURSEMENT. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, Borrower shall reimburse such LC Disbursement by paying to the Issuing Bank an amount equal to such LC Disbursement not later than 2:00 p.m., New York City time, on the date that such LC Disbursement is made, if Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time on such date, or, if such notice has not been received by Borrower prior to such time on such date, then not later than 2:00 p.m., New York City time, on (i) the Business Day that Borrower receives such notice, if such notice is received prior to 11:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.17 that such payment be financed with an ABR Revolving Loan or Swingline Loan in an equivalent amount and, to the extent so financed, Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Loan or Swingline Loan. If Borrower fails to make such payment when due, the Issuing Bank shall notify the Administrative Agent and the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from Borrower in respect thereof and such Lender's Pro Rata Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Pro Rata Percentage of the unreimbursed LC Disbursement in the same manner as provided in Section 2.02(f), with respect to Loans made by such Lender, and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from Borrower pursuant to this paragraph, the Administrative Agent shall, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse -49- the Issuing Bank, distribute such payment to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve Borrower of its obligation to reimburse such LC Disbursement. (f) OBLIGATIONS ABSOLUTE. The obligation of Borrower to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of Borrower hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Affiliates, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable law) suffered by Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank, any other issuing bank or any of their respective correspondent banks (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve Borrower of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement (other than with respect to the timing of such reimbursement obligation set forth in Section 2.18(e)). (h) INTERIM INTEREST. If the Issuing Bank shall make any LC Disbursement, then, unless Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that Borrower reimburses such LC Disbursement, at the -50- rate per annum then applicable to ABR Revolving Loans; provided that if Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.06(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) RESIGNATION OR REMOVAL OF THE ISSUING BANK. The Issuing Bank may resign as Issuing Bank hereunder at any time upon at least 30 days' prior notice to the Lenders, the Administrative Agent and Borrower. The Issuing Bank may be replaced at any time by written agreement among Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. One or more Lenders may be appointed as additional Issuing Banks by written agreement among Borrower, the Administrative Agent (whose consent will not be unreasonably withheld) and the Lender that is to be so appointed. The Administrative Agent shall notify the Lenders of any such resignation or replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such resignation or replacement shall become effective, Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.05(c). From and after the effective date of any such resignation, replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the resignation or replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, Borrower may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit. (j) CASH COLLATERALIZATION. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in the LC Sub-Account, in the name of the Collateral Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to Borrower described in clause (g) or (h) of Article VIII. Upon the Business Day Borrower receives such notice, Borrower shall deposit such cash collateral in the LC Sub-Account, to be held by the Collateral Agent as collateral for the payment and performance of the obligations of Borrower under this Agreement. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Collateral Agent and at the risk and expense of Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Collateral Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other Obligations of Borrower under this Agreement. If Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount plus any accrued -51- interest or realized profits or such amounts (to the extent not applied as aforesaid) shall be returned to Borrower within three Business Days after all Events of Default have been cured or waived. (k) ADDITIONAL ISSUING BANKS. Borrower may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of this Agreement. Any Lender designated as an issuing bank pursuant to this paragraph (k) shall be deemed (in addition to being a Lender) to be the Issuing Bank with respect to Letters of Credit issued or to be issued by such Lender, and all references herein and in the other Loan Documents to the term "Issuing Bank" shall, with respect to such Letters of Credit, be deemed to refer to such Lender in its capacity as Issuing Bank, as the context shall require. (l) OTHER. The Issuing Bank shall be under no obligation to issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; or (ii) the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank. The Issuing Bank shall be under no obligation to amend any Letter of Credit if (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. ARTICLE III REPRESENTATIONS AND WARRANTIES Each Credit Party represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders that: SECTION 3.01. ORGANIZATION; POWERS. Each Company (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, and (c) is qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in every jurisdiction where such qualification is required, except in such jurisdictions where the failure to so qualify, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. -52- SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action. This Agreement has been duly executed and delivered by each Loan Party and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party will constitute, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law and any implied covenant of good faith and fair dealing. SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. Except as set forth on Schedule 3.03, the Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created under the Loan Documents and (iii) consents, approvals, registrations, filings or actions the failure of which to obtain or perform could not reasonably be expected to result in a Material Adverse Effect, (b) will not violate the charter, by-laws or other organizational documents of any Company or any order of any Governmental Authority, (c) will not violate, result in a default or require any consent or approval under any applicable law or regulation, indenture, agreement or other instrument binding upon any Company or its assets, or give rise to a right thereunder to require any payment to be made by any Company, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any asset of any Company, except Liens created under the Loan Documents and Permitted Liens. SECTION 3.04. FINANCIAL STATEMENTS. (a) Borrower has heretofore delivered to the Lenders the audited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of Holdings and its Consolidated Subsidiaries and of Borrower and its Consolidated Subsidiaries, in each case, as of and for the fiscal years ended October 3, 2003, September 27, 2002 and September 28, 2001 (the statements as of and for the fiscal year ended October 3, 2003 referred to as the "AUDITED FINANCIAL STATEMENTS"). Such financial statements (and all financial statements delivered pursuant to Section 5.01) have been prepared in accordance with GAAP consistently applied and present, in all material respects, the consolidated financial condition, results of operations and cash flows of Holdings or Borrower, as the case may be. Except as set forth in such financial statements (and all financial statements delivered pursuant to Section 5.01), there are no liabilities of Holdings or any Company of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise, which could reasonably be expected to result in a Material Adverse Effect. (b) The pro forma consolidated balance sheet and related statements of income and cash flows of Borrower for the fiscal year ended October 3, 2003 (the "PRO FORMA FINANCIAL STATEMENTS") and the other pro forma information, including pro forma EBITDA, contained in the Confidential Information Memorandum have been prepared in good faith by the Loan Parties, based on the assumptions stated therein (which assumptions are believed by the Loan Parties on the date hereof and on the Closing Date to be reasonable), accurately reflect all adjustments required to be made to give effect to the Transactions and in the reasonable judgment of Borrower, present fairly on a pro forma basis the estimated consolidated financial position and results of operations of Borrower as and for such dates, assuming that the Transactions had actually occurred at such dates or at the beginning of such periods, as applicable. SECTION 3.05. PROPERTIES. (a) Each Company has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for irregularities or deficiencies in title that, individually or in the aggregate, do not interfere in a material respect with the -53- ability of the Companies taken as a whole to conduct their business as currently conducted. Title to all such property held by such Company is free and clear of all Liens except for Permitted Liens; provided, however, title to all Mortgaged Real Property is free and clear of all Liens except for the Prior Liens. The property of the Companies, taken as a whole, (i) is in good operating order, condition and repair (ordinary wear and tear excepted) (except to the extent such condition could not reasonably be expected to result in a Material Adverse Effect) and (ii) constitutes all the properties which are required for the business and operations of the Companies as currently conducted. (b) As of the Closing Date, Schedule 3.05(b) contains a true and complete list of each parcel of Real Property (i) owned by any Credit Party as of the date hereof and describes the type of interest therein held by such Credit Party and (ii) leased, subleased or otherwise occupied or utilized by any Credit Party, as lessee, as of the date hereof and describes the type of interest therein held by such Credit Party and, in the case of Real Property located in the United States, whether such lease, sublease or other instrument requires the consent of the landlord thereunder or other parties thereto to the Transactions. (c) Schedule 3.05(c) sets forth a list of all patents, patent applications, registered trademarks, domain names, registered service marks, and registered copyrights owned and necessary to such Loan Party for the conduct of the Acquired Business as currently conducted (the "INTELLECTUAL PROPERTY"), except for those the failure to own or license which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No written claim has been asserted and is pending or has been threatened in writing against the Loan Party by any person challenging or questioning the validity or effectiveness of or alleging infringement or other violation of any such U.S. Intellectual Property, except as set forth in Schedule 3.05(c). To the knowledge of each Loan Party, the use of such Intellectual Property by each Loan Party does not infringe or otherwise violate the intellectual property rights of any person, except for such claims, violations, and infringements that, individually or in the aggregate, could not reasonably be expected to be material to the Acquired Business. SECTION 3.06. EQUITY INTERESTS AND SUBSIDIARIES. (a) Schedule 3.06(a) sets forth a list of (i) all the Subsidiaries and their jurisdiction of organization as of the Closing Date and (ii) the number of shares of each class of its Equity Interests authorized, and the number outstanding, on the Closing Date and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the Closing Date. All Equity Interests of each Subsidiary are duly and validly issued and are fully paid and non-assessable and are owned directly or indirectly by Borrower. All Equity Interests of Borrower are owned directly by Holdings and all Equity Interests of Holdings are owned directly by Parent. Each Loan Party is the record and beneficial owner of, and has good and marketable title to, the Equity Interests pledged by it under the Security Agreement, free of any and all Liens, rights or claims of other persons, except for Permitted Liens. (b) No consent of any person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Agent in any Equity Interests, subject only to Permitted Liens, pledged to the Collateral Agent for the benefit of the Secured Parties under the Security Agreement or the exercise by the Collateral Agent of the voting or other rights provided for in the Security Agreement or the exercise of remedies in respect thereof. SECTION 3.07. LITIGATION; COMPLIANCE WITH LAWS. (a) There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or, to the knowledge of any Company, threatened against or affecting any Company or any business, property or rights of any such person (i) that challenge the enforceability or validity of any Loan Document or the -54- Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) Except for matters covered by Section 3.17, no Company or any of its property is in violation of, nor will the continued operation of their property as currently conducted violate, any Requirements of Law (including any zoning or building ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting the Real Property or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, in each case where such violation or default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.08. AGREEMENTS. (a) As of the Closing Date, no Credit Party is a party to any material agreement other than the Acquisition Documents and the agreements set forth on Schedule 3.08, and Borrower has delivered to the Administrative Agent complete and correct copies of all such material agreements, including any amendments, supplements or modifications with respect thereto. (b) No Company is in default under any agreement or instrument to which it is a party or by which it or any of its property are or may be bound (other than agreements relating to or evidencing Indebtedness) where such default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.09. FEDERAL RESERVE REGULATIONS. (a) No Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X. The pledge of the Securities Collateral (as defined in the Security Agreement) pursuant to the Security Agreement does not violate such regulations. SECTION 3.10. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. No Company is (a) an "investment company" or a company "controlled" by an "investment company," as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) a "holding company," an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended. SECTION 3.11. USE OF PROCEED. Borrower will use the proceeds of (a) the Term Loans to finance a portion of the Merger (through the making of the Closing Date Intercompany Loan), effect the Refinancing and pay fees and expenses in connection with the Transactions and (b) the Revolving Loans following the Closing Date to provide ongoing working capital requirements and for general corporate purposes. Borrower may also use the proceeds of the Revolving Loans on the Closing Date to fund up to $4.0 million to provide ongoing working capital requirements. All of the proceeds from the Equity Financing will be used to fund the Transactions (other than the Refinancing, except with respect to the Wells Fargo Agreement). All of the proceeds from the Closing Date Intercompany Loan will be used to fund the Merger consideration and to pay fees, commissions and expenses in connection with the Transactions. SECTION 3.12. TAXES. Each Company has (a) filed or caused to be filed all material federal, state, local and foreign Tax Returns required to be filed by it and (b) duly paid or caused -55- to be duly paid all Taxes (whether or not shown on any Tax Return) due and payable by it and all assessments received by it, except taxes (i) that are being contested in good faith by appropriate proceedings and for which such Company shall have set aside on its books adequate reserves in accordance with GAAP or which could not, individually or in the aggregate, have a Material Adverse Effect or (ii) with respect to taxable periods or portions thereof ending on or prior to the date of the Latest Balance Sheet for which it has made appropriate provision in the Latest Balance Sheet in accordance with GAAP. SECTION 3.13. NO MATERIAL MISSTATEMENTS. The information, reports, financial statements, exhibits and schedules furnished by or on behalf of any Company to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto (including the Confidential Information Memorandum) when taken as a whole does not contain any material misstatement of fact and does not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading as of the date such information is dated or certified; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection or pro forma adjustment, each Company represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule, it being understood that projections are subject to uncertainties and contingencies and that no assurance can be given that any projection will be realized. SECTION 3.14. LABOR MATTERS. As of the Closing Date, there are no strikes, lockouts or slowdowns against any Company pending or, to the knowledge of any Company, threatened which could reasonably be expected to result in a Material Adverse Effect. The hours worked by and payments made to employees of any Company have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters in any manner which could reasonably be expected to result in a Material Adverse Effect. All payments due from any Company, or for which any claim may be made against any Company, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Company except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Company is bound. SECTION 3.15. SOLVENCY. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the assets of each Loan Party will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) no Loan Party will have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. SECTION 3.16. EMPLOYEE BENEFIT PLANS. (a) Each Company and its ERISA Affiliates are in compliance with the applicable provisions of ERISA and the Tax Code and the regulations and published interpretations thereunder except where the failure to comply could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations of all underfunded -56- Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that would have a Material Adverse Effect. In the event of a complete withdrawal from each Multiemployer Plan, the aggregate liabilities of the Company and its ERISA Affiliates resulting therefrom could not reasonably be expected to result in a Material Adverse Effect. (b) Each Foreign Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities, except where the failure to comply or be maintained in good standing could not be reasonably expected to have a Material Adverse Effect. No Company has incurred any obligation in connection with the termination of or withdrawal from any Foreign Plan that could reasonably be expected to result in a Material Adverse Effect. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan which is required to be funded, determined as of the end of the most recently ended fiscal year of the respective Company (based on the actuarial assumptions used for purposes of the applicable jurisdiction's financial reporting requirements), did not exceed the current value of the assets of such Foreign Plan by an amount that could reasonably be expected to have a Material Adverse Effect, and for each Foreign Plan which is not funded, the obligations of such Foreign Plan are properly accrued, except where the failure to comply could not be reasonably expected to have a Material Adverse Effect. SECTION 3.17. ENVIRONMENTAL MATTERS. (a) The Real Property of the Companies does not contain therein, thereon or thereunder, including, without limitation, the soil and groundwater thereunder, any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, (ii) require a Response under, or (iii) could give rise to liability under, Environmental Laws, which violations, Response and liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (b) The Real Property and all operations of the Companies are in compliance, and in the last three years have been in compliance, with all Environmental Laws and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such non-compliance or failure to obtain any necessary Environmental Permits, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; (c) There have been no Releases at, from, under, or originating from properties adjacent to, the Real Property or otherwise in connection with the operations of any Company, which Releases, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (d) None of the Companies has received an Environmental Claim, nor to their knowledge has any been threatened, which, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (e) To the knowledge of the Companies, Hazardous Materials have not been transported from Real Property of the Companies by or on behalf of any of the Companies, nor have Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such Real Property in a manner that could give rise to liability under, or in violation of, any Environmental Law, nor has any Company retained or assumed any liability, contractually, by operation of law or otherwise, with respect to the generation, treatment, storage, transport or disposal of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect (it being understood that, for purposes of Section 8.01 of this Agreement (Event of Default), notwithstanding the qualification by the knowledge of the -57- Companies at the beginning of this subsection, the representations and warranties contained in this subsection shall be deemed not to be so qualified). (f) No Real Property of the Companies is (i) listed or, to the knowledge of the Companies, proposed for listing on the National Priorities List under CERCLA or (ii) listed on the Comprehensive Environmental Response, Compensation and Liability Information System promulgated pursuant to CERCLA, or (iii) included on any similar list maintained under any similar Environmental Law, in any case (i), (ii) or (iii), which, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; and (g) No Company is currently conducting any Response pursuant to any Environmental Law with respect to any Real Property or any other location which could reasonably be expected to result in a Material Adverse Effect. SECTION 3.18. INSURANCE. Schedule 3.18 sets forth a true, complete and correct summary description of all material insurance maintained by each Company as of the Closing Date. As of each such date, such insurance is in full force and effect and all premiums have been duly paid. Each Company has insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice. SECTION 3.19. SECURITY DOCUMENTS. (a) The Security Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in and Lien on the Security Agreement Collateral and, when (i) financing statements and other filings in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate and (ii) the Credit Parties have complied with Section 3.03 of the Security Agreement, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than (A) the Intellectual Property (as defined in the Security Agreement) and (B) such Collateral in which a security interest cannot be perfected under the Uniform Commercial Code as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Liens. (b) When the Security Agreement (including all schedules thereto) or a short-form thereof is filed in the United States Patent and Trademark Office and the United States Copyright Office in the manner prescribed by each office and all actions required under the laws of the state of organization of the relevant Credit Party with respect to the perfection of a security interest in such intangible property are undertaken, the Collateral Agent, for the benefit of the Secured Parties, shall have a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in the U.S. Intellectual Property (as defined in the Security Agreement) to the fullest extent permitted by law, in each case subject to no Liens other than Permitted Liens (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the grantors after the date hereof). (c) Each Mortgage executed and delivered as of the Closing Date is, or, to the extent any Mortgage is duly executed and delivered thereafter by the relevant Credit Party, will be, effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, a legal, valid and enforceable first priority Lien on and security interest in all of the Credit Parties' right, title and interest in and to the Mortgaged Real Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 1.01(a) (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of Sections 5.11 and 5.12, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in -58- accordance with the provisions of Sections 5.11 and 5.12), the Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Credit Parties in the Mortgaged Real Properties and the proceeds thereof, in each case prior and superior in right to any other person, other than Prior Liens. (d) Each Security Document (other than Mortgages) delivered pursuant to Section 5.11 and Section 5.12 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Credit Parties' right, title and interest in and to the Collateral thereunder, and when such Security Document is filed or recorded in the appropriate offices as may be required under applicable law, such Security Document will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Credit Parties in such Security Agreement Collateral, in each case subject to no Liens other than the applicable Permitted Liens. SECTION 3.20. ACQUISITION DOCUMENTS; REPRESENTATIONS AND WARRANTIES IN AGREEMENT. (a) Schedule 3.20 lists each agreement and each other material document contemplated by the Merger Agreement to be entered into, executed or delivered or to become effective in connection with the Merger. The Lenders have been furnished true and complete copies of each such document to the extent executed and delivered on or prior to the Closing Date. (b) All representations and warranties of each Company set forth in the Merger Agreement were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Closing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. SECTION 3.21. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF HOLDINGS AND PARENT. Each of Holdings and Parent hereby represents, warrants and agrees that each of the representations, warranties and agreements made by a Company or a Loan Party in Sections 3.01, 3.02, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19, 3.20, 3.22, 3.23 and 3.24 are also true and correct as to Holdings or Parent, as the case may be, as though references to such Company or Loan Party therein are references to Holdings or Parent, as the case may be. SECTION 3.22. ANTI-TERRORISM LAW. (a) No Loan Party and, to the knowledge of the Loan Parties, none of its Affiliates is in violation of any laws relating to terrorism or money laundering ("ANTI-TERRORISM LAWS"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the "EXECUTIVE ORDER"), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) No Loan Party and to the knowledge of the Loan Parties, no Affiliate or broker or other agent of any Loan Party acting or benefiting in any capacity in connection with the Loans is any of the following: (i) a person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person owned or controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; -59- (iii) a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a person that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; or (v) a person that is named as a "specially designated national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control ("OFAC") at its official website or any replacement website or other replacement official publication of such list. (c) No Loan Party and, to the knowledge of the Loan Parties, no broker or other agent of any Loan Party acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in paragraph (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. SECTION 3.23. BRIBERY. To the best knowledge of the Loan Parties, no Loan Party, nor any of their respective officers, directors, partners, employees, agents or affiliates or any other person acting on behalf of the Loan Parties, has directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, official or employee of any governmental agency (domestic or foreign), instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is or may be in a position to help or hinder the business of the Loan Parties (or assist the Loan Parties in connection with any actual or proposed transaction) which would subject any Loan Party or any other individual or entity to any damage or penalty in any civil, criminal or governmental litigation or proceeding (domestic or foreign) except for such damages or penalties, either individually or in the aggregate that would not reasonably be expected to have a Material Adverse Effect. SECTION 3.24. SUBORDINATION OF SENIOR SUBORDINATED NOTES. The Obligations are "Senior Debt," the Guaranteed Obligations are "Guarantor Senior Debt" and the Obligations and Guaranteed Obligations are "Designated Senior Debt," in each case, within the meaning of the Senior Subordinated Note Documents. ARTICLE IV CONDITIONS OF LENDING The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions: SECTION 4.01. ALL CREDIT EVENTS. On the date of each Borrowing, including each Borrowing of a Swingline Loan, and on the date of each issuance, amendment, extension or renewal of a Letter of Credit (each such event being called a "CREDIT EVENT"): (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.03) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, -60- the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.18(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the Administrative Agent shall have received a notice requesting such Swingline Loan as required by Section 2.17(b). (b) At the time of and immediately after such Credit Event, no Default or Event of Default shall have occurred and be continuing. (c) Each of the representations and warranties set forth in Article III hereof or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (d) There has been no material adverse change in the condition, financial or otherwise, business, operations, assets or liabilities of the Companies, taken as a whole, since October 3, 2003. Each Credit Event shall be deemed to constitute a representation and warranty by each Credit Party on the date of such Credit Event as to the matters specified in paragraphs (b), (c) and (d) of this Section 4.01. SECTION 4.02. FIRST CREDIT EVENT. On the Closing Date: (a) LOAN DOCUMENTS. All legal matters incident to this Agreement, the Borrowings and extensions of credit hereunder and the other Loan Documents shall be reasonably satisfactory to the Lenders, to the Issuing Bank and to the Administrative Agent and there shall have been delivered to the Administrative Agent an executed counterpart of each of the Loan Documents and Collateral Documents, including this Agreement, the Security Agreement, each Mortgage, the Perfection Certificate and each other applicable Loan Document and Collateral Document. (b) CORPORATE DOCUMENTS. The Administrative Agent shall have received: (i) a certificate of the Secretary or Assistant Secretary of each Credit Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the certificate or articles of incorporation or other constitutive documents, including all amendments thereto certified as of a recent date by the Secretary of State of the state of its organization, (B) that attached thereto is a true and complete copy of the by-laws of each Credit Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (C) below, (C) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors or managers of such person authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such person (together with a certificate of -61- another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate in this clause (i)); (ii) a long form certificate as to the good standing of each Credit Party as of a recent date, from such Secretary of State; and (iii) such other documents as the Administrative Agent may reasonably request. (c) OFFICER'S CERTIFICATE. The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b), (c) and (d) of Section 4.01. (d) FINANCINGS AND OTHER TRANSACTIONS, ETC. (i) The Lenders shall be satisfied with the form and substance of the Transaction Documents, the total financing requirements for the Transactions (including the value of the Rollover Equity) shall not exceed $315.0 million and the Transactions shall have been consummated or shall be consummated simultaneously on the Closing Date, in each case in all material respects in accordance with the terms hereof and the terms of the Transaction Documents (and without the waiver or amendment of any material terms thereof not approved by the Initial Lenders). (ii) Borrower shall have received not less than $125.0 million in gross proceeds from the issuance and sale of the Senior Subordinated Notes, and the Senior Subordinated Note Agreement shall be in form and substance reasonably satisfactory to the Lenders. (iii) Holdings shall have received 100% of the cash from the Equity Financing and shall have used all of such proceeds in accordance with Section 3.11. Any Rollover Equity shall be in the form of common equity (including options) of Holdings. (e) THE REFINANCING. (i) The Refinancing with respect to the Foothill Loan Agreement and the Wells Fargo Loan Agreement shall have been consummated in full to the satisfaction of the Lenders with all liens in favor of the existing lenders being unconditionally released; the Administrative Agent shall have received a "pay off' letter with respect to the Foothill Loan Agreement and the Wells Fargo Loan Agreement; the Administrative Agent shall have received from any person holding any Lien securing any such debt, such UCC termination statements, mortgage releases, releases of assignments of leases and rents and other instruments, in each case in proper form for recording, as the Administrative Agent shall have reasonably requested to release and terminate of record the Liens securing such debt. (ii) Borrower shall have effected a covenant defeasance of all of the Public Debt Securities on or prior to the Closing Date in accordance with the Indenture (the "DEFEASANCE ACTIVITIES"). All of the Public Debt Securities shall have either been (a) repurchased and be no longer outstanding or (b) called for redemption (with the redemption date being the 30th day following the date of the notice of redemption) and sufficient funds for such redemption shall have been irrevocably deposited with the trustee for the Public Debt Securities in accordance with the terms of the Indenture; provided that Borrower may defer the mailing of the notice of redemption described in clause (b) with respect to Public Debt Securities outstanding on the Closing Date for one Business Day following the Closing Date. (iii) All of the Junior Preferred Stock shall have been repurchased and be no longer outstanding. All of the Senior Preferred Stock shall have either been (a) repurchased and be no -62- longer outstanding or (b) called for redemption (with the redemption date being the 30th day following the date of the notice of redemption) in accordance with the terms of Borrower's restated certificate of incorporation and sufficient funds for such redemption shall have been irrevocably deposited with the Paying Agent in accordance with the terms of the Paying Agent Agreement; provided that Borrower may defer the mailing of the notice of redemption described in clause (b) with respect to any Senior Preferred Stock outstanding on the Closing Date for one Business Day following the Closing Date. (f) FINANCIAL STATEMENTS; PROJECTIONS. The Lenders shall have (i) received and shall be reasonably satisfied with the Audited Financial Statements and (ii) received and reviewed the Pro Forma Financial Statements, pro forma EBITDA and any changes to the forecasts of the financial performance of Borrower and its Subsidiaries (including quarterly forecasts through the quarter ending on or about September 30, 2004). (g) INDEBTEDNESS, PREFERRED STOCK AND MINORITY INTERESTS. After giving effect to the Transactions and the other transactions contemplated hereby, no Group Company shall have outstanding any Indebtedness, Preferred Stock or minority interests other than (i) the Loans and extensions of credit hereunder, (ii) Public Debt Securities to the extent sufficient funds for the redemption thereof have been irrevocably deposited with the trustee for the Public Debt Securities in accordance with the terms of the Indenture, (iii) shares of Senior Preferred Stock to the extent sufficient funds for the redemption thereof have been irrevocably deposited with the Paying Agent in accordance with the terms of the Paying Agent Agreement, (iv) the Senior Subordinated Notes, (v) intercompany Indebtedness represented by the Intercompany Note or intercompany notes to be pledged to the Collateral Agent pursuant to the Security Agreement and (vi) up to $1.0 million of other Indebtedness. (h) OPINIONS OF COUNSEL. The Administrative Agent shall have received, on behalf of itself, the other Agents, the Lenders and the Issuing Bank, (i) favorable written opinion of Simpson Thacher & Bartlett LLP, special counsel for the Credit Parties, in form reasonably acceptable to the Administrative Agent and the Initial Lenders, (A) dated the Closing Date, (B) addressed to the Agents, the Issuing Bank, and the Lenders and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request and (ii) a favorable written opinion of Stikeman Elliot LLP, Jeffer, Mangels, Butler & Marmaro LLP and Gadsby Hannah LLP, in form reasonably acceptable to the Administrative Agent and the Initial Lenders, (A) dated the Closing Date and (B) addressed to the Agents, the Issuing Bank, and the Lenders. (i) SOLVENCY CERTIFICATE. The Administrative Agent shall have received a solvency certificate from Borrower's chief financial officer, in substantially the form of Exhibit M, as to the solvency of each of the Loan Parties after giving effect to the Transactions. (j) REQUIREMENTS OF LAW. The Administrative Agent shall be satisfied that the Transactions shall be in full compliance with all material Requirements of Law, including without limitation Regulations T, U and X of the Board. (k) CONSENTS AND APPROVALS. The Administrative Agent shall be satisfied that all requisite Governmental Authorities and third parties shall have approved or consented to the Transactions, and there shall be no governmental or judicial action that has or would have, singly or in the aggregate, a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on the Transactions or the other transactions contemplated hereby. -63- (l) LITIGATION. There shall be no litigation, public or private, or administrative proceedings, governmental investigation or other legal or regulatory developments that, singly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or could materially and adversely affect the ability of Parent, Holdings, Borrower and the Subsidiaries to fully and timely perform their respective obligations under the Transaction Documents, or the ability of the parties to consummate the financings contemplated hereby or the other Transactions. (m) SOURCES AND USES. The sources and uses of the Loans shall be as set forth in Section 3.11. (n) FEES. The Agents and Lenders shall have received all Fees and other amounts due and payable hereunder and under the Fee Letter on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses (including the reasonable legal fees and expenses of Cahill Gordon & Reindel LLP, special counsel to the Agents) required to be reimbursed or paid by Borrower hereunder or under any other Loan Document. The fees and expenses of the Transactions shall not exceed $17.5 million. (o) PERSONAL PROPERTY REQUIREMENTS. The Collateral Agent shall have received: (i) all certificates, agreements or instruments representing or evidencing the Pledged Equity Interests and the Pledged Notes (each as defined in the Security Agreement) accompanied by instruments of transfer and stock powers endorsed in blank shall have been delivered to the Collateral Agent; (ii) all other certificates, agreements, including control agreements, or instruments necessary to perfect all Chattel Paper, all Instruments, all Deposit Accounts and all Investment Property of each Credit Party (as each such term is defined in the Security Agreement and to the extent required by Section 3.03 of the Security Agreement); (iii) UCC Financing Statements (Form UCC-1 or UCC-2, as appropriate) in appropriate form for filing under the UCC and such other documents under applicable Requirements of Law in each jurisdiction as may be necessary or appropriate to perfect the Liens created, or purported to be created, by the Security Documents; (iv) certified copies of Requests for Information (Form UCC-11), tax lien, judgment lien, bankruptcy and pending lawsuit searches or equivalent reports or lien search reports, each of a recent date listing all effective financing statements, lien notices or comparable documents that name any Credit Party as debtor and that are filed in those state and county jurisdictions in which any of the property of any Credit Party is located and the state and county jurisdictions in which any Credit Party's principal place of business is located, none of which encumber the Collateral covered or intended to be covered by the Security Documents (other than those relating to Liens acceptable to the Collateral Agent); (v) evidence of the completion of all recordings and filings of, or with respect to, the Security Agreement, including filings with the United States Patent, Trademark and Copyright Offices, and the execution and/or delivery of such other security and other documents, and the taking of all actions as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable, to -64- perfect the Liens created, or purported to be created, by the Security Agreement in Collateral located in the U.S., except for any of the foregoing to be provided after the Closing Date pursuant to Section 5.12 hereof; (vi) with respect to each location set forth on Schedule 4.02(o)(vi), a Landlord Access Agreement or Bailee Letter, as applicable; provided that no such Landlord Access Agreement or Bailee Letter shall be required with respect to any Real Property or personal property Collateral, as the case may be, that could not be obtained after the Loan Party that is the lessee or owner of the inventory or other personal property Collateral stored with the bailee thereof, as applicable, shall have used all commercially reasonable efforts to do so; (vii) evidence acceptable to the Collateral Agent of payment by the Loan Parties of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Collateral Documents; and (viii) the Intercompany Note executed by and among Parent and each of its subsidiaries, accompanied by instruments of transfer undated and endorsed in blank. (p) REAL PROPERTY REQUIREMENTS. The Collateral Agent shall have received: (i) a Mortgage encumbering each Mortgaged Real Property in favor of Collateral Agent, for the benefit of the Secured Parties, duly executed and acknowledged by each Credit Party that is the owner of or holder of any interest in such Mortgaged Real Property, and otherwise in form for recording in the recording office of each political subdivision where each such Mortgaged Real Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a lien under applicable law, and such UCC-1 Financing Statements, all of which shall be in form and substance reasonably satisfactory to Collateral Agent, and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction; (ii) with respect to each Mortgage, a policy (or commitment to issue a policy) of title insurance insuring (or committing to insure) the Lien of such Mortgage as a valid first mortgage Lien on the Real Property and fixtures described therein in an amount equal to 100% of the fair market value of such Real Property which policies (or commitments) (each, a "TITLE POLICY") shall (A) be issued by the Title Company, (B) to the extent necessary, include such reinsurance arrangements (with provisions for direct access, if necessary) as shall be reasonably acceptable to the Collateral Agent, (C) contain a "tie-in" or "cluster" endorsement (if available under applicable law), (D) have been supplemented by such endorsements as shall be reasonably requested by the Collateral Agent, and (E) contain no exceptions to title other than exceptions for the Prior Liens; (iii) with respect to each Mortgaged Real Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as shall be required to induce the Title Company to issue the Title Policies and endorsements contemplated in subparagraph (ii) above; -65- (iv) evidence reasonably acceptable to the Collateral Agent of payment by Borrower of all Title Policy premiums, search and examination charges, and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the Title Policies referred to subparagraph (ii) above; (v) with respect to each Mortgaged Real Property, copies of all Leases in which any Group Company holds the lessor's interest or other agreements relating to possessory interests of any Group Company, if any. To the extent any of the foregoing encumber any Mortgaged Real Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Real Property, either expressly by its terms or pursuant to a subordination, non-disturbance and attornment agreement; (vi) with respect to each Mortgaged Real Property, each Group Company shall have made all notification, registrations and filings, to the extent required by, and in accordance with, all Governmental Real Property Disclosure Requirements applicable to such Mortgaged Real Property, including the use of forms provided by state or local agencies, where such forms exist, whether to Borrower or to or with the state or local agency; (vii) a Survey with respect to each Mortgaged Real Property; and (viii) with respect to each leasehold Mortgaged Real Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as shall reasonably be deemed necessary by the Collateral Agent in order for the owner of the fee interest therein to consent to or approve of the Lien contemplated by the Mortgage with respect to such leasehold Mortgaged Real Property, and as may be obtained by the owner of such leasehold interest constituting such leasehold Mortgaged Real Property using commercially reasonable efforts. (q) INSURANCE. The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.04 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance reasonably satisfactory to the Administrative Agent. (r) PAYING AGENT AGREEMENT. The Paying Agent Agreement shall have been executed and delivered and shall be in form and substance reasonably satisfactory to the Joint Lead Arrangers. ARTICLE V AFFIRMATIVE COVENANTS Each Loan Party covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn -66- thereunder have been reimbursed in full or fully cash collateralized, unless the Required Lenders shall otherwise consent in writing, each Loan Party will, and will cause each of its subsidiaries to: SECTION 5.01. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of Borrower, furnish to the Administrative Agent (and the Administrative Agent shall furnish to each Lender): (a) ANNUAL REPORTS. Within 90 days after the end of each fiscal year, (i) the consolidated balance sheet of Borrower as of the end of such fiscal year and related consolidated statements of income, cash flows and stockholders' equity for such fiscal year, and notes thereto, accompanied by an opinion of KPMG LLP or other independent public accountants of recognized national standing satisfactory to the Administrative Agent (which opinion shall not be qualified as to scope or contain any going concern or other qualification), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations, cash flows and changes in stockholders' equity of the Consolidated Companies as of the end of and for such fiscal year in accordance with GAAP consistently applied, (ii) a management report in a form reasonably satisfactory to the Administrative Agent setting forth the financial condition, results of operation and cash flows of the Consolidated Companies as of the end of and for such fiscal year, as compared to the Consolidated Companies' financial condition, results of operation and cash flows as of the end of and for the previous fiscal year and its budgeted results of operations and cash flows, and (iii) a management's discussion and analysis of the financial condition and results of operations for such fiscal year, as compared to the previous fiscal year; (b) QUARTERLY REPORTS. Within 45 days after the end of each of the first three fiscal quarters of each fiscal year, (i) the consolidated balance sheet of Borrower as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and notes thereto, and accompanied by a certificate of a Financial Officer stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Consolidated Companies as of the date and for the periods specified in accordance with GAAP consistently applied and on a basis consistent with the audited financial statements referred to in clause (a) of this Section, subject to normal year-end audit adjustments and the absence of footnotes; (ii) a management report in a form reasonably satisfactory to the Administrative Agent setting forth the financial condition, results of operation and cash flows of the Consolidated Companies as of the end of and for such fiscal quarter and for the then elapsed portion of the fiscal year, as compared to the Consolidated Companies' financial condition, results of operation and cash flows as of the end of such fiscal quarter and for the comparable periods in the previous fiscal year and its budgeted results of operations and cash flows; and (iii) a management's discussion and analysis of the financial condition and results of operations for such fiscal quarter and the then elapsed portion of the fiscal year, as compared to the comparable periods in the previous fiscal year; (c) [RESERVED]; (d) FINANCIAL OFFICER'S CERTIFICATE. (i) Concurrently with any delivery of financial statements under paragraphs (a) or (b) above, a certificate of a Financial Officer certifying that no Default has occurred or, if such a Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (ii) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer setting forth computations in reasonable detail demonstrating compliance with the covenants contained in Section 6.07 (including, if a Tax Event has occurred, demonstrating -67- compliance with Section 6.07(c) for all prior Test Periods affected by the allocation of taxes in connection with such Tax Event) and, in the case of paragraph (a) above, setting forth Borrower's calculation of Excess Cash Flow; and (iii) in the case of paragraph (a) above, a report of the accounting firm opining on or certifying such financial statements stating that in the course of its regular audit of the financial statements of Borrower and its Subsidiaries, which audit was conducted in accordance with GAAP, such accounting firm obtained no knowledge that any Default under Section 6.07 has occurred or, if in the opinion of such accounting firm such a Default has occurred, specifying the nature and extent thereof; (e) FINANCIAL OFFICER'S CERTIFICATE REGARDING COLLATERAL. Concurrently with any delivery of financial statements under paragraph (a) above, a Perfection Certificate Supplement; (f) PUBLIC REPORTS. Promptly after they become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Company with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to holders of its material Indebtedness pursuant to the terms of the documentation governing such material Indebtedness (or any trustee, agent or other representative therefor), as the case may be; (g) MANAGEMENT LETTERS. Promptly after the receipt thereof by any Company, a copy of any "management letter" received by any such person from its certified public accountants and the management's responses thereto; (h) BUDGETS. No later than 90 days after the first day of each fiscal year of Borrower, an annual budget in form reasonably satisfactory to the Administrative Agent (including budgeted statements of income by each of Borrower's business units and sources and uses of cash and balance sheets) prepared by Borrower for each fiscal month of such fiscal year prepared in detail with appropriate presentation and discussion of the principal assumptions upon which such budget is based, accompanied by the statement of a Financial Officer of Borrower to the effect that to such officer's knowledge such budget is a reasonable estimate for the period covered thereby; and (i) OTHER INFORMATION. Promptly, from time to time, such other information regarding the operations, business affairs and financial condition of any Company, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. LITIGATION AND OTHER NOTICES. Furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) any Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity by or before any Governmental Authority, (i) against any Company that could reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document; (c) any development that has resulted in, or could reasonably be expected to result in a Material Adverse Effect; and -68- (d) the occurrence of a Casualty Event in excess of $500,000. SECTION 5.03. EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.04 or, in the case of any Subsidiary, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply with all applicable Requirements of Law (including any applicable Environmental Law, zoning or building ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Real Property) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; pay and perform its obligations under all Transaction Documents; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all commercially reasonable repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be conducted at all times as it is currently conducted; provided, however, that nothing in this Section 5.03(b) shall prevent (i) sales of assets, consolidations or mergers by or involving any Company in accordance with Section 6.04; (ii) the withdrawal by any Company of its qualification as a foreign corporation in any jurisdiction where such withdrawal, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; or (iii) the abandonment by any Company of any property, rights, franchises, licenses and patents that such person reasonably determines are not necessary for the proper conduct of its business. SECTION 5.04. INSURANCE. (a) Keep its insurable property adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any property owned, occupied or controlled by it; and maintain such other insurance as may be required by law; and, with respect to the Mortgaged Property, otherwise maintain all insurance coverage required under the applicable Mortgage, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Collateral Agent. (b) All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days (10 days for non-payment) after receipt by the Collateral Agent of written notice thereof and (ii) name the Collateral Agent as insured party or additional loss payee, (iii) if reasonably requested by the Collateral Agent, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Collateral Agent. (c) Borrower shall, upon the Administrative Agent's or the Collateral Agent's request, deliver to the Administrative Agent and the Collateral Agent and the Lenders a report of a reputable insurance broker annually with respect to such insurance and such supplemental reports with respect thereto as the Administrative Agent or the Collateral Agent may from time to time reasonably request. SECTION 5.05. OBLIGATIONS AND TAXES. Pay its material Indebtedness and other material obligations promptly and in accordance with their terms and pay and discharge promptly -69- when due all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien other than a Permitted Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings, the applicable Company shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP, non-payment or non-discharge could not reasonably be expected to have a Material Adverse Effect and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien other than a Permitted Lien and, in the case of Collateral, the applicable Company shall have otherwise complied with the provisions of the applicable Security Document in connection with such nonpayment. SECTION 5.06. EMPLOYEE BENEFITS. (a) Comply with the applicable provisions of ERISA and the Tax Code, except where such noncompliance, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) furnish to the Administrative Agent (i) as soon as possible after, and in any event within 30 days after any Responsible Officer of the Companies or their ERISA Affiliates knows or has reason to know that, any ERISA Event has occurred that alone or together with any other ERISA Event could reasonably be expected to result in liability of the Companies or their ERISA Affiliates in an aggregate amount exceeding $1.0 million, a statement of a Financial Officer of Holdings setting forth details as to such ERISA Event and the action, if any, that the Companies propose to take with respect thereto, and (ii) upon request by the Administrative Agent, copies of: (w) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Company or any ERISA Affiliate with the Internal Revenue Service with respect to each Plan; (x) the most recent actuarial valuation report for each Plan; (y) all notices received by any Company or any ERISA Affiliate from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (z) such other documents or governmental reports or filings relating to any Plan (or employee benefit plan sponsored or contributed to by any Company) as the Administrative Agent shall reasonably request. SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. Keep proper books of record and account (i) in which full, true and correct entries are made in conformity with all Requirements of Law, (ii) in form permitting financial statement conforming with GAAP to be derived therefrom and (iii) in which all material dealings and transactions in relation to its business and activities are recorded. Each Company will permit any representatives designated by any Agent (at the sole cost and expense of the Lenders) to visit and inspect the financial records and the property of such Company upon reasonable prior notice during regular business hours and under guidance of officers of such Company and to make extracts from and copies of such financial records, and permit any representatives designated by any Agent to discuss the affairs, finances and condition of any Company with and be advised as to the same by the officers thereof and the independent accountants therefor, all at such reasonable times and intervals and to such reasonable extent as any Agent or its representatives may request. SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans, the Closing Date Intercompany Loan and the Equity Financing and request the issuance of Letters of Credit only for the purposes set forth in Section 3.11. SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS; ENVIRONMENTAL REPORTS. (a) Comply and use commercially reasonable efforts to cause all lessees and other persons occupying Real Property owned or operated by any Company to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and property and obtain and renew -70- all material Environmental Permits applicable to its operations and property and conduct any Response in accordance with Environmental Laws; provided, however, that no Company shall be required to undertake any Response to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP. (b) If a Default caused by reason of a breach of Section 3.17 or Section 5.09(a) shall have occurred and be continuing for more than 20 Business Days without the Companies commencing activities reasonably likely to cure such Default, at the written request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of Borrower, an environmental site assessment report regarding the matters which are the subject of such default, including where appropriate, any soil and/or groundwater sampling, prepared by an environmental consulting firm and in form and substance reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Response to address them in connection with such Default. SECTION 5.10. [RESERVED]. SECTION 5.11. ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS. (a) Subject to this Section 5.11, with respect to any assets acquired after the Closing Date by any Credit Party that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (but, in any event, excluding any assets described in paragraph (b) of this subsection), promptly (and in any event within 45 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments or supplements to the relevant Security Documents or such other documents as the Administrative Agent shall reasonably deem necessary to grant to the Administrative Agent, for its benefit and for the benefit of the other Secured Parties, a Lien on such properties or assets subject to no Liens other than Permitted Liens, and (ii) take all actions reasonably necessary to cause such Lien to be duly perfected to the extent required by such Security Document in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. Borrower shall otherwise take such actions and execute and/or deliver to the Administrative Agent such documents as the Administrative Agent shall reasonably require to confirm the validity, perfection and priority of the Lien of Security Documents against such after-acquired properties or assets. (b) With respect to any Person that is or becomes a Subsidiary (other than any Foreign Subsidiary that is not a direct Subsidiary of a Loan Party or a Non-Guarantor Subsidiary) promptly (and in any event within 45 days after such Person becomes a Subsidiary) (i) deliver to the Administrative Agent the certificates, if any, representing the Equity Interests of such Subsidiary (provided that with respect to any Foreign Subsidiary of Borrower, in no event shall more than 65% of the Equity Interests of any Foreign Subsidiary be subject to any Lien or pledged under any Loan Document), together with undated stock powers executed and delivered in blank by a duly authorized officer of such Subsidiary's parent, as the case may be, and all intercompany notes owing from such Subsidiary to any Loan Party together with instruments of transfer duly executed and delivered in blank by a duly authorized officer of such Loan Party, and (ii) cause such new Subsidiary (other than any Foreign Subsidiary or a Non-Guarantor Subsidiary) (A) to execute a Joinder Agreement or such comparable documentation which is in form and substance reasonably satisfactory to the Administrative Agent, and (B) to take all actions reasonably necessary or advisable to cause the Lien created by the Security Agreement to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. -71- (c) (i) Each Credit Party will promptly grant to the Collateral Agent, within 180 Business Days of the acquisition thereof, security interests and Mortgages in such owned or leased Real Property of such Credit Party as is acquired by such Credit Party after the Closing Date and that, together with any improvements thereon, in the case of any such owned or leased Real Property, individually or in the aggregate has a fair market value of at least $5.0 million, as additional security for the Obligations (unless, with respect to any such property, (x) such property is already mortgaged to a third party to the extent permitted by Section 6.02 or (y) the Administrative Agent determines, in its reasonable discretion, that the fees and expenses of obtaining a Mortgage with respect to such property and the other related deliveries required by this Section 5.11 would be disproportionate to the expected benefits to be received by the Secured Parties) and (ii) in the event the San Carlos Agreement is terminated or the sale of the San Carlos Facility is not otherwise consummated prior to March 31, 2007, Holdings will promptly grant to the Collateral Agent, within 30 days of March 31, 2007 (or, if earlier, the date of termination of the San Carlos Agreement), security interests and a Mortgage in the San Carlos Facility. In connection with either clause (i) or (ii) above, the Collateral Agent shall have received: (A) a Mortgage encumbering each Mortgaged Real Property in favor of Collateral Agent, for the benefit of the Secured Parties, duly executed and acknowledged by the Credit Party that is the owner of or holder of a possessory interest in such Mortgaged Real Property, and otherwise in form for recording in the recording office of each political subdivision where each such Mortgaged Real Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a Lien under applicable law, and such UCC-1 Financing Statements, all of which shall be in form and substance reasonably satisfactory to Collateral Agent, and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction; (B) with respect to each leasehold Mortgaged Real Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as shall reasonably be deemed necessary by the Collateral Agent in order for the owner of the fee interest therein to consent to or approve of the Lien contemplated by the Mortgage with respect to such leasehold Mortgaged Real Property, and as may be obtained by the owner of such leasehold interest constituting such leasehold Mortgaged Real Property using commercially reasonable efforts; (C) with respect to each Mortgage, a Title Policy shall (A) be issued by the Title Company, (B) to the extent reasonably necessary, include such reinsurance arrangements (with provisions for direct access, if necessary) as shall be reasonably acceptable to the Collateral Agent, (C) contain a "tie-in" or "cluster" endorsement (if available under applicable law), (D) have been supplemented by such endorsements as shall be reasonably requested by the Collateral Agent, and (E) contain no exceptions to title other than exceptions for the Permitted Liens applicable to such Mortgaged Real Property and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements); (D) with respect to each Mortgaged Real Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as shall be reasonably required to induce the Title Company to issue the Title Policies and endorsements contemplated in subparagraph (iii) above; (E) evidence reasonably acceptable to the Collateral Agent of payment by Borrower of all Title Policy premiums, search and examination charges, and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the Title Policies referred to in subparagraph (iii) above; -72- (F) with respect to each Mortgaged Real Property, copies of all leases in which any Group Company holds the lessor's interest or other agreements relating to possessory interests of any Group Company, if any. To the extent any of the foregoing encumber any Mortgaged Real Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Real Property, either expressly by its terms or pursuant to a subordination, non-disturbance and attornment agreement; (G) with respect to each Mortgaged Real Property, each Group Company shall have made all notifications, registrations and filings, to the extent required by, and in accordance with, all Governmental Real Property Disclosure Requirements applicable to such Mortgaged Real Property, including the use of forms provided by state or local agencies, where such forms exist, whether to Borrower or to or with the state or local agency; (H) with respect to each Mortgaged Real Property, a legal opinion from counsel licensed in the state in which the Mortgaged Real Property is located in form and substance reasonably satisfactory to Collateral Agent; and (I) a Survey of any such Mortgaged Real Property. The Mortgages and instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges due and payable in connection therewith shall be paid in full. Such Credit Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent shall reasonably require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property within 60 days after prompt notice of the acquisition of such after-acquired Real Property is provided to the Collateral Agent. SECTION 5.12. SECURITY INTERESTS; FURTHER ASSURANCES. Each Credit Party shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement. Promptly, upon the reasonable request of the Administrative Agent or the Collateral Agent, at Borrower's expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Collateral Documents or otherwise deemed by Administrative Agent or the Collateral Agent reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby superior to and prior to the rights of all third persons other than the holders of Permitted Liens and subject to other Liens except as permitted by the Security Documents, or obtain any consents, including, without limitation, access agreements or landlord or similar Lien waivers and consents, as may be reasonably necessary in connection therewith, and as may be obtained by using commercially reasonable efforts. Deliver or cause to be delivered to the Administrative Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to the Administrative Agent as the Administrative Agent shall reasonably deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by the Administrative Agent or the Collateral Agent of any power, right, privilege or remedy pursuant to any Loan Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority or any other person, execute and deliver and/or obtain all applications, certifications, instruments and other documents and papers that the Administrative Agent or the Collateral Agent may be so required to obtain. -73- SECTION 5.13. REDEMPTION NOTES. If any Public Debt Securities were outstanding as of the Closing Date and Borrower did not mail a notice of redemption with respect thereto on the Closing Date, then Borrower shall mail such notice on the Business Day following the Closing Date in accordance with the terms of the Indenture. If any Senior Preferred Stock was outstanding as of the Closing Date and Borrower did not mail a notice of redemption with respect thereto on the Closing Date, then Borrower shall mail such notice on the Business Day following the Closing Date in accordance with the terms of its certificate of incorporation. SECTION 5.14. POST-CLOSING MATTERS. (a) The applicable Credit Parties shall obtain and deliver to the Collateral Agent, within the time periods set forth below (unless waived or extended by the Collateral Agent in its discretion), to the extent such items have not provided as of the Closing Date, the following: (i) Each of the items in clauses (i) through (viii) of Section 4.02(p) of this Agreement with respect to the Mortgaged Real Property located at 607/811 Hansen Way, Palo Alto, CA 94303, within ten (10) Business Days after the Closing Date; (ii) Favorable opinions from Jeffer, Mangels, Butler & Marmaro LLP and Gadsby Hannah LLP in form reasonably satisfactory to the Collateral Agent, as required by Section 4.02(h) of this Agreement, within ten (10) Business Days after the Closing Date; (iii) Survey for the Mortgaged Real Property located at 150 Sohier Road Beverly, MA 01915-5595 within thirty (30) Business Days of the Closing Date; (iv) Endorsements to each Title Policy delivered, with respect to the Mortgaged Real Property located at 150 Sohier Road, Beverly, MA 01915-5595, removing the standard survey exceptions therein and providing the comprehensive and survey endorsements thereto, within ten (10) Business Days after the delivery of the Survey described in clause (iii) of this Section 5.14(a); (v) Insurance certificates as required by Section 4.02(q) of this Agreement, within ten (10) Business Days after the Closing Date; (vi) The certificate or certificates, representing the Equity Interests of Holdings, together with undated stock powers executed and delivered in blank by a duly authorized officer of Parent within ten (10) Business Days after the Closing Date; and (vii) The certificates, representing 65% of the Equity Interests of each Foreign Subsidiary together with undated stock powers executed and delivered in blank by a duly authorized officer of such Subsidiary's parent within forty five (45) days of the Closing Date, to the extent that certificates representing 65% of such Equity Interests could not be delivered on the Closing Date due to the denominations of such existing certificates, (b) The applicable Credit Parties shall use their commercially reasonable efforts to obtain and deliver to the Collateral Agent (unless waived or extended by the Collateral Agent in its discretion), within the time periods set forth below, to the extent such items have not provided as of the Closing Date, the following: (i) Landlord Waiver and Consents from Varian, Inc., relating to that certain sublease dated August 10, 1995, as amended, and Varian Medical Systems, Inc. relating to that certain sublease dated April 1, 1999, in form and substance reasonably satisfactory to the Collateral Agent for the Real Property located at 3120 Hansen Way, Palo Alto, CA 94303, within forty-five (45) days after the Closing Date; and -74- (ii) Landlord Access Agreements for the Real Properties located at 2045 Route 35 South, Suite 101, South Amboy, NJ; 5205 Babcock Street N.E., Suite 2, Palm Bay, FL and 4130 Linden Avenue, No.255 Dayton, OH 45432, in form and substance reasonably acceptable to the Collateral Agent, unless the Collateral Agent, in its reasonable judgment, waives such delivery, with respect to each of the leased Real Properties set forth in this clause (ii), within forty-five (45) days after the Closing Date. ARTICLE VI NEGATIVE COVENANTS Holdings and Parent (each only with respect to Section 6.12(a)) and each Loan Party covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired or been fully cash collateralized and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, Holdings and Parent (each only with respect to Section 6.12(a)) will not, Borrower will not, nor will Borrower cause or permit any Subsidiary to: SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist, directly or indirectly, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Loan Documents; (b) non-speculative Interest Rate Protection Agreements which may be entered into from time to time by any Company and which such Company in good faith believes will provide protection against fluctuations in interest rates with respect to floating rate Indebtedness then outstanding, and permitted to remain outstanding, pursuant to the other provisions of this Section 6.01; (c) Indebtedness under Hedging Agreements (other than Interest Rate Protection Agreements) entered into from time to time by any Company in accordance with Section 6.03(c); (d) intercompany Indebtedness of the Companies outstanding to the extent permitted by Section 6.03(d); (e) Indebtedness in respect of Purchase Money Obligations and Capital Lease Obligations and refinancings or renewals thereof, in an aggregate amount not to exceed at any time outstanding $7.5 million at that time; (f) Indebtedness in respect of workers' compensation claims, self-insurance obligations, performance bonds, surety appeal or similar bonds and completion guarantees provided by a Company in the ordinary course of its business; (g) other Indebtedness of any Company not to exceed $10.0 million in aggregate principal amount at any time outstanding; (h) Contingent Obligations in respect of Indebtedness otherwise permitted under Section 6.01; -75- (i) Acquired Indebtedness in an aggregate principal amount that shall not exceed $10.0 million since the Closing Date; (j) the Senior Subordinated Notes and the Senior Subordinated Note Guarantees (including any notes and guarantees issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the Senior Subordinated Notes and Senior Subordinated Note Guarantees); and (k) Indebtedness of any Foreign Subsidiary not to exceed $10.0 million in aggregate principal amount at any time outstanding. SECTION 6.02. LIENS. Create, incur, assume or permit to exist, directly or indirectly, any Lien on any property now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except that the following (the "PERMITTED LIENS") shall be permitted: (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, or (ii) in the case of any such charge or claim which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions. (b) Liens in respect of property of any Company imposed by law which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money including Liens arising under 42 U.S.C. Section 9607(l) and similar Environmental Laws and those such as carriers', warehousemen's, materialmen's, landlords', workmen's, suppliers', repairmen's and mechanics' Liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of the property of the Companies, taken as a whole, and do not materially impair the use thereof in the operation of the business of the Companies, taken as a whole or (ii) which are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, and (iii) in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (c) easements, rights-of-way, restrictions (including zoning restrictions), covenants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Real Property, in each case whether now or hereafter in existence, (i) not securing Indebtedness and (ii) not individually or in the aggregate materially interfering with the conduct of the business of the Companies at such property; (d) Liens arising out of judgments or awards not resulting in an Event of Default; (e) Liens (other than any Lien imposed by ERISA) (i) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, (ii) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government -76- contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (iii) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; (f) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Company in the ordinary course of business in accordance with the past practices of such Company; (g) Liens arising pursuant to Purchase Money Obligations or Capital Lease Obligations incurred pursuant to Section 6.01(e); provided that (i) the Indebtedness secured by any such Lien (including refinancings thereof) does not exceed 100% of the cost of the property being acquired or leased at the time of the incurrence of such Indebtedness and (ii) any such Liens attach only to the property being financed pursuant to such Purchase Money Obligations or Capital Lease Obligations and do not encumber any other property of any Company; (h) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Company, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and other account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness for borrowed money; (i) Liens on assets of a person existing at the time such person is acquired or merged with or into or consolidated with any Company (and not created in anticipation or contemplation thereof); provided that such Liens do not extend to assets not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than the existing Lien; (j) Liens pursuant to the Security Documents; (k) Licenses of Intellectual Property granted by any Company in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Companies taken as a whole; (l) other Liens securing Indebtedness or that are incurred in the ordinary course of business of any Company; provided that the obligations so secured do not in the aggregate exceed $1.0 million at any time outstanding; (m) Liens in favor of any Loan Party to secure intercompany Indebtedness; (n) Liens deemed to exist in connection with Investments in repurchase agreements for Cash Equivalents permitted under Section 6.04; (o) Liens securing Hedging Obligations to the extent such Hedging Obligations are permitted by Sections 6.01(b), 6.01(c) and 6.03(c); (p) the existence of the "equal and ratable" clause in the Senior Subordinated Note Documents (but not any security interests granted pursuant thereto); and -77- (q) Liens securing Indebtedness of Foreign Subsidiaries permitted under Section 6.01(k) provided that such Liens shall not exist, directly or indirectly, on any Collateral; provided, however, that no Liens other than pursuant to clauses (a) and (n) shall be permitted to exist, directly or indirectly, on any Securities Collateral (as defined in the Security Agreement). Notwithstanding the foregoing, no consensual mortgage or other Lien shall be permitted to exist on the San Carlos Facility (other than mortgages or Liens required pursuant to the San Carlos Agreement) and no agreement, instrument, deed or lease shall prohibit or limit the ability of any Credit Party to create, incur, assume or suffer to exist a Lien in favor of any of the Secured Parties upon the San Carlos Facility, or which requires the grant of any security for an obligation if security is granted to secure the Obligations (other than pursuant to mortgages or Liens required pursuant to the San Carlos Agreement). SECTION 6.03. INVESTMENT, LOAN AND ADVANCES. Directly or indirectly, lend money or credit or make advances to any person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract (all of the foregoing, collectively, "INVESTMENTS"), except that the following shall be permitted: (a) the Companies may consummate the Transactions in accordance with the provisions of the Transaction Documents; (b) the Companies may (i) acquire and hold accounts receivables owing to any of them if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms, (ii) acquire and hold cash and Cash Equivalents, (iii) endorse negotiable instruments for collection in the ordinary course of business or (iv) make lease, utility and other similar deposits in the ordinary course of business; (c) the Companies may enter into Interest Rate Protection Agreements to the extent permitted by Section 6.01(b) and may enter into and perform their obligations under Hedging Agreements entered into in the ordinary course of business and so long as any such Hedging Agreement is not speculative in nature and is (i) related to income derived from foreign operations of any Company or otherwise related to purchases permitted hereunder from foreign suppliers or (ii) entered into to protect such Companies against fluctuations in the prices of raw materials used in their businesses; (d) (1) any Company may make intercompany loans to any Loan Party or, in the case of the Closing Date Intercompany Loan, to Holdings and any Loan Party may make intercompany loans and advances to any other Loan Party; provided that (i) such loan shall be evidenced by the Intercompany Note and shall be pledged (and delivered) by such Loan Party that is the lender of such intercompany loan as Collateral pursuant to the Security Agreement, (ii) any loans made by any Foreign Subsidiary or Non Guarantor Subsidiary to any Loan Party pursuant to this paragraph (d) shall be subordinated to the obligations of the Loan Parties pursuant to the Intercompany Note and (iii) in the case of the Closing Date Intercompany Loan, (A) the proceeds thereof are used in accordance with Section 3.11 and (B) the amount thereof shall be the minimum amount necessary to consummate the Transactions and (2) (i) Borrower may make Investments in any Subsidiary Guarantor, (ii) any Company may make Investments in Borrower, (iii) any Subsidiary Guarantor may make Investments in another Subsidiary Guarantor and (iv) any Non-Guarantor Subsidiary may make Investments in any other Non-Guarantor Subsidiary; provided that any such Investment in the form of an intercompany loan shall meet the requirements set forth in clause (1) above; -78- (e) Borrower and the Subsidiaries may make loans and advances (including payroll, travel and entertainment related advances) in the ordinary course of business to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $3.0 million; (f) Borrower and the Subsidiaries may sell or transfer assets to the extent permitted by Section 6.04 (other than clause (c) thereof); (g) Borrower may establish (i) Wholly Owned Subsidiaries to the extent permitted by Section 6.11 and (ii) non-Wholly Owned Subsidiaries and/or joint ventures to the extent that Investments in such non-Wholly Owned Subsidiaries and/or joint ventures shall not exceed $5.0 million at any time outstanding, after taking into account amounts returned in cash (including upon disposition); (h) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (i) Investments made by Borrower or any Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with Section 6.04; (j) Investments consisting of advances, loans and/or other extensions of credit to officers, directors and employees of Borrower or any of its Subsidiaries made in connection with the purchase by such persons of Equity Interests of Parent so long as the cash proceeds of such purchase as received by Parent are contemporaneously remitted by Parent to Holdings and by Holdings to Borrower as capital contributions; (k) Investments by Borrower in the Collateral Account and LC Sub-Account, and other Investments in other demand deposit accounts; (l) Investments constituting Permitted Acquisitions; (m) Investments by Borrower or any Subsidiary of up to $50.0 million in the aggregate, to the extent such Investments are funded with the proceeds from issuances of Equity Interests of Parent; (n) other Investments by Borrower or any Subsidiary in an aggregate amount not to exceed $5.0 million at any time; (o) Investments in Foreign Subsidiaries not to exceed $10.0 million at any time outstanding; provided that Investments pursuant to this clause (o) and clause (p) below shall not, in the aggregate, exceed $50.0 million at any time outstanding; and (p) Investments in Canadian Subsidiaries made in the form of an intercompany loan from a Loan Party used solely to effect Permitted Acquisitions, in an amount not to exceed $50.0 million (less the amount of Investments outstanding under clause (o) above) at any time outstanding; provided that such intercompany loan is evidenced by an intercompany note pledged to the Collateral Agent as security for the Obligations. Such intercompany note shall be secured by all assets and property acquired (and all assets and property of any entities acquired) in connection with such Permitted Acquisition and pursuant to documentation as set forth in Sections 5.11 -79- and 5.12 as if such Canadian Subsidiary were a Credit Party or such comparable documentation as shall be reasonably acceptable to the Collateral Agent. SECTION 6.04. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS. Wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets of any person (or agree to do any of the foregoing at any future time), except that: (a) Capital Expenditures by Borrower and the Subsidiaries shall be permitted to the extent permitted by Section 6.07(d); (b) (i) purchases or other acquisitions of tangible and intangible assets in the ordinary course of business shall be permitted, (ii) sales, transfers or dispositions of inventory shall be permitted, (iii) Asset Sales of used, worn out, obsolete or surplus property by any Company in the ordinary course of business and the abandonment or other disposition of assets that are, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the conduct of the business of the Companies taken as a whole shall be permitted and (iv) subject to Section 2.10(c), the sale, lease or other disposal of any other assets shall be permitted; (c) Investments to the extent permitted by Section 6.03 (other than clause (f) thereof); (d) Borrower and the Subsidiaries may sell Cash Equivalents in the ordinary course of business; (e) Borrower and the Subsidiaries may lease (as lessee or lessor) real or personal property and may guaranty such lease in the ordinary course of business; (f) the Transactions shall be permitted as contemplated by the Transaction Documents; (g) Borrower and the Subsidiaries may consummate Permitted Acquisitions; (h) any Loan Party may be merged into Borrower (as long as Borrower is the surviving corporation of such merger and remains a Wholly Owned Subsidiary of Holdings) or any other Wholly Owned Subsidiary Guarantor; provided, however, that the Lien on and security interest in such property granted in favor of the Collateral Agent under the Security Documents shall be maintained in accordance with the provisions of Section 5.12; (i) any Subsidiary may dissolve, liquidate or wind up its affairs at any time (including, without limitation, by converting from a corporation to a limited liability company or other entity); provided that such dissolution, liquidation or winding up, as applicable, could not reasonably be expected to have a Material Adverse Effect; (j) Asset Sales by any Company to any other Company shall be permitted; provided that any such Asset Sale involving a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.06; (k) Holdings may be merged with and into Borrower and Borrower may be merged with and into Holdings; provided that (i) following any such merger, all references in the Loan -80- Documents to Holdings shall be deemed to be references to Parent and (ii) if Holdings is the surviving entity then all references to Borrower in the Loan Documents shall be deemed to be references to the surviving entity and, in each case, the Loan Parties shall take such actions as the Administrative Agent or the Collateral Agent may request to provide for the valid assumption of the Obligations and to confirm the validity and perfection of the security interests granted to the Collateral Agent for the benefit of the Secured Parties to secure the Obligations; and (l) Equity Interests may be issued to the extent permitted by Section 6.10. To the extent the Required Lenders waive the provisions of this Section 6.04 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 6.04, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and the Agents shall take all actions deemed appropriate in order to effect the foregoing. SECTION 6.05. DIVIDENDS. Authorize, declare or pay, directly or indirectly, any Dividends with respect to any Company, except that: (a) any Subsidiary of Borrower (i) may pay cash Dividends to Borrower or any Wholly Owned Subsidiary of Borrower and (ii) if such Subsidiary is not a Wholly Owned Subsidiary of Borrower, may pay cash Dividends to its shareholders generally so long as Borrower or its Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary); (b) so long as no Default exists or would result therefrom, Borrower may pay Dividends to Holdings for the purpose of paying Dividends to Parent in order to enable Parent to repurchase outstanding shares of its capital stock (or options to purchase such capital stock) following the death, disability, retirement or termination of employment of employees, officers or directors of any Company or upon the exercise by any such person of any "put" right in respect of any such capital stock (or options); provided that the aggregate amount of Dividends paid by Borrower pursuant to this paragraph (b) shall not exceed an aggregate amount of $3.0 million (exclusive of any amounts repaid to Borrower concurrently therewith in respect of loans made pursuant to Section 6.03(j); (c) Borrower may pay cash Dividends to Holdings for the purpose of paying cash Dividends to Parent, so long as all proceeds thereof are promptly used by Parent to pay its franchise taxes and operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including legal and accounting expenses and similar expenses and customary fees to non-officer directors of Parent); provided that the aggregate amount of Dividends paid to Holdings pursuant to this clause (c) shall not exceed $1.0 million in any fiscal year of Parent; (d) Borrower or any Subsidiary may pay cash Dividends to Holdings for the purpose of paying cash dividends to Parent in an amount not in excess of the federal and state (in such states that permit consolidated or combined tax returns) income tax liability that Borrower and the Subsidiaries would have been liable for if any of the Companies had filed their taxes on a stand-alone basis, for the purpose of paying such taxes; provided that such payments shall be made by Parent no earlier than five days prior to the date on which Parent is required to make its payments to the Internal Revenue Service, as applicable; -81- (e) Borrower may pay Dividends to Holdings for the purpose of paying dividends to Parent of capital stock of Parent to the extent such capital stock of Parent is acquired by Borrower as a result of a foreclosure action following a default on an advance, loan and/or other extension of credit permitted pursuant to Section 6.03(j); and (f) Borrower may pay Dividends to the extent permitted by Section 6.06(h). SECTION 6.06. TRANSACTIONS WITH AFFILIATES. Enter into, directly or indirectly, any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of any Company (other than between or among Borrower and the Subsidiary Guarantors), other than on terms and conditions substantially as favorable to such Company as would reasonably be obtained by such Company at that time in a comparable arm's-length transaction with a person other than an Affiliate, except that: (a) Dividends may be paid to the extent provided in Section 6.05; (b) loans may be made and other transactions may be entered into between and among any Company and its Affiliates to the extent permitted by Sections 6.01(d) and 6.03(d); (c) customary director fees may be paid to directors of any Group Company; (d) Borrower or any Subsidiary may make payments to Holdings pursuant to a Tax Sharing Agreement; provided that such payments otherwise meet the requirements for Dividends paid in accordance with Section 6.05(d); (e) the Transactions may be effected; (f) transfers of cash and assets to Borrower or any Subsidiary Guarantor may be made; (g) commercially reasonable employment arrangements may be made with and compensation may be paid to the officers, directors, employees or consultants of any Company; (h) payments (in the form of Dividends or otherwise) of cash amounts received by any Group Company under any escrow agreements entered into under the Merger Agreement that do not constitute Escrow Proceeds may be made to Holdings or any of its Affiliates; and (i) the sale-leaseback transaction between Borrower and Holdings relating to the San Carlos Facility may be unwound. -82- SECTION 6.07. FINANCIAL COVENANTS. (a) MAXIMUM LEVERAGE RATIO. Permit the Leverage Ratio, as of the last day of any Test Period, to exceed the ratio set forth opposite the date in the table below which is closest to the last day of such Test Period:
DATE LEVERAGE RATIO - ------------------------------------------------------------- April 2, 2004 4.95 to 1.0 - ------------------------------------------------------------- July 2 2004 4.95 to 1.0 - ------------------------------------------------------------- October 1, 2004 4.95 to 1.0 - ------------------------------------------------------------- December 31, 2004 4.65 to 1.0 - ------------------------------------------------------------- April 1, 2005 4.65 to 1.0 - ------------------------------------------------------------- July 1 2005 4.65 to 1.0 - ------------------------------------------------------------- September 30, 2005 4.65 to 1.0 - ------------------------------------------------------------- December 30, 2005 4.15 to 1.0 - ------------------------------------------------------------- March 31, 2006 4.15 to 1.0 - ------------------------------------------------------------- June 30, 2006 4.15 to 1.0 - ------------------------------------------------------------- September 29, 2006 4.15 to 1.0 - ------------------------------------------------------------- December 29, 2006 3.50 to 1.0 - ------------------------------------------------------------- March 30, 2007 3.50 to 1.0 - ------------------------------------------------------------- June 29, 2007 3.50 to 1.0 - ------------------------------------------------------------- September 28, 2007 3.50 to 1.0 - ------------------------------------------------------------- January 4, 2008 3.25 to 1.0 - ------------------------------------------------------------- April 4, 2008 3.25 to 1.0 - ------------------------------------------------------------- July 4, 2008 3.25 to 1.0 - ------------------------------------------------------------- October 3, 2008 3.25 to 1.0 - ------------------------------------------------------------- January 2, 2009 3.00 to 1.0 - ------------------------------------------------------------- April 3, 2009 3.00 to 1.0 - ------------------------------------------------------------- July 3, 2009 3.00 to 1.0 - ------------------------------------------------------------- October 2, 2009 3.00 to 1.0 - ------------------------------------------------------------- January 1, 2010 3.00 to 1.0 - ------------------------------------------------------------- April 2, 2010 3.00 to 1.0 - ------------------------------------------------------------- July 2, 2010 3.00 to 1.0 - -------------------------------------------------------------
-83- (b) MINIMUM INTEREST COVERAGE RATIO. Permit the Consolidated Interest Coverage Ratio, for any Test Period, to be less than the ratio set forth opposite the date in the table below which is closest to the last day of such Test Period:
DATE INTEREST COVERAGE RATIO - ----------------------------------------------------------------- April 2, 2004 2.25 to 1.0 - ----------------------------------------------------------------- July 2 2004 2.25 to 1.0 - ----------------------------------------------------------------- October 1, 2004 2.25 to 1.0 - ----------------------------------------------------------------- December 31, 2004 2.50 to 1.0 - ----------------------------------------------------------------- April 1, 2005 2.50 to 1.0 - ----------------------------------------------------------------- July 1 2005 2.50 to 1.0 - ----------------------------------------------------------------- September 30, 2005 2.50 to 1.0 - ----------------------------------------------------------------- December 30, 2005 2.75 to 1.0 - ----------------------------------------------------------------- March 31, 2006 2.75 to 1.0 - ----------------------------------------------------------------- June 30, 2006 2.75 to 1.0 - ----------------------------------------------------------------- September 29, 2006 2.75 to 1.0 - ----------------------------------------------------------------- December 29, 2006 3.00 to 1.0 - ----------------------------------------------------------------- March 30, 2007 3.00 to 1.0 - ----------------------------------------------------------------- June 29, 2007 3.00 to 1.0 - ----------------------------------------------------------------- September 28, 2007 3.00 to 1.0 - ----------------------------------------------------------------- January 4, 2008 3.00 to 1.0 - ----------------------------------------------------------------- April 4, 2008 3.00 to 1.0 - ----------------------------------------------------------------- July 4, 2008 3.00 to 1.0 - ----------------------------------------------------------------- October 3, 2008 3.00 to 1.0 - ----------------------------------------------------------------- January 2, 2009 3.00 to 1.0 - ----------------------------------------------------------------- April 3, 2009 3.00 to 1.0 - ----------------------------------------------------------------- July 3, 2009 3.00 to 1.0 - ----------------------------------------------------------------- October 2, 2009 3.00 to 1.0 - ----------------------------------------------------------------- January 1, 2010 3.00 to 1.0 - ----------------------------------------------------------------- April 2, 2010 3.00 to 1.0 - ----------------------------------------------------------------- July 2, 2010 3.00 to 1.0 - -----------------------------------------------------------------
(c) MINIMUM FIXED CHARGE COVERAGE RATIO. Permit the Consolidated Fixed Charge Coverage Ratio, for any Test Period to be less than 1.20 to 1.0. -84- (d) LIMITATION ON CAPITAL EXPENDITURES. (i) Permit the aggregate amount of Capital Expenditures made in any fiscal year to exceed $7.5 million; provided, however, that (x) if the aggregate amount of Capital Expenditures made in any fiscal year shall be less than $7.5 million for such fiscal year (before giving effect to any carryover), then an amount of such shortfall not exceeding 75% of such maximum amount may be added to the amount of Capital Expenditures permitted under this Section 6.07(d) for the immediately succeeding (but not any other) fiscal year and (y) in determining whether any amount is available for carryover, the amount expended in any fiscal year shall first be deemed to be from the amount allocated to such fiscal year (before giving effect to any carryover). SECTION 6.08. PREPAYMENTS OF OTHER INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, OTHER CONSTITUTIVE DOCUMENTS OR BY-LAWS AND CERTAIN OTHER AGREEMENTS, ETC. (i) Make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Subordinated Indebtedness, except as otherwise permitted by this Agreement; (ii) cause or permit any other obligation (other than the Obligations and the Guaranteed Obligations) to constitute Designated Senior Debt (or any similar term), as defined in the documents governing any such Subordinated Indebtedness; (iii) amend or modify, or permit the amendment or modification, assignment or license of any Transaction Document (including, without limitation, all documents relating to the Equity Financing) in each case except for amendments or modifications which are not in any way adverse in any material respect to the interests of the Lenders; or (iv) amend, modify or change the articles of incorporation or other constitutive documents (including by the filing or modification of any certificate of designation) or by-laws of Borrower and the Subsidiaries, or any agreement entered into by them, with respect to their capital stock (including any shareholders' agreement), or enter into any new agreement with respect to their capital stock, other than any amendments, modifications, agreements or changes pursuant to this clause (iv) which do not in any way materially adversely affect in any material respect the interests of the Lenders. SECTION 6.09. LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by Borrower or any Subsidiary of Borrower, or pay any Indebtedness owed to Borrower or a Subsidiary of Borrower, (b) make loans or advances to Borrower or any of Borrower's Subsidiaries or (c) transfer any of its properties to Borrower or any of Borrower's Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law; (ii) this Agreement and the other Loan Documents; (iii) the Senior Subordinated Note Documents as in effect on the Closing Date; (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of Borrower or a Subsidiary of Borrower; (v) customary provisions restricting assignment of any agreement entered into by Borrower or a Subsidiary of Borrower in the ordinary course of business; (vi) any holder of a Lien permitted by Section 6.02 may restrict the transfer of the asset or assets subject thereto; (vii) restrictions which are not more restrictive than those contained in this Agreement contained in any documents governing any Indebtedness incurred after the Closing Date in accordance with the provisions of this Agreement; (viii) customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under Section 6.04 pending the consummation of such sale; (ix) any agreement in effect at the time such Subsidiary becomes a Subsidiary of Borrower, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary of Borrower; or (x) in the case of any joint venture which is not a Loan Party in respect of any matters referred to in clauses (b) and (c) above, restrictions in such person's organizational or governing documents or pursuant to any joint venture agreement or stockholders agreement solely to the extent of the Equity Interests of or assets held in the subject joint venture or other entity. -85- SECTION 6.10. LIMITATION ON ISSUANCE OF CAPITAL STOCK. Borrower will not, and will not permit any Subsidiary to, issue any Equity Interest (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, Equity Interests, except (i) for stock splits, stock dividends and additional Equity Interest issuances which do not decrease the percentage ownership of Borrower or any Subsidiaries in any class of the Equity Interest of such Subsidiary; (ii) Subsidiaries of Borrower formed after the Closing Date pursuant to Section 6.11 may issue Equity Interests to Borrower or the Subsidiary of Borrower which is to own such stock; and (iii) Borrower may issue common stock that is Qualified Capital Stock to Holdings. All Equity Interests issued in accordance with this Section 6.10 shall, to the extent required by Section 5.11 or the Security Agreement, be delivered to the Collateral Agent for pledge pursuant to the Security Agreement. SECTION 6.11. LIMITATION ON CREATION OF SUBSIDIARIES. Establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Lenders; provided that Borrower may (a) establish or create one or more Wholly Owned Subsidiaries of Borrower or one of its Wholly Owned Subsidiaries without such consent so long as (i) the relevant percentage of the Equity Interest of any new Subsidiary is upon the creation or establishment of any such new Subsidiary pledged and delivered to the Collateral Agent for the benefit of the Secured Parties under the Security Agreement in accordance with Section 5.11; and (ii) upon the creation or establishment of any such new Wholly Owned Subsidiary, such Subsidiary becomes a party to the applicable Security Documents and shall become a Subsidiary Guarantor hereunder and execute a Joinder Agreement and the other Loan Documents to the extent required by Section 5.11; and (b) establish, create or acquire one or more Subsidiaries that are not Wholly Owned Subsidiaries without such consent if such Subsidiaries are acquired in connection with a Permitted Acquisition or pursuant to Investments permitted by Section 6.03(g). SECTION 6.12. BUSINESS. (a) With respect to Holdings and Parent, engage in any business activities or have any assets or liabilities, other than (i) its ownership of the Equity Interests of Borrower and Holdings, respectively, (ii) the issuances of guarantees of Indebtedness of Borrower and pledges of Equity Interests, to the extent such Indebtedness and pledges of Equity Interests are permitted by this Agreement, (iii) issuances of its Equity Interests and other activities expressly permitted by this Agreement, (iv) in the case of Holdings, the borrowing of funds from Borrower pursuant to the Closing Date Intercompany Loan and (v) activities and assets reasonably related to the foregoing clauses (i), (ii), (iii) and (iv). (b) With respect to Borrower and the Subsidiaries, engage (directly or indirectly) in any business other than those businesses in which Borrower and its Subsidiaries are engaged on the Closing Date (or which are similar, complementary or reasonably related thereto or are reasonable extensions thereof). SECTION 6.13. LIMITATION ON ACCOUNTING CHANGES. Make or permit any change in accounting policies or reporting practices without the consent of the Required Lenders, which consent shall not be unreasonably withheld, except changes that, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect or are required by GAAP. SECTION 6.14. FISCAL YEAR. Change its fiscal year-end to a date other than the Friday closest to September 30. SECTION 6.15. SALE AND LEASEBACK TRANSACTIONS. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as -86- the property being sold or transferred unless (i) the sale of such property is permitted by Section 6.04 and (ii) any Liens arising in connection with its use of such property are permitted by Section 6.02. SECTION 6.16. ANTI-TERRORISM LAW; ANTI-MONEY LAUNDERING. (a) Directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in Section 3.22, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by the Administrative Agent in its reasonable discretion, confirming the Loan Parties' compliance with this Section 6.16). (b) Knowingly cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of law. ARTICLE VII GUARANTEE SECTION 7.01. THE GUARANTEE. The Guarantors hereby jointly and severally guarantee as a primary obligor and not as a surety to each Secured Party and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Bankruptcy Code after any bankruptcy or insolvency petition under the Bankruptcy Code) on the Loans made by the Lenders to, and the Notes held by each Lender of, Borrower, and all other Obligations from time to time owing to the Secured Parties by any Credit Party under any Loan Document or Interest Rate Protection Agreement relating to the Loans, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). The Guarantors hereby jointly and severally agree that if Borrower or other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. SECTION 7.02. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under Section 7.01 shall constitute a guaranty of payment and are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of Borrower under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: -87- (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien or security interest granted to, or in favor of, Issuing Bank or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or (v) the release of any other Guarantor. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Credit Party exhaust any right, power or remedy or proceed against Borrower under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between Borrower and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding. SECTION 7.03. REINSTATEMENT. The obligations of the Guarantors under this Article VII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of a Credit Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly and severally agree that they will indemnify each Secured Party on demand for all reasonable out-of-pocket costs and expenses (including reasonable fees of counsel) incurred by such Secured Party in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, -88- insolvency or similar law, other than any costs or expenses resulting from the gross negligence or bad faith or willful misconduct of such Secured Party. SECTION 7.04. SUBROGATION; SUBORDINATION. Each Guarantor hereby agrees that until the payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 7.01, whether by subrogation or otherwise, against Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. The payment of any amounts due with respect to any indebtedness of Borrower or any other Guarantor now or hereafter owing to any Guarantor or Borrower by reason of any payment by such Guarantor under the Guarantee in this Article VII is hereby subordinated to the prior payment in full in cash of the Guaranteed Obligations. In addition, any Indebtedness of the Guarantors now or hereafter held by any Guarantor is hereby subordinated in right of payment in full in cash to the Guaranteed Obligations. Each Guarantor agrees that it will not demand, sue for or otherwise attempt to collect any such indebtedness of Borrower to such Guarantor until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, any Guarantor shall prior to the payment in full in cash of the Guaranteed Obligations collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Guarantor as trustee for the Secured Parties and be paid over to Administrative Agent on account of the Guaranteed Obligations without affecting in any manner the liability of such Guarantor under the other provisions of the guaranty contained herein. Any Indebtedness of any Loan Party permitted pursuant to Section 6.01(d) shall be subordinated to such Loan Party's Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness. SECTION 7.05. REMEDIES. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of Borrower under this Agreement and the Notes, if any, may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in said Article VIII) for purposes of Section 7.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 7.01. SECTION 7.06. INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby acknowledges that the guarantee in this Article VII constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213 to the extent permitted thereunder. SECTION 7.07. GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 7.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 7.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any other Credit Party or any other person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. -89- ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01. EVENTS OF DEFAULT. In case of the happening of any of the following events ("EVENTS OF DEFAULT"): (a) default shall be made in the payment of any principal of, or premium on, any Loan or the reimbursement with respect to any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof (including a Term Loan Repayment Date) or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (b) default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in (a) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; (c) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any certificate furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (d) default shall be made in the due observance or performance by any Credit Party of any covenant, condition or agreement contained in Section 5.02(a), 5.03(a), 5.08 or 5.13 or in Article VI; (e) default shall be made in the due observance or performance by Parent, Holdings or any Company of any covenant, condition or agreement contained in any Loan Document (other than those specified in (a), (b) or (d) above) or the Fee Letter and such default shall continue unremedied or shall not be waived for a period of 30 days after written notice thereof from the Administrative Agent or the Required Lenders to Borrower; (f) any Group Company shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness (other than the Obligations) when and as the same shall become due and payable or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a representative on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity; provided that it shall not constitute an Event of Default pursuant to this paragraph (f) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) exceeds $5.0 million at any one time; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Group Company, or of a substantial part of the property or assets of any Group Company, under the Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Group Company or for a substantial part of the property or assets of any Group Company; or (iii) the winding-up or liquidation of any Group Company; and such proceeding or petition shall -90- continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) any Group Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above; (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Group Company or for a substantial part of the property or assets of any Group Company; (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) take any action for the purpose of effecting any of the foregoing; or (viii) wind up or liquidate; (i) one or more judgments for the payment of money in an aggregate amount in excess of $5.0 million (exclusive of amounts covered by insurance) shall be rendered against any Group Company or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any Group Company to enforce any such judgment; (j) an ERISA Event or noncompliance with respect to Foreign Plans shall have occurred so that, when taken together with all other such ERISA Events and noncompliance with respect to Foreign Plans that have occurred, could reasonably be expected to result in liability of any Group Company or a combination thereof in an aggregate amount exceeding $5.0 million; (k) any security interest and Lien purported to be created by any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent, for the benefit of the Secured Parties, the Liens, rights, powers and privileges purported to be created and granted under such Security Documents (including a perfected first priority security interest in and Lien on all of the Collateral thereunder (except as otherwise expressly provided in such Security Documents or except to the extent any loss of perfection or priority results from the failure of the Collateral Agent to file UCC continuation statements or maintain possession of certificates actually delivered to it representing the securities pledged to it under the Security Agreement)) in favor of the Collateral Agent, or shall be asserted by any Credit Party not to be a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in or Lien on the Collateral covered thereby; (l) the Guarantees shall cease to be in full force and effect or any Guarantor shall contest the validity or enforceability of its Guarantee; (m) any Loan Document or any material provisions thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by any Credit Party, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Credit Party shall repudiate or deny that it has any liability or obligation for the payment of principal or interest or other obligations purported to be created under any Loan Document; or (n) there shall have occurred a Change in Control; -91- then, and in every such event (other than an event with respect to Parent, Holdings or Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrower and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to Parent, Holdings or Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrower and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding. ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS SECTION 9.01. COLLATERAL ACCOUNT. (a) The Collateral Agent is hereby authorized to establish and maintain at its office at 677 Washington Boulevard, Stamford, Connecticut 06901, in the name of the Collateral Agent and pursuant to a Control Agreement (to the extent requested), a restricted deposit account designated "Collateral Account". Each Credit Party shall deposit into the Collateral Account from time to time (i) the cash proceeds of any of the Collateral (including pursuant to any disposition thereof) to the extent contemplated herein or in any other Loan Document, (ii) the cash proceeds of any Casualty Event with respect to Collateral to the extent contemplated herein or in any other Loan Document, and (iii) any cash such Credit Party is required to pledge as additional collateral security hereunder pursuant to the Loan Documents. (b) The balance from time to time in the Collateral Account shall constitute part of the Collateral and shall not constitute payment of the Obligations until applied as hereinafter provided. So long as no Event of Default has occurred and is continuing or will result therefrom, the Collateral Agent shall, within one Business Day's of receiving a request of the applicable Credit Party for release of cash proceeds constituting (i) Net Cash Proceeds from the Collateral Account, remit such cash proceeds on deposit in the Collateral Account to or upon the order of such Credit Party, so long as such Credit Party has satisfied the conditions relating thereto set forth in Section 9.02, (ii) Net Cash Proceeds from any sale or other disposition of Collateral from the Collateral Account, remit such cash proceeds on deposit in the Collateral Account, so long as such Credit Party has satisfied the conditions relating thereto set forth in Section 9.02 and (iii) with respect to the LC Sub-Account at such time as all Letters of Credit shall have been terminated and all of the liabilities in respect of the Letters of Credit have been paid in full. At any time following the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, if instructed by the Required Lenders as specified herein, shall) in its (or their) discretion apply and provide notice to Borrower of such application or cause to be applied (subject to collection) the balance from time to time outstanding to the credit of the Collateral Account to the payment of the Obligations in the manner specified in Section 9.03 hereof, subject, however, in the case of amounts deposited in the LC Sub-Account, to the provisions of Sections 2.18(j) and 9.03. The Credit Parties shall have no right to withdraw, transfer or otherwise receive any funds deposited in the Collateral Account except to the extent specifically provided herein. -92- (c) Amounts on deposit in the Collateral Account shall be invested from time to time in Cash Equivalents as the applicable Credit Party (or, after the occurrence and during the continuance of an Event of Default, the Collateral Agent) shall determine, which Cash Equivalents shall be held in the name and be under the control of the Collateral Agent (or any sub-agent); provided that at any time after the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, if instructed by the Required Lenders as specified herein, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Cash Equivalents and to apply or cause to be applied the proceeds thereof to the payment of the Obligations in the manner specified in Section 9.03 hereof. (d) Amounts deposited into the Collateral Account as cover for liabilities in respect of Letters of Credit under any provision of this Agreement requiring such cover shall be held by the Collateral Agent in a separate sub-account designated as the "LC Sub-Account" (the "LC SUB-ACCOUNT"). SECTION 9.02. PROCEEDS OF CASUALTY EVENTS. (a) So long as no Event of Default shall have occurred and be continuing, in the event there shall be any Net Cash Proceeds in respect of any Casualty Event, the applicable Credit Party shall have the right, at such Credit Party's option, to apply such Net Cash Proceeds in accordance with the applicable provisions of this Agreement. (b) In the event any Net Cash Proceeds are required to be deposited in the Collateral Account in accordance with Section 2.10(f), the Collateral Agent shall not release any part of such Net Cash Proceeds until the applicable Credit Party has furnished to the Collateral Agent (i) an Officers' Certificate setting forth: (A) a brief description of the reason for the release, (B) the dollar amount of the expenditures to be made, or costs incurred by such Credit Party in connection with such release and (C) each request for payment shall be made on at least one Business Day's prior notice to the Collateral Agent and such request shall state that the properties acquired in connection with such release have a fair market value at least equal to the amount of such Net Cash Proceeds requested to be released from the Collateral Account and (ii) all security agreements and Mortgages and other items required by the provisions of Sections 5.11 and 5.12 to, among other things, subject such reinvestment properties or assets to the Lien of the Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties. SECTION 9.03. APPLICATION OF PROCEEDS. The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall be applied, together with any other sums then held by the Collateral Agent pursuant to this Agreement, promptly by the Collateral Agent as follows: (a) First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including, without limitation, compensation to the Collateral Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by the Collateral Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; (b) Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization, including, without limitation, compensation to the other Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; -93- (c) Third, without duplication of amounts applied pursuant to clauses (a) and (b) above, to the payment in full in cash, pro rata, of (i) interest, principal and other amounts constituting Obligations (other than the Related Hedging Obligations) owing to the Secured Parties, in each case equally and ratably in accordance with the respective amounts thereof then due and owing and (ii) Related Hedging Obligations in accordance with the terms of the applicable Hedging Agreements; and (d) Fourth, the balance, if any, to the person lawfully entitled thereto (including the applicable Credit Party or its successors or assigns). In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (c) of this Section 9.03, the Loan Parties shall remain liable for any deficiency. ARTICLE X THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT SECTION 10.01. APPOINTMENT. Each Lender hereby irrevocably designates and appoints each of the Administrative Agent and the Collateral Agent as an agent of such Lender under this Agreement and the other Loan Documents. Each Lender irrevocably authorizes each Agent, in such capacity, through its agents or employees, to take such actions on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. SECTION 10.02. AGENT IN ITS INDIVIDUAL CAPACITY. Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder. SECTION 10.03. EXCULPATORY PROVISIONS. No Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 11.02), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose or shall be liable for the failure to disclose, any information relating to Borrower or any of its Subsidiaries that is communicated to or obtained by the person serving as such Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 11.02) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower or a Lender, and no Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or -94- document or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document. SECTION 10.04. RELIANCE BY AGENT. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by a proper person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by a proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for Borrower), independent accountants and other advisors selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or advisors. SECTION 10.05. DELEGATION OF DUTIES. Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Affiliates of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. SECTION 10.06. SUCCESSOR AGENT. Each Agent may resign as such at any time upon at least 30 days' prior notice to the Lenders, the Issuing Bank and Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of Borrower (not to be unreasonably withheld or delayed), to appoint a successor Agent from among the Lenders; provided, that no consent of Borrower shall be required if an Event of Default has occurred and is continuing. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent with the consent of Borrower (not to be unreasonably withheld or delayed), which successor shall be a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, in each case, having combined capital and surplus of at least $250 million; provided, that no consent of Borrower shall be required if an Event of Default has occurred and is continuing; provided, further that if such retiring Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth above, the retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor Agent. Upon the acceptance of its appointment as an Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After an Agent's resignation hereunder, the provisions of this Article X and Section 11.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent. SECTION 10.07. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and -95- without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder. SECTION 10.08. NO OTHER ADMINISTRATIVE AGENT. The Lenders identified in this Agreement and the Syndication Agent and the Documentation Agent shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders. Without limiting the foregoing, the Syndication Agent and the Documentation Agent shall not have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to the Syndication Agent and the Documentation Agent as it makes with respect to the Administrative Agent or any other Lender in this Article X. Notwithstanding the foregoing, the parties hereto acknowledge that the Syndication Agent and the Documentation Agent hold such titles in name only, and that such titles confer no additional rights or obligations relative to those conferred on any Lender hereunder. SECTION 10.09. INDEMNIFICATION. The Lenders severally agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by a Credit Party and without limiting the obligation of the Credit Parties to do so), ratably according to their respective outstanding Loans and Commitments in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which all Commitments shall have terminated and the Loans and other Obligations shall have been paid in full, ratably in accordance with such outstanding Loans and Commitments as in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans and other Obligations) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. ARTICLE XI MISCELLANEOUS SECTION 11.01. NOTICES. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: -96- (a) if to a Credit Party, to it at: Communications & Power Industries, Inc. c/o The Cypress Group L.L.C. 65 E. 55th Street New York, New York 10022 Attention: Michael F. Finley Phone: (212) 705-0150 Telecopy No.: (212) 705-0199; (b) if to the Administrative Agent, or the Collateral Agent to it at: UBS AG, Stamford Branch 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Vladimira Holeckova Phone: (203) 719-6403 Telecopy No.: (203) 719-4176; and (c) if to a Lender, to it at its address (or telecopy number) set forth on the applicable Lender Addendum or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or by certified or registered mail, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 11.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 11.01 and failure to deliver courtesy copies of notices and other communications shall in no event affect the validity or effectiveness of such notices and other communications. SECTION 11.02. WAIVERS; AMENDMENT. (a) No failure or delay by any Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Credit Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Credit Party or Credit Parties that are parties thereto, in each case with the written consent of the Required Lenders, provided that no such agreement shall (i) increase the Commitment of -97- any Lender without the written consent of such Lender, (ii) reduce or forgive the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any Fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or any scheduled date of payment of the principal amount of any Term Loan under Section 2.09, or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment or postpone the scheduled date of expiration of any Letter of Credit beyond the Revolving Maturity Date, without the written consent of each Lender affected thereby, (iv) change Section 2.14(b) or (c) in a manner that would alter the pro rata sharing of payments or set-offs required thereby without the written consent of each Lender, (v) change the percentage set forth in the definition of "Required Lenders" or any other provision of any Loan Document (including this Section) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder without the written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release any Guarantor from its Guarantee, or limit its liability in respect of such Guarantee, without the written consent of each Lender, (vii) release all or substantially all of the Collateral from the Liens of the Security Documents or alter the relative priorities of the Obligations entitled to the Liens of the Security Documents (except in connection with securing additional Obligations equally and ratably with the other Obligations), in each case without the written consent of each Lender, or (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class; provided, further, that (1) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender, as the case may be, (2) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Lenders) or the Term Lenders (but not the Revolving Lenders) may be effected by an agreement or agreements in writing entered into by Borrower and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time, and (3) any waiver, amendment or modification prior to the earlier of (i) the date which is 30 days after the Closing Date and (ii) the date of the successful completion of the syndication of the Loans and Commitments (as determined by the Joint Lead Arrangers) may not be effected without the written consent of the Administrative Agent. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by Borrower, the Required Lenders and the Administrative Agent (and, if their rights or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (x) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (y) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. (c) If, in connection with any proposed change, waiver, discharge or termination of any of the provisions of this Agreement as contemplated by Section 11.02(b) (other than clause (iii) of such Section), the consent of the Supermajority Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then Borrower shall have the right to replace any of such non-consenting Lenders with one or more persons pursuant to Section 2.16 so long as at the time of such replacement each such new Lender consents to the proposed change, waiver, discharge or termination. -98- SECTION 11.03. EXPENSES; INDEMNITY. (a) The Loan Parties agree, jointly and severally, to pay, promptly upon demand: (i) all reasonable costs and expenses incurred by the Arranger, the Administrative Agent, the Collateral Agent, the Swingline Lender and the Issuing Bank, including the reasonable fees, charges and disbursements of Advisors for the Arranger, the Administrative Agent, the Collateral Agent, the Swingline Lender and the Issuing Bank, in connection with the syndication of the Loans and Commitments, the preparation, execution and delivery of the Loan Documents, the administration of the Loans and Commitments, the perfection and maintenance of the Liens securing the Collateral and any actual or proposed amendment, supplement or waiver of any of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated); (ii) all reasonable costs and expenses incurred by the Administrative Agent or the Collateral Agent, including the reasonable fees, charges and disbursements of Advisors for the Administrative Agent and the Collateral Agent, in connection with any action, suit or other proceeding affecting the Collateral or any part thereof, in which action, suit or proceeding the Administrative Agent or the Collateral Agent is made a party or participates or in which the right to use the Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Administrative Agent or the Collateral Agent to defend or uphold the Liens granted by the Security Documents (including any action, suit or proceeding to establish or uphold the compliance of the Collateral with any Requirements of Law); (iii) all reasonable costs and expenses incurred by the Arranger, the Administrative Agent, the Collateral Agent, the Swingline Lender, the Issuing Bank or any Lender, including the reasonable fees, charges and disbursements of Advisors for the Arranger, the Administrative Agent, the Collateral Agent, the Swingline Lender, the Issuing Bank or any Lender, incurred in connection with the enforcement or protection of its rights under the Loan Documents, including its rights under this Section 11.03(a), or in connection with the Loans made or Letters of Credit issued hereunder and the collection of the Obligations, including all such costs and expenses incurred during any workout, restructuring or negotiations in respect of the Obligations; and (iv) all documentary and similar taxes and charges in respect of the Loan Documents. For purposes of this Section 11.03(a), "ADVISORS" shall mean legal counsel (including local counsel), auditors, accountants, consultants, appraisers or other advisors; provided that (x) in the case of clause (i), the engagement of any Advisors other than legal counsel (including local counsel) shall be subject to approval by Borrower (which approval shall not be unreasonably withheld) and (y) in the case of clause (iii), the engagement of any Advisors other than one firm of legal counsel by any Lender shall be subject to approval by the Administrative Agent. (b) The Credit Parties agree, jointly and severally, to indemnify the Agents, each Lender, the Issuing Bank and the Swingline Lender, each Affiliate of any of the foregoing persons and each of their respective partners, controlling persons, directors, officers, trustees, employees and agents (each such person being called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, all reasonable out-of-pocket costs and any and all losses, claims, damages, liabilities, penalties, judgments, suits and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution, delivery, performance, administration or enforcement of the Loan Documents, (ii) any actual or proposed use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or -99- (iv) any actual or alleged presence or Release or threatened Release of Hazardous Materials, on, under or from any property owned, leased or operated by any Group Company, or any Environmental Claim related in any way to any Group Company; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) The provisions of this Section 11.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans or other Obligations, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Agents, the Issuing Bank, the Swingline Lender or any Lender. All amounts due under this Section 11.03 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested. (d) To the extent that Borrower fails to promptly pay any amount required to be paid by it to the Agents, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Agents, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against any of the Agents, the Issuing Bank or the Swingline Lender in its capacity as such provided further, however, that to the extent any Issuing Bank or Swingline Lender is entitled to indemnification under this Section 11.03, to the extent such indemnification relates solely to such Issuing Bank's or such Swingline Lender's acting in such capacity the indemnification provided for in this Section 11.03 will be the obligation solely of the Revolving Lenders. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the total Revolving Exposure, outstanding Term Loans and unused Commitments at the time. SECTION 11.04. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that no Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and any attempted assignment or transfer by any Credit Party without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Affiliates of each of the Agents, the Issuing Bank, the Swingline Lender and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender shall have the right at any time to assign to one or more banks, insurance companies, investment companies or funds or other institutions (other than any Group Company or any Affiliate thereof) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or a Lender Affiliate, each of Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender, an Affiliate of a -100- Lender or a Lender Affiliate, any assignment made in connection with the primary syndication of the Commitment and Loans by the Joint Lead Arrangers or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) in the case of Revolving Commitments and Revolving Loans, $1.0 million, and (y) in the case of Term Loan Commitments and Term Loans, $1.0 million unless each of Borrower and the Administrative Agent otherwise consent (provided that substantially contemporaneous assignments to an assignee and one or more of its Lender Affiliates shall be aggregated for purposes of such minimum assignment amounts), (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (except that such fee will not be payable with respect to an assignment to a Lender or a Lender Affiliate), and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided, further, that any consent of Borrower otherwise required under this paragraph shall not be required (1) if an Event of Default under Article VIII has occurred and is continuing or (2) prior to the earlier of (x) the date which is 30 days after the Closing Date and (y) date on which a successful syndication of the Loans and Commitments shall have been declared by the Joint Lead Arrangers; provided, however, that in the case of clause (2), Borrower shall have the consultation rights with respect to syndication of the Loans as set forth in the Commitment Letter. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement (provided that any liability of Borrower to such assignee under Section 2.12, 2.13 or 2.15 shall be limited to the amount, if any, that would have been payable thereunder by Borrower in the absence of such assignment, except to the extent any such amounts are attributable to a Change in Law occurring after the date of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.15 and 11.03). (c) the Administrative Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "REGISTER"). The entries in the Register shall be conclusive in the absence of manifest error, and Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower, the Issuing Bank, the Collateral Agent, the Swingline Lender and any Lender (with respect to its own interest only), at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement -101- unless (i) it has been recorded in the Register as provided in this paragraph or (ii) the original Note evidencing the assigned Loan (or portion thereof), if any, is returned to the Borrower marked "cancelled" and one or more new Notes are issued to the assignee, if requested by the assignee and the assigning Lender, if necessary. (e) Any Lender shall have the right at any time, without the consent of Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, to sell participations to one or more banks or other entities (a "PARTICIPANT") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clause (i), (ii), or (iii) of the first proviso to Section 11.02(b) that affects such Participant. Subject to paragraph (f) of this Section, Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender, provided that such Participant agrees to be subject to Section 2.14(c) as though it were a Lender. Each Lender shall, acting for this purpose as an agent of the Borrower, maintain at one of its offices a register for the recordation of the names and addresses of its Participants, and the amount and terms of its participations, provided that no Lender shall be required to disclose or share the information contained in such register with the Borrower or any other party, except as required by applicable law. (f) A Participant shall not be entitled to receive any greater payment under Section 2.12, 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.15(e) and (f) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of or notice to the Borrower or Administrative Agent, collaterally assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities. SECTION 11.05. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Credit Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and de- -102- livery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agents, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12, 2.14, 2.15 and 11.03 and Article X shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the other Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 11.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and the Fee Letter constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 11.07. SEVERABILITY. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 11.08. RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of Borrower against any of and all the obligations of Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 11.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each Credit Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevoca- -103- bly and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Credit Party or its properties in the courts of any jurisdiction. (c) Each Credit Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 11.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable law. SECTION 11.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 11.11. HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 11.12. CONFIDENTIALITY. Each of the Agents, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to such Agent's and such Lender's Affiliates and their directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (ii) to the extent requested by any regulatory authority or any quasi-regulatory authority (including the National Association of Insurance Commissioners), (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or -104- (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Borrower and its obligations, (vii) with the written consent of Borrower, (viii) to the extent such Information (A) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section or (B) becomes available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than Borrower or any Subsidiary or (ix) to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's advisor (so long as such contractual counterparty or advisor to such contractual counterparty agrees to be bound by the provisions of this Section 11.12). For the purposes of this Section, "INFORMATION" means all information received from any Group Company relating to any Group Company or its business that is clearly identified at the time of delivery as confidential, other than any such information that is available to the any Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by any Group Company. Any person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord to its own confidential information. SECTION 11.13. INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "CHARGES"), shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 11.14. LENDER ADDENDUM. Each Lender to become a party to this Agreement on the date hereof shall do so by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the Borrower and the Administrative Agent. SECTION 11.15. ADMINISTRATIVE AGENT CONSENT TO DEFEASANCE. Pursuant to Section 8.04(a) of the Indenture, dated as of August 11, 1995, as amended, with respect to the Public Debt Securities (the "INDENTURE") and in connection with the Defeasance Activities, the Administrative Agent hereby consents to a covenant defeasance by Borrower pursuant to Article 8 of the Indenture. [Signature Pages Follow] -105- S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. COMMUNICATIONS & POWER INDUSTRIES, INC., as Borrower By: _____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION, as a Guarantor By: _____________________________________ Name: Title: CPI SUBSIDIARY HOLDINGS INC., as a Guarantor By: _____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES INTERNATIONAL INC., as a Guarantor By: _____________________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES ASIA INC., as a Guarantor By: _____________________________________ Name: Title: CPI ACQUISITION CORP., as a Guarantor Communications & POWER Industries, Inc., Credit Agreement S-2 By: _____________________________________ Name: Title: UBS SECURITIES LLC, as a Joint Lead Arranger By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: UBS AG, STAMFORD BRANCH, as Administrative Agent, Collateral Agent and Issuing Bank By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: UBS LOAN FINANCE LLC, as Swingline Lender By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: Communications & POWER Industries, Inc., Credit Agreement S-3 BEAR, STEARNS & CO. INC., as a Joint Lead Arranger By: _____________________________________ Name: Title: BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent By: _____________________________________ Name: Title: WACHOVIA CAPITAL MARKETS, LLC, as Co-arranger By: _____________________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION, as Documentation Agent By: _____________________________________ Name: Title: Communications & POWER Industries, Inc., Credit Agreement ANNEX 1 AMORTIZATION TABLE
TERM LOAN DATE AMOUNT - --------------------------------------------------------------------------- June 30, 2004 $ 225,000 - --------------------------------------------------------------------------- September 30, 2004 $ 225,000 - --------------------------------------------------------------------------- December 31, 2004 $ 225,000 - --------------------------------------------------------------------------- March 31, 2005 $ 225,000 - --------------------------------------------------------------------------- June 30, 2005 $ 225,000 - --------------------------------------------------------------------------- September 30, 2005 $ 225,000 - --------------------------------------------------------------------------- December 31, 2005 $ 225,000 - --------------------------------------------------------------------------- March 31, 2006 $ 225,000 - --------------------------------------------------------------------------- June 30, 2006 $ 225,000 - --------------------------------------------------------------------------- September 30, 2006 $ 225,000 - --------------------------------------------------------------------------- December 31, 2006 $ 225,000 - --------------------------------------------------------------------------- March 31, 2007 $ 225,000 - --------------------------------------------------------------------------- June 30, 2007 $ 225,000 - --------------------------------------------------------------------------- September 30, 2007 $ 225,000 - --------------------------------------------------------------------------- December 31, 2007 $ 225,000 - --------------------------------------------------------------------------- March 31, 2008 $ 225,000 - --------------------------------------------------------------------------- June 30, 2008 $ 225,000 - --------------------------------------------------------------------------- September 30, 2008 $ 225,000 - --------------------------------------------------------------------------- December 31, 2008 $ 225,000 - --------------------------------------------------------------------------- March 31, 2009 $ 225,000 - --------------------------------------------------------------------------- June 30, 2009 $ 225,000 - --------------------------------------------------------------------------- September 30, 2009 $21,318,750 - --------------------------------------------------------------------------- December 31, 2009 $21,318,750 - --------------------------------------------------------------------------- March 31, 2010 $21,318,750 - --------------------------------------------------------------------------- July 23, 2010 $21,318,750 - --------------------------------------------------------------------------- Total $90,000,000 - ---------------------------------------------------------------------------
EX-10.2 7 f96399exv10w2.txt EXHIBIT 10.2 EXHIBIT 10.2 ================================================================================ SECURITY AGREEMENT BY COMMUNICATIONS & POWER INDUSTRIES INC., AS PLEDGOR AND THE GUARANTORS PARTY HERETO AND UBS AG, STAMFORD BRANCH, AS COLLATERAL AGENT ---------------------- DATED AS OF JANUARY 23, 2004 ================================================================================ TABLE OF CONTENTS
Page ---- PREAMBLE............................................................................... 1 RECITALS............................................................................... 1 ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.01. Definitions.............................................................. 2 Section 1.02. Interpretation........................................................... 7 Section 1.03. Perfection Certificate................................................... 7 ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS Section 2.01. Pledge................................................................... 7 Section 2.02. Secured Obligations...................................................... 9 Section 2.03. Security Interest........................................................ 9 ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF SECURITY AGREEMENT COLLATERAL Section 3.01. Delivery of Certificated Securities Collateral........................... 10 Section 3.02. Perfection of Uncertificated Securities Collateral....................... 10 Section 3.03. Financing Statements and Other Filings................................... 10 Section 3.04. Other Actions............................................................ 11 Section 3.05. Motor Vehicles........................................................... 16 Section 3.06. Supplements; Further Assurances.......................................... 16 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS Section 4.01. Title.................................................................... 17 Section 4.02. Perfected First Priority Liens........................................... 17 Section 4.03. Limitation on Liens...................................................... 18 Section 4.04. Other Financing Statements............................................... 18 Section 4.05. Chief Executive Office; Change of Name; Jurisdiction of Organization..... 18
-i-
Page ---- Section 4.06. Certain Provisions Concerning Securities Collateral...................... 19 Section 4.07. Certain Provisions Concerning Intellectual Property...................... 21 Section 4.08. Inspection and Verification.............................................. 23 Section 4.09. Payment of Taxes; Compliance with Laws; Contesting Liens; Claims......... 23 Section 4.10. Transfers and Other Liens................................................ 23 Section 4.11. Insurance................................................................ 23 Section 4.12. PPSA Acknowledgements.................................................... 24 ARTICLE V REMEDIES Section 5.01. Remedies................................................................. 24 Section 5.02. Notice of Sale........................................................... 26 Section 5.03. Waiver of Notice and Claims.............................................. 27 Section 5.04. Certain Sales of Security Agreement Collateral........................... 27 Section 5.05. No Waiver; Cumulative Remedies........................................... 28 Section 5.06. Certain Additional Actions Regarding Intellectual Property............... 28 ARTICLE VI MISCELLANEOUS Section 6.01. Concerning Collateral Agent.............................................. 28 Section 6.02. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact......................................................... 30 Section 6.03. Expenses................................................................. 30 Section 6.04. Continuing Security Interest; Assignment................................. 31 Section 6.05. Termination; Release..................................................... 31 Section 6.06. Modification in Writing.................................................. 31 Section 6.07. Notices.................................................................. 32 Section 6.08. Governing Law; Jurisdiction; Consent to Service of Process............... 32 Section 6.09. WAIVER OF JURY TRIAL..................................................... 33 Section 6.10. Severability of Provisions............................................... 33 Section 6.11. Execution in Counterparts................................................ 33 Section 6.12. Business Days............................................................ 33 Section 6.13. No Claims Against Collateral Agent....................................... 33 Section 6.14. No Release............................................................... 34 Section 6.15. Obligations Absolute..................................................... 34
-ii- SIGNATURES EXHIBIT 1 Form of Issuer Acknowledgment EXHIBIT 2 Form of Copyright Security Agreement EXHIBIT 3 Form of Patent Security Agreement EXHIBIT 4 Form of Trademark Security Agreement EXHIBIT 5 Form of Bailee Letter -iii- SECURITY AGREEMENT SECURITY AGREEMENT (the "AGREEMENT"), dated as of January 23, 2004, made by COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation having an office at 811 Hansen Way, Palo Alto, California, 94303, (the "BORROWER"), and EACH OF THE GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (collectively, the "GUARANTORS"), as pledgors, collateral assignors and debtors (Borrower, together with the Guarantors, in such capacities and together with any successors in such capacities, the "PLEDGORS," and each, a "PLEDGOR"), in favor of UBS AG, STAMFORD BRANCH, having an office at 677 Washington Boulevard, Stamford, Connecticut 06901, in its capacity as Collateral Agent for the lending institutions (the "LENDERS") from time to time party to the Credit Agreement (as hereinafter defined), as pledgee, collateral assignee and secured party (in such capacities and together with any successors in such capacities, the "COLLATERAL AGENT"). RECITALS WHEREAS, pursuant to that certain credit agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; all terms used but not defined herein shall have the meaning ascribed to such terms in the Credit Agreement), among Borrower, the Guarantors, the Lenders, UBS Securities LLC and Bear Stearns & Co., Inc., as Joint Lead Arrangers and bookrunners, UBS AG, Stamford Branch, as Administrative Agent and Collateral Agent, Bear Stearns Corporate Lending Inc., as Syndication Agent, Wachovia Bank National Association, as Documentation Agent and Wachovia Capital Markets, LLC as Co-Arranger the Lenders have agreed to make to or for the account of Borrower certain Loans and to issue certain Letters of Credit for the account of Borrower. WHEREAS, it is contemplated that one or more of the Pledgors may enter into one or more Hedging Agreements in respect of the Loans with one or more persons. WHEREAS, each Guarantor has, pursuant to the Credit Agreement, among other things, guaranteed (the "GUARANTEE") the obligations of Borrower under the Credit Agreement and the other Loan Documents. WHEREAS, each Guarantor will receive substantial benefits from the execution, delivery and performance of the Loan Documents and each is, therefore, willing to enter into this Agreement. WHEREAS, each Pledgor is or will be the legal and/or beneficial owner of the rights in the Collateral to be pledged by it hereunder. -2- WHEREAS, it is a condition to the obligations of the Lenders to make the Loans under the Credit Agreement and a condition to any Lender issuing Letters of Credit under the Credit Agreement or entering into any Hedging Agreement in respect of the Loans that each Pledgor execute and deliver the applicable Loan Documents, including this Agreement. WHEREAS, this Agreement is given by each Pledgor in favor of the Collateral Agent for the benefit of the Secured Parties to secure the payment and performance of all of the Secured Obligations (as hereinafter defined). AGREEMENT NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors and the Collateral Agent hereby agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.01. Definitions. (a) Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. (b) The following capitalized terms used herein that are defined in the UCC have the meanings assigned to the uncapitalized definitions thereof in the UCC: "ACCOUNT"; "BANK"; "CERTIFICATES OF TITLE"; "CHATTEL PAPER"; "COMMERCIAL TORT CLAIMS"; "COMMODITY ACCOUNT"; "COMMODITY CONTRACT"; "COMMODITY INTERMEDIARY"; "DOCUMENTS"; "ELECTRONIC CHATTEL PAPER"; "ENTITLEMENT HOLDER"; "ENTITLEMENT ORDER"; "EQUIPMENT" (provided that Equipment shall include all Fixtures); "FINANCIAL ASSET"; "FIXTURES"; "GENERAL INTANGIBLES"; "GOODS"; "INVENTORY"; "LETTER-OF-CREDIT RIGHTS"; "LETTERS OF CREDIT"; "PROCEEDS"; "SECURITIES ACCOUNT"; "SECURITIES INTERMEDIARY"; and "TANGIBLE CHATTEL PAPER". (c) The following terms shall have the following meanings: "AGREEMENT" shall mean this Agreement, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof. -3- "BAILEE LETTER" shall be an agreement in form substantially similar to Exhibit 5 annexed hereto. "BORROWER" shall have the meaning assigned to such term in the Preamble hereto. "CLAIMS" shall mean any and all property and other taxes, assessments and special assessments, levies, fees and all governmental charges imposed upon or assessed against, and all claims (including landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Security Agreement Collateral. "COLLATERAL ACCOUNT" shall mean a collateral account or sub-account established and maintained by the Collateral Agent (or a Lender that agrees to be an administrative sub-agent for the Collateral Agent) in its name as Collateral Agent for the Secured Parties in accordance with the provisions of Section 9.01 of the Credit Agreement and all property from time to time on deposit in the Collateral Account including, without limitation, all Cash Equivalents and all certificates and instruments from time to time representing or evidencing such investments. "COLLATERAL AGENT" shall have the meaning assigned to such term in the Preamble hereto. "CONTROL AGREEMENT" shall mean an agreement in form and substance reasonably acceptable to Collateral Agent sufficient to establish control, in favor of the Collateral Agent for the benefit of the Secured Parties, over any applicable Investment Property (including, without limitation any Securities Account or Commodity Account) or Deposit Account. "COPYRIGHTS" shall mean, collectively, with respect to each Pledgor, all copyrights (whether statutory or common law and whether established or registered in the United States or any other country) now owned or hereafter created or acquired by or assigned to such Pledgor, whether published or unpublished, and all copyright registrations and applications made by such Pledgor, including, without limitation, the copyrights, registrations and applications listed in Schedule 13(b) of the Perfection Certificate, together with any and all (a) rights and privileges arising under applicable law with respect to such Pledgor's use of any copyrights, (b) reissues, renewals, continuations and extensions thereof, (c) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (d) rights corresponding thereto throughout the world and (e) rights to sue for past, present or future infringements thereof. "COPYRIGHT SECURITY AGREEMENT" shall mean an agreement substantially in the form annexed hereto as Exhibit 2. -4- "CREDIT AGREEMENT" shall have the meaning assigned to such term in the Recitals hereto. "CREDIT AGREEMENT L/CS" shall mean "Letter of Credit" as such term is defined in the Credit Agreement "DEPOSIT ACCOUNT" shall mean, collectively, with respect to each Pledgor, (a) all "deposit accounts" as such term is defined in the UCC and in any event shall include, without limitation, the LC Sub-Account and the Collateral Account and all accounts and sub-accounts relating to any of the foregoing accounts and (b) all cash, funds, checks, notes and any instruments from time to time on deposit in any of the accounts or sub-accounts described in clause (a) of this definition. "DISTRIBUTIONS" shall mean, collectively, with respect to each Pledgor, all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds, including as a result of a split, revision, reclassification or other like change of the Pledged Equity Interests, from time to time received, receivable or otherwise distributed to such Pledgor in respect of or in exchange for any or all of the Pledged Equity Interests or Pledged Notes. "GUARANTEE" shall have the meaning assigned to such term in the Recitals hereto. "GUARANTORS" shall have the meaning assigned to such term in the Preamble hereto, but shall not include any Foreign Subsidiaries. "INSTRUMENTS" shall mean, collectively, with respect to each Pledgor, all "instruments," as such term is defined in Article 9, rather than Article 3, of the UCC to the extent such instruments evidence any amounts payable under or in connection with any item of Security Agreement Collateral or Mortgaged Real Property or such instruments constitute Proceeds of any item of Security Agreement Collateral or Mortgaged Real Property, and in any event shall include, without limitation, all promissory notes, drafts, bills of exchange or acceptances. "INTELLECTUAL PROPERTY" shall mean, collectively, with respect to each Pledgor, (a) all Patents, (b) all Trademarks, (c) all Copyrights, (d) all Licenses and (e) all know-how, trade secrets, customer and supplier lists, proprietary information, inventions, methods, procedures, formulae, descriptions, compositions, technical data, drawings, specifications, name plates, catalogs, confidential information and the right to limit the use or disclosure thereof by any person or entity, pricing and cost information and business and marketing plans and proposals. "ISSUERS" shall mean the collective reference to each issuer of any Pledged Equity Interests. -5- "INVESTMENT PROPERTY" shall mean, collectively, with respect to each Pledgor, all "investment property" as such term is defined in Article 9 of the UCC, provided that investment property shall not include any Equity Interests held by the Borrower for the benefit of the relevant beneficial owners of any non-qualified deferred compensation account. "JOINDER AGREEMENT" shall mean the form of joinder agreement attached to the Credit Agreement as Exhibit F. "LENDERS" shall have the meaning assigned to such term in the Preamble hereto. "LICENSES" shall mean, collectively, with respect to each Pledgor, all license and distribution agreements and covenants not to sue with any other party with respect to any Patent, Trademark or Copyright, whether such Pledgor is a licensor or licensee, distributor or distributee under any such license or distribution agreement, including the license and distribution agreements listed in Schedules 13(a) and 13(b) of the Perfection Certificate, together with any and all (a) renewals, extensions, supplements and continuations thereof, (b) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements or violations thereof, (c) rights to sue for past, present and future infringements or violations thereof and (d) any other rights to use, exploit or practice any or all of the Patents, Trademarks or Copyrights. "OPERATIVE AGREEMENT" shall mean (a) in the case of any limited liability company or partnership or other non-corporate entity, any membership or partnership agreement or other organizational agreement or document thereof and (b) in the case of any corporation, any charter or certificate of incorporation and by-laws thereof. "PATENT SECURITY AGREEMENT" shall mean an agreement substantially in the form annexed hereto as Exhibit 3. "PATENTS" shall mean, collectively, with respect to each Pledgor, all patents issued or assigned to and all patent applications and registrations made by such Pledgor (whether established or registered or recorded in the United States or any other country), including, without limitation, the patents, patent applications, registrations and recordings listed in Schedule 13(a) of the Perfection Certificate, together with any and all (a) rights and privileges arising under applicable law with respect to such Pledgor's use of any patents, (b) inventions and improvements described and claimed therein, (c) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (d) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements thereof, (e) rights corresponding thereto throughout the world and (f) rights to sue for past, present or future infringements thereof. -6- "PLEDGED EQUITY INTERESTS" shall mean with respect to each Pledgor, (a) the issued and outstanding Equity Interests of each Issuer listed on Schedule 10 of the Perfection Certificate and (b) all Distributions (other than cash Distributions) from time to time received, receivable or otherwise distributed to such Pledgor in respect or in exchange for any or all of the Pledged Equity Interests; provided, however, that such Pledged Equity Interests shall not include shares representing more than 65% of the voting power of all classes of Equity Interests entitled to vote of any Subsidiary which is a controlled foreign corporation (as defined in Section 957(a) of the Tax Code) and, in any event, such pledgor shall not be required to pledge the shares of stock of any Subsidiary otherwise required to be pledged pursuant to this Agreement to the extent that such pledge would constitute an investment of earnings in United States property under Section 956 (or a successor provision) of the Tax Code, which investment would trigger an increase in the gross income of a United States shareholder of such Pledgor pursuant to Section 951 (or a successor provision) of the Tax Code. "PLEDGED NOTES" shall mean, with respect to each Pledgor, all intercompany notes described in Schedule 11 to the Perfection Certificate (and each other intercompany note hereafter acquired by such Pledgor) and all amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof to the extent permitted pursuant to the terms hereof. "PLEDGOR" shall have the meaning assigned to such term in the Preamble hereto. "PPSA" shall mean the Personal Property Security Act (Ontario) as amended from time to time. "SECURED OBLIGATIONS" shall mean all Obligations whether (a) such Obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, reduced to judgment or not, liquidated or unliquidated, disputed or undisputed, legal or equitable, due or to become due whether at stated maturity, by acceleration or otherwise, (b) discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or similar proceeding with respect to any Credit Party or any other person and/or (c) now existing or hereafter arising. "SECURITIES COLLATERAL" shall mean, collectively, the Pledged Equity Interests, the Pledged Notes and the Distributions. "SECURITY AGREEMENT COLLATERAL" shall have the meaning assigned to such term in Section 2.01 hereof. "TRADEMARK SECURITY AGREEMENT" shall mean an agreement substantially in the form annexed hereto as Exhibit 4. -7- "TRADEMARKS" shall mean, collectively, with respect to each Pledgor, all trademarks (including service marks), slogans, logos, certification marks, trade dress, corporate names and trade names, whether registered or unregistered, owned by or assigned to such Pledgor and all registrations and applications for the foregoing (whether statutory or common law and whether established or registered in the United States or any other country) including, without limitation, the registrations and applications listed in Schedule 13(a) of the Perfection Certificate, together with any and all (a) rights and privileges arising under applicable law with respect to such Pledgor's use of any trademarks, (b) reissues, continuations, extensions and renewals thereof, (c) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present or future infringements thereof, (d) rights corresponding thereto throughout the world, (e) rights to sue for past, present and future infringements thereof and (f) all goodwill of such Pledgor's business symbolized thereby. "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Security Agreement Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" shall also mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.02. INTERPRETATION. The rules of interpretation specified in the Credit Agreement shall be applicable to this Agreement. If any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall govern. SECTION 1.03. PERFECTION CERTIFICATE. The Collateral Agent and each Credit Party agree that the Perfection Certificate and all descriptions of Collateral, schedules, amendments and supplements thereto are and shall at all times remain a part of this Agreement. ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS SECTION 2.01. PLEDGE. As collateral security for the payment and performance in full of all the Secured Obligations, each Pledgor hereby pledges, collaterally assigns and grants to the Collateral Agent for the benefit of the Secured Parties, a security interest in and to and pledge of all of, subject only to Permitted Liens, the right, title and interest of such Pledgor in, to and under the following property, wherever located, whether now existing or hereafter arising or acquired from time to time (collectively, the "Security Agreement Collateral"): -8- (a) Accounts; (b) Chattel Paper; (c) Commercial Tort Claims; (d) Deposit Accounts; (e) Distributions; (f) Documents; (g) Equipment; (h) General Intangibles; (i) Goods; (j) Instruments; (k) Intellectual Property; (l) Inventory; (m) Investment Property and Financial Assets; (n) Letters of Credit and Letter-of-Credit Rights; (o) Pledged Equity Interests; (p) Pledged Notes; (q) all books and records relating to the Security Agreement Collateral; (r) to the extent not covered by clauses (a) through (q) of this sentence, all other personal property and any and all Proceeds of any and all of the foregoing; provided, however, that (i) any agreement to which any Pledgor is a party shall be excluded from the security interest granted by such Pledgor pursuant to this Section 2.01 to the extent that the collateral assignment thereof or the creation of a security interest therein would constitute a breach of the terms of such agreement, or would permit any party to such agreement to terminate such agreement, in each case as entered into by the applicable Pledgor, (ii) any of the agreements excluded in accordance with the foregoing clause (i) shall cease to be so excluded if, at such -9- time, (A) the prohibition of collateral assignment or creation of a security interest in such agreement is no longer in effect, or is rendered ineffective as a matter of law, or (B) the applicable Pledgor has obtained all of the consents of the other parties to such agreement necessary for the collateral assignment of, or creation of a security interest in, such agreement and (iii) in no event shall clause (i) of this proviso be applicable to the Acquisition Documents. Notwithstanding the foregoing provisions of this Section 2.01, the Security Agreement Collateral shall not include any property or asset hereafter acquired by Pledgor which is subject to a Lien permitted to be incurred pursuant to Section 6.02(g) of the Credit Agreement solely to the extent that the documents evidencing such Lien prohibit the grant of a security interest on or Lien on such property or asset; provided, however, that at such time as such property or asset is no longer subject to such Lien or such prohibition, such property or asset shall (without any act or delivery by any person) constitute Security Agreement Collateral hereunder. SECTION 2.02. SECURED OBLIGATIONS. This Agreement secures, and the Security Agreement Collateral is collateral security for, the payment in full when due of the Secured Obligations. SECTION 2.03. SECURITY INTEREST. (a) Each Pledgor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction, or the PPSA, as applicable, for the filing of any financing statement or amendment, including, without limitation, (i) whether the Pledgor is an organization, the type of organization and any organizational identification number issued to the Pledgor, (ii) in the case of any financing statements, a description of the Security Agreement Collateral as "all assets which the Pledgor now owns or hereinafter acquires rights," and (iii) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Security Agreement Collateral relates. The Pledgor agrees to provide such information to the Collateral Agent promptly upon request. (b) Each Pledgor hereby ratifies its authorization for the Collateral Agent to file in Ontario and in any relevant jurisdiction in the United States any initial financing statements, financing change statements or amendments thereto if filed prior to the date hereof. (c) The Collateral Agent is further authorized to file filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country, provided that no such filing in any other country may be made unless the value of the Intellectual Property of all Pledgors in such country is materially greater than the cost of such filings) including, without limitation, this Agreement, the Copyright Security Agreement, the Patent Security and the Trademark Security Agreement, or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by each Pledgor hereunder, without the signature of any Pledgor if permitted by -10- law, and naming any Pledgor or the Pledgors, as debtors, and the Collateral Agent for the benefit of the Secured Parties, as secured party. ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF SECURITY AGREEMENT COLLATERAL SECTION 3.01. DELIVERY OF CERTIFICATED SECURITIES COLLATERAL. All certificates, agreements or instruments representing or evidencing the Securities Collateral, to the extent not previously delivered to the Collateral Agent, shall promptly upon receipt thereof by any Pledgor be delivered to and held by or on behalf of the Collateral Agent pursuant hereto. All certificated Securities Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Collateral Agent. The Collateral Agent shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Collateral Agent or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder. The Collateral Agent shall provide prompt notice to the Pledgor of any action taken in the preceding sentence, provided that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. In addition, the Collateral Agent shall have the right at any time to exchange certificates representing or evidencing Securities Collateral for certificates of smaller or larger denominations. SECTION 3.02. PERFECTION OF UNCERTIFICATED SECURITIES COLLATERAL. If any of the Pledged Equity Interests are at any time not evidenced by certificates of ownership, then each applicable Pledgor shall take such action, as the Collateral Agent may request, to ensure the validity and perfection of such pledge to the reasonable satisfaction of the Collateral Agent (including, if requested by the Collateral Agent, causing the applicable Issuer to execute and deliver to the Collateral Agent an acknowledgment of the pledge of such Pledged Equity Interests substantially in the form of Exhibit 1 annexed hereto). SECTION 3.03. FINANCING STATEMENTS AND OTHER FILINGS. The only filings, registrations and recordings necessary and appropriate to create, preserve, protect, publish notice of and perfect the security interest granted by each Pledgor to the Collateral Agent (for the benefit of the Secured Parties) pursuant to this Agreement in respect of the Security Agreement Collateral to the extent a security interest can be perfected by filing under the UCC, the PPSA or with the United States Patent and Trademark Office or United States Copyright Office (or any successor office) are listed in Schedule 6 of the Perfection Certificate. Each Pledgor agrees that -11- at any time and from time to time, at the sole cost and expense of the Pledgors, it will execute and file and refile, or permit the Collateral Agent to file and refile, such financing statements, financing change statements, continuation statements and other documents (including, without limitation, this Agreement), in form reasonably acceptable to the Collateral Agent, in such offices (including, without limitation, the United States Patent and Trademark Office and the United States Copyright Office) as the Collateral Agent may in its reasonable judgment deem necessary or appropriate, wherever required by law in order to perfect, continue and maintain a valid, enforceable, first priority security interest in the Security Agreement Collateral as provided herein to the extent a security interest can be perfected by filing under the UCC (or any foreign equivalent, including, without limitation, the PPSA) or with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) and to preserve the other rights and interests granted to the Collateral Agent hereunder, as against third parties, with respect to any Security Agreement Collateral. Each Pledgor hereby authorizes the Collateral Agent to file any such financing, financing change or continuation statement or other document without the signature of such Pledgor where permitted by law. SECTION 3.04. OTHER ACTIONS. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Collateral Agent's security interest in the Security Agreement Collateral, each Pledgor represents as follows and agrees, in each case at such Pledgor's own expense, to take the following actions with respect to the following Security Agreement Collateral: (a) INSTRUMENTS AND TANGIBLE CHATTEL PAPER. If any amount then payable under or in connection with any of the Pledged Collateral shall be evidenced by any Instrument or Tangible Chattel Paper, and such amount, together with all amounts payable evidenced by any Instrument or Tangible Chattel Paper not previously delivered to the Collateral Agent exceeds $600,000 in the aggregate for all Pledgors, the Pledgor acquiring such Instrument or Tangible Chattel Paper shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably specify. (b) DEPOSIT ACCOUNTS. For each Deposit Account that any Pledgor at any time opens or maintains, such Pledgor shall promptly notify the Collateral Agent thereof and either (A) pursuant to a Control Agreement cause the applicable depository Bank to agree to comply at any time with instructions from the Collateral Agent to such Bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Pledgor or any other person, or (B) arrange for the Collateral Agent to become the customer of the applicable depository Bank with respect to the Deposit Account, with the Pledgor being permitted, only with the consent of the Col- -12- lateral Agent, to exercise rights to withdraw funds from such Deposit Account pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent. As of the date hereof, such Pledgor maintains no Deposit Accounts other than (A) those set forth in Schedule 15 to the Perfection Certificate or (B) those for which the applicable Pledgor has provided notice thereof to Collateral Agent pursuant to the preceding sentence. Each such Deposit Account is subject to a Control Agreement which is in full force and effect. The Collateral Agent agrees with each Pledgor that (x) the Collateral Agent shall not give any such instructions directing the disposition of funds, issue a notice of sole control or any similar instructions or withhold any withdrawal rights from any Pledgor, unless an Event of Default has occurred and is continuing or after giving effect to any withdrawal that would occur and (y) the Collateral Agent shall promptly deliver notice to the applicable depository Bank rescinding any notice of sole control or any similar instructions at such time as an Event of Default is no longer continuing. The provisions of this Section 3.04(b) shall not apply to the Collateral Account or to any other Deposit Accounts for which the Collateral Agent is the depository or as set forth in clause (ii) below. The Collateral Agent shall deliver a copy of any notice of sole control or similar instructions to the applicable Pledgor simultaneously with the delivery of such notice to the applicable depository Bank; provided that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. (ii) Each Pledgor uses foreign Deposit Accounts for substantially the purposes disclosed, as of the date hereof, to the Collateral Agent or as otherwise agreed with the Collateral Agent. With respect to such foreign Deposit Accounts, the Pledgors shall not be subject to the provisions of Section 3.04(b)(i) hereof. In addition, the provisions of Section 3.04(b)(i) shall not apply to (A) Borrower's Deposit Account at Beverly National Bank listed on Schedule 15 to the Perfection Certificate to the extent that the total funds held in such account is less than $100,000 at any time (B) any Deposit Account governed by an agreement which requires such account to sustain a zero balance at the end of each day and (C) any Deposit Account which does not hold any property of any Pledgor. (C) INVESTMENT PROPERTY. (i) If any Pledgor shall at any time hold or acquire any certificated securities constituting Investment Property, such Pledgor shall promptly endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank, all in form and substance reasonably satisfactory to the Collateral Agent. If any securities now or hereafter acquired by any Pledgor constituting Investment Property are uncertificated and are issued to such Pledgor or its nominee directly by the issuer thereof, such Pledgor shall immediately notify the Collateral Agent thereof and such Pledgor shall either (A) pursuant to a Control Agreement cause the issuer to agree to comply with instructions from the Collateral -13- Agent as to such securities, without further consent of any Pledgor, such nominee or any other person, or (B) arrange for the Collateral Agent to become the registered owner of the securities. If any securities constituting Investment Property, whether certificated or uncertificated, or other Investment Property now or hereafter acquired by any Pledgor is held by such Pledgor or its nominee through a Securities Intermediary or Commodity Intermediary, such Pledgor shall promptly notify the Collateral Agent thereof and, either (A) pursuant to a Control Agreement cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders or other instructions from the Collateral Agent to such Securities Intermediary as to such securities or other Investment Property, or to apply any value distributed on account of any Commodity Contract as directed by the Collateral Agent to such Commodity Intermediary, as the case may be, in each case without further consent of any Pledgor, such nominee or any other person, or (B) in the case of Financial Assets constituting Investment Property or other Investment Property held through a Securities Intermediary, arrange for the Collateral Agent to become the Entitlement Holder with respect to such Investment Property, with the Pledgor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property pursuant to an agreement in form and substance satisfactory to the Collateral Agent. As of the date hereof, such Pledgor maintains no Securities Accounts or Commodity Accounts with any Securities Intermediary or Commodity Intermediary other than (i) as set forth in Schedule 15 to the Perfection Certificate or (ii) those for which the applicable Pledgor has provided notice thereof to Collateral Agent pursuant to the preceding sentence. Each such Securities Account or Commodities Account is subject to a Control Agreement which is in full force and effect. The Collateral Agent agrees with each of the Pledgors that (x) the Collateral Agent shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, shall not issue a notice of sole control or any similar instructions and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Pledgor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur and (y) the Collateral Agent shall promptly deliver notice to the applicable Securities Intermediary or Commodities Intermediary rescinding any notice of sole control or any similar instructions at such time as an Event of Default is no longer continuing. The provisions of this Section 3.04(c) shall not apply to any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary. The Collateral Agent shall deliver a copy of any notice of sole control or any similar instructions to the applicable Pledgor simultaneously with the delivery of such notice to the applicable Securities Intermediary or Commodity Intermediary; provided that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. Notwithstanding the foregoing, the provisions set forth in this Section 3.04(c)(i), shall not apply to any Investment Property (x) held by any Pledgor for less than two days solely in connection with short-term repurchase agreements and (y) -14- held by any Pledgor for less than ninety one days solely in connection with short-term repurchase agreements, provided that the aggregate value of such Investment Property described in this clause (y) is less then $2,500,000 in the aggregate for all Pledgors. (ii) As between the Collateral Agent and the Pledgors, the Pledgors shall bear the investment risk with respect to the Investment Property, Pledged Notes and Pledged Equity Interests, and the risk of loss of, damage to, or the destruction of the Investment Property, Pledged Notes, and Pledged Equity Interests whether in the possession of, or maintained as a security entitlement by, or subject to the control of, the Collateral Agent (unless due to the gross negligence or willful misconduct of the Collateral Agent), a Securities Intermediary, Commodities Intermediary, the Pledgor or any other person; provided, however, that nothing contained in this Section 3.04(c) shall release or relieve any Securities Intermediary or Commodities Intermediary, of its duties and obligations to the Pledgors or any other person under any Control Agreement or under applicable law. Each Pledgor shall promptly pay all Claims and fees of whatever kind or nature with respect to the Investment Property pledged by it or this Agreement. In the event any Pledgor shall fail to make such payment contemplated in the immediately preceding sentence, the Collateral Agent may do so for the account of such Pledgor and the Pledgors shall promptly reimburse and indemnify the Collateral Agent from all costs and expenses incurred by the Collateral Agent under this Section 3.04(c) in accordance with Section 6.03 hereof. (d) ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If any amount payable under or in connection with any of the Security Agreement Collateral shall be evidenced by any Electronic Chattel Paper or any "transferable record," as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, the Pledgor acquiring such Electronic Chattel Paper or transferable record shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may reasonably request to vest in the Collateral Agent control under UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The requirement in the preceding sentence shall apply to the extent that such amount, together with all amounts payable evidenced by Electronic Chattel Paper or any transferable record in which the Collateral Agent has not been vested control within the meaning of the statutes described in this sentence exceeds $600,000 in the aggregate for all Pledgors. The Collateral Agent agrees with such Pledgor that the Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent's loss of control, for the Pledgor to -15- make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act of Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Pledgor with respect to such Electronic Chattel Paper or transferable record. (e) LETTER-OF-CREDIT RIGHTS. If any Pledgor is at any time a beneficiary under a Letter of Credit now or hereafter issued in favor of such Pledgor, such Pledgor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, such Pledgor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the Letter of Credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the Letter of Credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the Letter of Credit are to be applied as provided in the Credit Agreement. The actions in the preceding sentence shall be taken to the extent that (x) the amount under such Letter of Credit, together with all amounts under Letters of Credit for which the actions described above in clause (i) and (ii) have not been taken, exceeds $5,000,000 in the aggregate for all Pledgors or (y) the amount under such Letter of Credit exceeds $2,000,000. The provisions of this Section 3.04(e) shall not apply to Letters of Credit issued in favor of any Pledgor in connection with sales of goods to foreign jurisdictions in the ordinary course of such Pledgor's business. (f) COMMERCIAL TORT CLAIMS. If any Pledgor shall at any time hold or acquire a Commercial Tort Claim pursuant to which such Pledgor reasonably expects to recover more than $300,000 relating to any of the Security Agreement Collateral, the Pledgor shall promptly notify the Collateral Agent in writing signed by such Pledgor of the brief details thereof and grant to the Collateral Agent in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent. (g) BAILEE LETTERS. Each Pledgor shall use its commercially reasonable efforts to obtain as soon as practicable after the date hereof with respect to each location set forth on Schedule 2(e) to the Perfection Certificate a Bailee Letter, and use commercially reasonable efforts to obtain a Bailee Letter from all such bailees who from time to time have possession of the Pledged Collateral in the ordinary course of such Pledgor's business and if reasonably requested by the Collateral Agent. A Bailee Letter shall not be required if the value of the Pledged Collateral held by such bailee is less than $70,000, provided that the aggregate value of the Pledged Collateral held by all bailees who have not delivered a Bailee Letter is less than $500,000 in the aggregate. Notwithstanding the -16- foregoing, the provisions set forth in this Section 3.04(g) with respect to Bailee Letters, shall not apply to consignment Inventory held by customers of any Pledgor on a trial or sample basis in the ordinary course of such Pledgor's business. SECTION 3.05. MOTOR VEHICLES. Upon the request of the Collateral Agent, each Pledgor shall deliver to the Collateral Agent originals of the certificates of title or ownership for the motor vehicles owned by it with the Collateral Agent listed as lienholder therein, provided that the book value of such motor vehicles is at least $600,000 greater than the book value of such motor vehicles owned by all of the Pledgors as of the date hereof. SECTION 3.06. SUPPLEMENTS; FURTHER ASSURANCES. (a) The Pledgors shall cause each person which, from time to time, after the date hereof shall be required to pledge any assets to the Collateral Agent for the benefit of the Secured Parties pursuant to the provisions of the Credit Agreement, to execute and deliver to the Collateral Agent a Joinder Agreement and, upon such execution and delivery, such person shall constitute a "Guarantor" and a "Pledgor" for all purposes hereunder with the same force and effect as if originally named as a Guarantor and Pledgor herein. The execution and delivery of such joinder agreement shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor and Pledgor as a party to this Agreement. (b) Each Pledgor shall, upon obtaining any Pledged Equity Interests or Pledged Notes of any person, accept the same in trust for the benefit of the Collateral Agent and forthwith deliver to the Collateral Agent a Perfection Certificate Supplement, and the certificates and other documents required under this Article III in respect of the additional Pledged Equity Interests, Pledged Notes or other possessory Security Agreement Collateral which is to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Pledged Equity Interests or Pledged Notes. (c) Each Pledgor agrees to take such further actions, and to execute and deliver to the Collateral Agent such additional assignments, agreements, supplements, powers and instruments, as the Collateral Agent may in its reasonable judgment deem necessary or appropriate, wherever required by law, in order to perfect, preserve and protect the security interest in the Security Agreement Collateral as provided herein and the rights and interests granted to the Collateral Agent hereunder, to carry into effect the purposes hereof or better to assure and confirm unto the Collateral Agent or permit the Collateral Agent to exercise and enforce its rights, powers and remedies hereunder with respect to any Security Agreement Collateral. Without limiting the generality of the foregoing, each Pledgor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Collateral Agent from time to time upon reasonable request such lists, descriptions and designations of the Security Agreement Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, -17- invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, financing change statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments. If a Default has occurred and is continuing, the Collateral Agent may institute and maintain, in its own name or in the name of any Pledgor, such suits and proceedings as the Collateral Agent may be advised by counsel shall be necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Security Agreement Collateral. All of the foregoing shall be at the sole cost and expense of the Pledgors. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS Each Pledgor represents, warrants and covenants as follows: SECTION 4.01. TITLE. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to this Agreement and Permitted Liens, such Pledgor owns the rights in each item of Collateral pledged by it hereunder free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Collateral Agent pursuant to this Agreement or as are permitted by the Credit Agreement. SECTION 4.02. PERFECTED FIRST PRIORITY LIENS. The security interests granted pursuant to this Agreement (a) upon completion of the filings specified on Schedule 6 of the Perfection Certificate (which, in the case of all filings and other documents referred to on said Schedule, have been delivered to the Collateral Agent in completed form) and completion of the actions described in Article III hereof will constitute valid perfected security interests in all of the Security Agreement Collateral located either in the United States or Ontario to the extent a security interest can be perfected by filing under the UCC, the PPSA or with the United States Patent and Trademark Office or United States Copyright Office or by possession in favor of the Collateral Agent as collateral security for the Secured Obligations, enforceable in accordance with the terms hereof against all creditors of such Pledgor and any persons purporting to purchase any Collateral from such Pledgor subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and covenants of good faith and fair dealing, and (b) are prior to all other Liens on the Security Agreement Collateral in existence on the date hereof except for Permitted Liens which are permitted to be senior to the security interests granted pursuant to this Agreement by the Credit Agreement. -18- SECTION 4.03. LIMITATION ON LIENS. Such Pledgor is as of the date hereof, and, as to Security Agreement Collateral acquired by it from time to time after the date hereof, such Pledgor will be, the sole direct and beneficial owner of all rights in the Security Agreement Collateral pledged by it hereunder free from any Lien or other right, title or interest of any person other than Permitted Liens. Such Pledgor shall, at its own cost and expense, defend title to the Security Agreement Collateral pledged by it hereunder and the security interest therein and Lien thereon granted to the Collateral Agent and the priority thereof against all claims and demands of all persons, at its own cost and expense, at any time improperly claiming (except to the extent related to a Permitted Lien) any interest therein adverse to the Collateral Agent or any other Secured Party. SECTION 4.04. OTHER FINANCING STATEMENTS. There is no (nor will there be any) valid or effective financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Security Agreement Collateral other than financing statements relating to Permitted Liens. So long as any of the Secured Obligations remain unpaid, or the Commitments of the Lenders to make any Loan or to issue any Letter of Credit shall not have expired or been sooner terminated, no Pledgor shall execute, authorize or permit to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to any Security Agreement Collateral, except, in each case, financing statements filed or to be filed in respect of and covering the security interests granted by such Pledgor to the holder of Permitted Liens. SECTION 4.05. CHIEF EXECUTIVE OFFICE; CHANGE OF NAME; JURISDICTION OF ORGANIZATION. (a) The exact legal name, type of organization, jurisdiction of organization, Federal Taxpayer Identification Number, organizational identification number and chief executive office of such Pledgor is indicated next to its name in Schedule 1(a) of the Perfection Certificate. Such Pledgor shall not (a) change its corporate name, (b) establish any other location where Security Agreement Collateral is maintained, (c) change its identity or type of organization or corporate structure, (d) change its Federal Taxpayer Identification Number or organizational identification number (including, without limitation, by merging with or into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction) until (A) it shall have given the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such change and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (B) with respect to such change, such Pledgor shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the perfection and priority of the security interest of the Collateral Agent for the benefit of the Secured Parties in the Security Agreement Collateral intended to be granted hereby, including, without limitation, using commercially reasonable efforts to obtain access agreements or waivers of landlord's or warehousemen's liens with respect to such new location, if applicable. -19- Each Pledgor agrees to promptly provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the preceding sentence. (b) Each Pledgor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Security Agreement Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Pledgor is engaged, but in any event to include complete accounting records as required by the Credit Agreement, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing in summary form the type, amount and location of any and all Security Agreement Collateral. SECTION 4.06. CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL. (a) Each Pledgor has delivered to the Collateral Agent true, correct and complete copies of its Operative Agreements and the Operative Agreements of any Issuer in which such Pledgor owns an equity interest, except that the Operative Agreements for Communications & Power Industries Italia S.r.L., Communications & Power Industries Australia Pty Limited and Communications & Power Industries Europe Limited shall be delivered to the Collateral Agent within 45 days of the date hereof. All such Operative Agreements are in full force and effect, have not as of the date hereof been amended or modified except as permitted by the Credit Agreement. Each Pledgor shall deliver to the Collateral Agent a copy of any notice of default given or received by it under any such Operative Agreement within ten days after such Pledgor gives or receives such notice. (b) Such Pledgor is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any agreement to which such Pledgor is a party relating to the Pledged Equity Interests pledged by it, and such Pledgor is not in violation of any other provisions of any such agreement to which such Pledgor is a party, or otherwise in default or violation thereunder, except where such default or non-compliance, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Securities Collateral pledged by such Pledgor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Pledgor by any person with respect thereto, and as of the date hereof, there are no certificates, instruments, documents or other writings (other than the applicable Operative Agreements and certificates, if any, delivered to the Collateral Agent) which evidence any Pledged Equity Interests of such Pledgor. (c) So long as no Event of Default shall have occurred and be continuing and the Pledgors shall not have received written notice from the Collateral Agent stating its intention to exercise its rights under Section 4.06(d): (i) Each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any pur- -20- pose not inconsistent with the terms or purposes hereof or any other document evidencing the Secured Obligations; provided, however, that no Pledgor shall in any event exercise such rights in any manner which may have an adverse effect on the value of the Security Agreement Collateral or the Lien and security interest intended to be granted to the Collateral Agent hereunder. (ii) Each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien hereof, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Credit Agreement; provided, however, that any and all such Distributions consisting of rights or interests in the form of securities shall be forthwith delivered to the Collateral Agent to hold as Security Agreement Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Pledgor and be promptly delivered to the Collateral Agent as Security Agreement Collateral in the same form as so received (with any necessary endorsement). (iii) The Collateral Agent shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of any Pledgor and at the sole cost and expense of the Pledgors, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 4.06(c)(i) hereof and to receive the Distributions which it is authorized to receive and retain pursuant to Section 4.06(c)(ii) hereof. (d) Upon the occurrence and during the continuance of any Event of Default and receipt by the Pledgors of written notice from the Collateral Agent stating its intention to exercise its rights under this Section: (i) All rights of each Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 4.06(c)(i) hereof without any action or the giving of any notice shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights. (ii) All rights of each Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 4.06(c)(ii) hereof shall cease and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to receive and hold as Security Agreement Collateral such Distributions. -21- (e) Each Pledgor shall, at its sole cost and expense, from time to time execute and deliver to the Collateral Agent appropriate instruments as the Collateral Agent may request in order to permit the Collateral Agent to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 4.06(d)(i) hereof and to receive all Distributions which it may be entitled to receive under Section 4.06(d)(ii) hereof. (f) All Distributions which are received by any Pledgor contrary to the provisions of Section 4.06(d)(ii) hereof shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Pledgor and shall promptly be paid over to the Collateral Agent as Security Agreement Collateral in the same form as so received (with any necessary endorsement). SECTION 4.07. CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY. (a) Each Pledgor agrees that it will use commercially reasonable efforts to not, nor will it knowingly permit any of its licensees to, do any act, or omit to do any act, whereby any Patent that is in Borrower's reasonable judgment material to the conduct of the business of the Pledgors, taken as a whole, may become prematurely invalidated or dedicated to the public, and agrees that it shall continue to mark any material products, taken as a whole, covered by an issued Patent as required under applicable patent laws unless in the Borrower's reasonable judgment a failure to so mark such material products would not be material to the would not be material to the conduct of the Pledgor's business taken as a whole. (b) Each Pledgor will use its commercially reasonable efforts to, for each Trademark that is in Borrower's reasonable judgment material to the conduct of the business of the Pledgors, taken as a whole, and for which such Pledgor then intends to continue the use in its business (i) maintain such Trademark in full force free from any adjudication of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark sufficient to preclude an adjudication of abandonment, (iii) display such Trademark with notice of Federal or foreign registration to the extent required under applicable law and (iv) not knowingly use or knowingly permit its licensee's use of such Trademark in violation of any third party rights. (c) Each Pledgor will use its commercially reasonable efforts, for each work covered by a material Copyright that is in Borrower's reasonable judgment material to the conduct of the business of the Pledgors, taken as a whole, to use, distribute and/or display the work with appropriate copyright notice as required under applicable copyright laws. (d) Each Pledgor shall notify the Collateral Agent promptly if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of the business of the Pledgors, taken as a whole, may have become abandoned, cancelled, lost or dedicated to the public, or of any determination or development which would have a material adverse effect -22- on the business of the Pledgors, taken as a whole, regarding such Pledgor's ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same. (e) Each Pledgor will exercise its reasonable business judgment in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States, Canada or in any other country to the extent reasonably required by the Collateral Agent, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of the business of the Pledgors, taken as a whole, including when applicable or necessary in such Pledgor's reasonable business judgment timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if in Borrower's reasonable judgment consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties. (f) In the event that any Pledgor has reason to believe that any Security Agreement Collateral consisting of Intellectual Property material to the conduct of any Pledgor's business has been or is about to be materially infringed, misappropriated or diluted by a third party, such Pledgor promptly shall notify the Collateral Agent and shall, if in Borrower's reasonable judgment consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages and/or injunctive relief for such infringement, misappropriation or dilution, and take such other actions in Borrower's reasonable judgment as are appropriate under the circumstances. (g) Upon and during the continuance of an Event of Default and at the request of the Collateral Agent, each Pledgor shall use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each License to effect the assignment of all of such Pledgor's right, title and interest thereunder to the Security Agreement Collateral Agent or its designee. (h) As of the date hereof, all Intellectual Property owned by each Pledgor and registered with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) in the name of Varian Associates, Inc. is not material to the conduct of the business of the Pledgors, taken as a whole. To the extent that any such Intellectual Property becomes material to the conduct of the business of the Pledgors, taken as a whole, each Pledgor owning such Intellectual Property agrees to cause such Intellectual Property to be registered with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) in the name of such Pledgor and to notify the Collateral Agent of such registration. -23- SECTION 4.08. INSPECTION AND VERIFICATION. Each Pledgor will grant the Collateral Agent or any representative designated by the Collateral Agent the same access and inspection rights as granted to the Administrative Agent by the Companies pursuant to Section 5.07 of the Credit Agreement. For the avoidance of doubt, in respect of Accounts or Security Agreement Collateral in the possession of any third person, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent or any designated representative shall have the right to contact such account debtors or third persons in possession of such Security Agreement Collateral for verification purposes; provided that Borrower shall have received prior notice thereof. The Collateral Agent (i) shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party and (ii) shall share any information it gains from such inspection or verification with Borrower, upon written request therefor. SECTION 4.09. PAYMENT OF TAXES; COMPLIANCE WITH LAWS; CONTESTING LIENS; CLAIMS. Each Pledgor represents and warrants that all Claims imposed upon or assessed against the Security Agreement Collateral have been paid and discharged except to the extent such Claims constitute a Permitted Lien or a Lien not yet due and payable. Notwithstanding the foregoing, each Pledgor may at its own expense contest the validity, amount or applicability of any Claims so long as the contest thereof shall satisfy the Contested Collateral Lien Conditions. Notwithstanding the foregoing provisions of this Section 4.09, no contest of any such obligation may be pursued by such Pledgor if such contest would expose the Collateral Agent or any other Secured Party to any possible criminal liability. SECTION 4.10. TRANSFERS AND OTHER LIENS. No Pledgor shall sell, convey, assign or otherwise dispose of, or grant any option with respect to, any of the Security Agreement Collateral pledged by it hereunder except as permitted by the Credit Agreement. No Pledgor shall make or permit to be made an assignment for security, pledge or hypothecation of the Security Agreement Collateral or shall grant any other Lien in respect of the Security Agreement Collateral, except as permitted by Section 6.02 of the Credit Agreement. SECTION 4.11. INSURANCE. Each Pledgor, at its own expense, shall maintain or cause to be maintained, insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.04 of the Credit Agreement. Each Pledgor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Pledgor's true and lawful agent (and attorney-in-fact) for the purposes, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Security Agreement Collateral under policies of insurance, endorsing the name of such Pledgor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Pledgor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or in part relating -24- thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Pledgors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. The Collateral Agent shall provide prompt notice to the Pledgor of any action taken in the preceding sentence, provided that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. All sums disbursed by the Collateral Agent in connection with this Section 4.11, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Pledgors to the Collateral Agent and shall be additional Secured Obligations. SECTION 4.12. PPSA ACKNOWLEDGEMENTS. Each Pledgor acknowledges that (a) value has been given, (b) it has rights in the Pledged Equity Interests and (iii) it has not agreed to postpone the time of attachment of the security interests granted hereunder. ARTICLE V REMEDIES SECTION 5.01. REMEDIES. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent may from time to time exercise in respect of the Security Agreement Collateral, in addition to the other rights and remedies provided for herein or otherwise available to it: (a) Personally, or by agents or attorneys, immediately take possession of the Security Agreement Collateral or any part thereof, from any Pledgor or any other person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon any Pledgor's premises where any of the Security Agreement Collateral is located, remove such Security Agreement Collateral, remain present at such premises to receive copies of all communications and remittances relating to the Security Agreement Collateral and use in connection with such removal and possession (i) any and all services, supplies, aids and other facilities of any Pledgor and (ii) intellectual property, other than Trademarks, of any Pledgor, with no right of sublicense or assignment and solely to the extent permitted by all agreements relating to intellectual property of any Pledgor; (b) Demand, sue for, collect or receive any money or property at any time payable or receivable in respect of the Security Agreement Collateral including, without limitation, instructing the obligor or obligors on any agreement, instrument or other obligation constituting part of the Security Agreement Collateral to make any payment re- -25- quired by the terms of such agreement, instrument or other obligation directly to the Collateral Agent, and in connection with any of the foregoing, compromise, settle, extend the time for payment and make other modifications with respect thereto; provided, however, that in the event that any such payments are made directly to any Pledgor, prior to receipt by any such obligor of such instruction, such Pledgor shall segregate all amounts received pursuant thereto in trust for the benefit of the Collateral Agent and shall promptly (but in no event later than one Business Day after receipt thereof) pay such amounts into the Collateral Account; (c) Sell, assign, grant a license to use or otherwise liquidate, or direct any Pledgor to sell, assign, grant a license to use or otherwise liquidate, any and all investments made in whole or in part with the Security Agreement Collateral or any part thereof, and take possession of the proceeds of any such sale, assignment, license or liquidation; (d) Take possession of the Security Agreement Collateral or any part thereof, by directing any Pledgor in writing to deliver the same to the Collateral Agent at any place or places so designated by the Collateral Agent, in which event such Pledgor shall at its own expense: (i) forthwith cause the same to be moved to the place or places designated by the Collateral Agent and there delivered to the Collateral Agent, (ii) store and keep any Security Agreement Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent and (iii) while the Security Agreement Collateral shall be so stored and kept, provide such security and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition. Each Pledgor's obligation to deliver the Security Agreement Collateral as contemplated in this Section 5.01(d) is of the essence hereof. Upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by any Pledgor of such obligation; (e) Withdraw all moneys, instruments, securities and other property in any bank, financial securities, deposit or other account of any Pledgor constituting Security Agreement Collateral for application to the Secured Obligations as provided in Article IX of the Credit Agreement; (f) Following written notice from the Collateral Agent to the Pledgors in accordance with Section 4.06(d), retain and apply the Distributions to the Secured Obligations as provided in the Credit Agreement; (g) Following written notice from the Collateral Agent to the Pledgors in accordance with Section 4.06(d), exercise any and all rights as beneficial and legal owner of the Security Agreement Collateral, including, without limitation, perfecting assignment -26- of and exercising any and all voting, consensual and other rights and powers with respect to any Security Agreement Collateral; and (h) All the rights and remedies of a secured party on default under the UCC, and the Collateral Agent may also in its sole discretion, without notice except as specified in Section 5.02 hereof, sell, assign or grant a license to use the Security Agreement Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as are commercially reasonable. The Collateral Agent or any other Secured Party or any of their respective Affiliates may be the purchaser, licensee, assignee or recipient of any or all of the Security Agreement Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Security Agreement Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured Obligations owed to such person as a credit on account of the purchase price of any Security Agreement Collateral payable by such person at such sale. Each purchaser, assignee, licensee or recipient at any such sale shall acquire the property sold, assigned or licensed absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall not be obligated to make any sale of Security Agreement Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives, to the fullest extent permitted by law, any claims against the Collateral Agent arising by reason of the fact that the price at which any Security Agreement Collateral may have been sold, assigned or licensed at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent accepts the first offer received and does not offer such Security Agreement Collateral to more than one offeree. The Collateral Agent shall provide contemporaneous notice to the Pledgor of any action taken in subsections 5.01(a), (b) (c), (d), (e) and (h); provided that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. SECTION 5.02. NOTICE OF SALE. Each Pledgor acknowledges and agrees that, to the extent notice of sale shall be required by law, ten days' notice to such Pledgor of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters. No notification -27- need be given to any Pledgor if it has signed, during the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. SECTION 5.03. WAIVER OF NOTICE AND CLAIMS. Each Pledgor hereby waives, to the fullest extent permitted by applicable law, notice or judicial hearing in connection with the Collateral Agent's taking possession or the Collateral Agent's disposition of any of the Security Agreement Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which such Pledgor would otherwise have under law, and each Pledgor hereby further waives, to the fullest extent permitted by applicable law: (a) all damages occasioned by such taking of possession, (b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder and (c) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable law. The Collateral Agent shall not be liable for any incorrect or improper payment made pursuant to this Article V in the absence of gross negligence or willful misconduct. Any sale of, or the grant of options to purchase, or any other realization upon, any Security Agreement Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the applicable Pledgor therein and thereto, and shall be a perpetual bar both at law and in equity against such Pledgor and against any and all persons claiming or attempting to claim the Security Agreement Collateral so sold, optioned or realized upon, or any part thereof, from, through or under such Pledgor. SECTION 5.04. CERTAIN SALES OF SECURITY AGREEMENT COLLATERAL. Each Pledgor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any Governmental Authority, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Security Agreement Collateral, to limit purchasers to those who meet the requirements of such Governmental Authority. Each Pledgor acknowledges that any such sales may be at prices and on terms less favorable to the Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that, except as may be required by applicable law, the Collateral Agent shall have no obligation to engage in public sales. (b) Each Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act, and applicable state securities laws, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Securities Collateral and Investment Property, to limit purchasers to persons who will agree, among other things, to acquire such Securities Collateral or Investment Property for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Collateral Agent than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such -28- circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral or Investment Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. SECTION 5.05. NO WAIVER; CUMULATIVE REMEDIES. (a) No failure on the part of the Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of the Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy; nor shall the Collateral Agent be required to look first to, enforce or exhaust any other security, collateral or guaranties. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (b) In the event that the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case, the Pledgors, the Collateral Agent and each other Secured Party shall be restored to their respective former positions and rights hereunder with respect to the Security Agreement Collateral, and all rights, remedies and powers of the Collateral Agent and the other Secured Parties shall continue as if no such proceeding had been instituted. SECTION 5.06. CERTAIN ADDITIONAL ACTIONS REGARDING INTELLECTUAL PROPERTY. If any Event of Default shall have occurred and be continuing, upon the written demand of Collateral Agent, each Pledgor shall execute and deliver to Collateral Agent an assignment or assignments of the registered Patents, Trademarks and/or Copyrights and such other documents as are necessary or appropriate to carry out the intent and purposes hereof. ARTICLE VI MISCELLANEOUS SECTION 6.01. CONCERNING COLLATERAL AGENT. (a) The Collateral Agent has been appointed as Collateral Agent pursuant to the Credit Agreement. The actions of the Collateral Agent hereunder are subject to the provisions of the Credit Agreement. The Collateral Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limita- -29- tion, the release or substitution of the Security Agreement Collateral), in accordance with this Agreement and the Credit Agreement. The Collateral Agent may employ agents and attorneys-in-fact in connection herewith. The Collateral Agent may resign and a successor Collateral Agent may be appointed (or the Lenders shall assume the responsibilities of the Collateral Agent) in the manner provided in the Credit Agreement. Upon the acceptance of any appointment as the Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Agent. (b) The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Security Agreement Collateral in its possession if such Security Agreement Collateral is accorded treatment substantially equivalent to that which the Collateral Agent, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Collateral Agent nor any of the other Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Securities Collateral, whether or not the Collateral Agent or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any person with respect to any Security Agreement Collateral. (c) The Collateral Agent shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Agreement and its duties hereunder, upon advice of counsel selected by it. (d) With respect to any of its rights and obligations as a Lender, the Collateral Agent shall have and may exercise the same rights and powers hereunder. The term "Lenders," "Lender" or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity as a Lender. The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with such Pledgor or any Affiliate of such Pledgor to the same extent as if the Collateral Agent were not acting as collateral agent. (e) If any item of Security Agreement Collateral also constitutes collateral granted to the Collateral Agent under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of -30- any type in respect of such collateral, the provisions of this Agreement shall control, unless such other document explicitly provides that the terms of such document shall control. SECTION 6.02. COLLATERAL AGENT MAY PERFORM; COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. If an Event of Default shall have occurred and be continuing, the Collateral Agent may (but shall not be obligated to) remedy or cause to be remedied any such breach, and may expend funds for such purpose; provided, however, that the Collateral Agent shall in no event be bound to inquire into the validity of any tax, lien, imposition or other obligation which such Pledgor fails to pay or perform as and when required hereby and which such Pledgor does not contest in accordance with the provision of Section 6.02 of the Credit Agreement. Any and all amounts so expended by the Collateral Agent shall be paid by the Pledgors in accordance with the provisions of Section 6.03 hereof. Neither the provisions of this Section 6.02 nor any action taken by Collateral Agent pursuant to the provisions of this Section 6.02 shall prevent any such failure by any Pledgor to observe any covenant contained in this Agreement nor any breach of warranty from constituting an Event of Default. Each Pledgor hereby appoints the Collateral Agent its attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time during the continuance of an Event of Default in the Collateral Agent's discretion to take any action and to execute any instrument consistent with the terms hereof and the other Loan Documents which the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof. Except where prior notice is expressly required by the terms of this Agreement, the Collateral Agent shall provide prompt notice to the Pledgor following any action taken in the preceding sentence, provided that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 6.03. EXPENSES. Each Pledgor will promptly pay to the Collateral Agent the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Collateral Agent may incur in connection with (a) any action, suit or other proceeding affecting the Security Agreement Collateral or any part thereof commenced, in which action, suit or proceeding the Collateral Agent is made a party or participates or in which the right to use the Security Agreement Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Collateral Agent to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Security Agreement Collateral with any requirements of any Governmental Authority or law), (b) the collection of the Secured Obligations, (c) the enforcement and administration hereof, (d) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Security Agreement Collateral, (e) the exercise or enforcement of any of the rights of the Collateral Agent or any other Secured Party hereunder or (f) the failure by any Pledgor to perform or ob- -31- serve any of the provisions hereof. All amounts expended by the Collateral Agent and payable by any Pledgor under this Section 6.03 shall be due upon demand therefor (together with interest thereon accruing at the default rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. Each Pledgor's obligations under this Section 6.03 shall survive the termination hereof and the discharge of such Pledgor's other obligations under this Agreement, the Credit Agreement and the other Loan Documents. SECTION 6.04. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement shall create a continuing security interest in the Security Agreement Collateral and shall (a) be binding upon the Pledgors, their respective successors and assigns and (b) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and the other Secured Parties and each of their respective permitted successors, transferees and assigns. No other persons (including, without limitation, any other creditor of any Pledgor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (b), any Secured Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other person, and such other person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party, herein or otherwise, subject however, to the provisions of the Credit Agreement and any Hedging Agreement. SECTION 6.05. TERMINATION; RELEASE. The Security Agreement Collateral shall be released from the Lien of this Agreement in accordance with Section 6.04 of the Credit Agreement. Upon termination hereof or any release of Security Agreement Collateral in accordance with Section 6.04 of the Credit Agreement, the Collateral Agent shall, upon the request and at the sole cost and expense of the Pledgors, assign, transfer and deliver to Pledgor, against receipt and without recourse to or warranty by the Collateral Agent except as to the fact that Collateral Agent has not encumbered the released assets, such of the Security Agreement Collateral to be released (in the case of a release) as may be in possession of the Collateral Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other Security Agreement Collateral, proper documents and instruments (including UCC-3 termination statements or releases) acknowledging the termination hereof or the release of such Security Agreement Collateral, as the case may be. SECTION 6.06. MODIFICATION IN WRITING. No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by any Pledgor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit Agreement and unless in writing and signed by the Collateral Agent. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by any Pledgor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or -32- given. Except where notice is specifically required by this Agreement or any other document evidencing the Secured Obligations, no notice to or demand on any Pledgor in any case shall entitle any Pledgor to any other or further notice or demand in similar or other circumstances. SECTION 6.07. NOTICES. Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, as to any Pledgor, addressed to it at the address of Borrower set forth in the Credit Agreement and as to the Collateral Agent, addressed to it at the address set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 6.07. Failure to deliver courtesy copies of notices and other communications shall in no event affect the validity or effectiveness of such notices or other communications. SECTION 6.08. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent or any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Pledgor or its properties in the courts of any jurisdiction. (c) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. -33- Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.07. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 6.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 6.10. SEVERABILITY OF PROVISIONS. Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 6.11. EXECUTION IN COUNTERPARTS. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. SECTION 6.12. BUSINESS DAYS. In the event any time period or any date provided in this Agreement ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 6.13. NO CLAIMS AGAINST COLLATERAL AGENT. Nothing contained in this Agreement shall constitute any consent or request by the Collateral Agent, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Security Agreement Collateral or any part thereof, nor as giving any Pledgor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Collateral Agent in respect thereof or any claim that any Lien -34- based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 6.14. NO RELEASE. Nothing set forth in this Agreement shall relieve the Pledgor from the performance of any term, covenant, condition or agreement on the Pledgor's part to be performed or observed under or in respect of any of the Security Agreement Collateral or from any liability to any person under or in respect of any of the Security Agreement Collateral or shall impose any obligation on the Collateral Agent or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Pledgor's part to be so performed or observed or shall impose any liability on the Collateral Agent or any other Secured Party for any act or omission on the part of the Pledgor relating thereto or for any breach of any Hedging Agreement, any representation or warranty on the part of the Pledgor contained in this Agreement, the Credit Agreement or the other Security Documents, or under or in respect of the Security Agreement Collateral or made in connection herewith or therewith. The obligations of the Pledgor contained in this Section 6.14 shall survive the termination hereof and the discharge of the Pledgor's other obligations under this Agreement, the Credit Agreement, any Hedging Agreement and the other Security Documents. SECTION 6.15. OBLIGATIONS ABSOLUTE. All obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of: (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Pledgor or any other Credit Party; (b) any lack of validity or enforceability of the Credit Agreement, any Hedging Agreement or any other Loan Document, or any other agreement or instrument relating thereto; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document, any Hedging Agreement or any other agreement or instrument relating thereto; (d) any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (e) any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Credit Agreement, any other Loan Document or any Hedging Agreement except as specifically set forth in a waiver granted pursuant to the provisions of Section 6.06 hereof; or -35- (f) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any Pledgor. [Signature Pages Follow] S-1 IN WITNESS WHEREOF, the Pledgors and the Collateral Agent have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. COMMUNICATIONS & POWER INDUSTRIES, INC., as Pledgor By: ______________________________ Name: Title: COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION., as Pledgor By: ______________________________ Name: Title: CPI ACQUISITION CORP., as Pledgor By: ______________________________ Name: Title: CPI SUBSIDIARY HOLDINGS INC., as Pledgor By: ______________________________ Name: Title Security Agreement S-2 COMMUNICATIONS & POWER INDUSTRIES INTERNATIONAL INC., as Pledgor By: ______________________________ Name: Title COMMUNICATIONS & POWER INDUSTRIES ASIA INC., as Pledgor By: ______________________________ Name: Title Security Agreement S-3 UBS AG, STAMFORD BRANCH, as Collateral Agent By: ______________________________ Name: Title: By: ______________________________ Name: Title: Security Agreement EXHIBIT 1 [FORM OF ISSUER ACKNOWLEDGMENT] The undersigned hereby (a) acknowledges receipt of a copy of that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "SECURITY AGREEMENT"; capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), dated as of January 23, 2004, among COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation (the "BORROWER"), the Guarantors party thereto, and UBS AG, STAMFORD BRANCH, as collateral agent (in such capacity and together with any successors in such capacity, the "COLLATERAL AGENT"), (b) agrees promptly to note on its books the security interests granted to the Collateral Agent and confirmed under the Security Agreement, (c) agrees that it will comply with instructions of the Collateral Agent with respect to the applicable Securities Collateral without further consent by the applicable Pledgor, (d) agrees to notify the Collateral Agent upon obtaining knowledge of any interest in favor of any person in the applicable Securities Collateral that is adverse to the interest of the Collateral Agent therein and (e) waives any right or requirement at any time hereafter to receive a copy of the Security Agreement in connection with the registration of any Securities Collateral thereunder in the name of the Collateral Agent or its nominee or the exercise of voting rights by the Collateral Agent or its nominee. [NAME OF ISSUER] By: ______________________________ Name: Title: Exh. 1-1 Exhibit 2-5 Provided Under Separate Cover Exh.1-1 EX-10.3 8 f96399exv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 FORM OF OPTION ROLLOVER AGREEMENT (U.S. EMPLOYEES) OPTION ROLLOVER AGREEMENT dated as of January 23, 2004 (the "Agreement") between CPI Acquisition Corp., a Delaware corporation, (the "Acquiror"), and the manager named on Schedule A (the "Manager"). WHEREAS, the Acquiror, CPI Merger Sub Corp. (the "Merger Sub"), Communications & Power Industries Holding Corporation (the "Company") and Green Equity Investors II, L.P. have entered into an Agreement and Plan of Merger, dated as of November 17, 2003 (the "Merger Agreement"); WHEREAS, pursuant to the Merger Agreement, as of the Closing which occurs on the Closing Date (each as defined in the Merger Agreement), the Merger Sub will merge with and into the Company, with the Company surviving, and the Company shall be a wholly owned subsidiary of the Acquiror; and WHEREAS, the Manager and other members of the Company management team currently hold options to acquire shares of the Company's common stock ("Company Options") and have agreed that, as of the Closing Date, Company Options shall be converted into options to purchase shares of the Acquiror; NOW THEREFORE, in consideration of the foregoing, and the covenants and promises and representations set forth herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and accepted, the parties hereto agree as follows: 1. This Agreement shall constitute a binding obligation of the parties hereto as of the date hereof; provided that the operative provisions of this Agreement shall only take effect upon the occurrence of the Closing Date. In the event the Merger Agreement is terminated for any reason without the Closing Date having occurred, this Agreement shall be terminated without further obligation or liability of any party hereunder. Defined terms not otherwise defined herein shall have the meanings set forth in the Merger Agreement. 2. Notwithstanding any provision in the Merger Agreement, as of the date hereof, the Manager agrees not to exercise any Company Options. 3. With respect to each grant of Company Options held by the Manager as of the Closing Date, the Manager agrees that the number of Company Options subject to such grant set forth on Schedule A attached hereto (the "Continuing Options") shall be converted into options to purchase shares of the Acquiror ("Acquiror Options"). The remaining Company Options shall be cancelled and shall be converted into the right to receive a cash payment as set forth in the Merger Agreement. Each Acquiror Option shall be subject to the same terms and conditions as the corresponding Company Option (provided that the vesting of such Acquiror Option shall accelerate to the extent that the vesting of the corresponding Company Option accelerates pursuant to the Merger Agreement) and, in the aggregate, shall, as of immediately 2 following the Closing Date, preserve the difference between (a) the Per Share Amount minus (b) the exercise price per share of such Company Option. The shares of Acquiror issued upon exercise of the Acquiror Options will be subject to the terms and conditions of the stockholders' agreement described in the Information Memorandum previously provided to the Manager. In addition, with respect to each Continuing Option, the Manager shall be entitled to (x) the Per Share Additional Amount (if any) and (y) the payment described in Section 2.3.1(e) of the Merger Agreement and distributions from the Expense Escrow Amount and the Working Capital Escrow Amount, subject to the terms and conditions of the Merger Agreement and the Escrow Agreement, such amounts payable in accordance with the Merger Agreement. 4. The Manager represents and warrants to the Acquiror as follows: (a) The Manager is as of the date hereof an employee of the Company and in such capacity has acquired at least a general understanding of the Company and its business. The Manager has been given the opportunity to obtain any additional information or documents (and to ask questions and receive answers about such information and documents) about the Acquiror and its business (and the Company and its business) which he deems necessary to evaluate the merits and risks related to his investment in the Acquiror Options (which, for purposes of this Section 4 shall include the underlying shares of the Acquiror). (b) In making his decision to invest in the Acquiror, the Manager has relied upon independent investigations made by him and, to the extent believed by the Manager to be appropriate, his representatives, including his own professional, financial, tax and other advisors. (c) The Manager is able to bear the economic risk of a total loss of the Manager's investment in the Acquiror, and the Manager has adequate means of providing for the Manager's current needs and foreseeable personal contingencies and has no need for the Manager's investment in the Acquiror Options to be liquid. (d) The Manager understands that an investment in the Acquiror is a speculative investment which involves a high degree of risk of loss of his investment therein, there are substantial restrictions on the transferability of the Acquiror Options, and, on the date hereof and for an indefinite period following the date hereof, there will be no public market for the Acquiror Options and, accordingly, it may not be possible for the Manager to liquidate his investment in case of emergency, if at all. (e) The Manager understands and has taken cognizance of all risk factors related to the retention of the Acquiror Options, and the Manager has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of his purchase of the Acquiror Options as contemplated by this Agreement. 5. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 3 6. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement, it being understood that all parties need not sign the same counterpart. [SIGNATURE PAGES FOLLOW THIS PAGE] [CPI ACQUISITION CORP. SIGNATURE PAGE - OPTION ROLLOVER AGREEMENT] CPI ACQUISITION CORP. By: ______________________________ Name: Title: [MANAGER SIGNATURE PAGE - OPTION ROLLOVER AGREEMENT] ______________________________ Name: 1 Schedule A 1. Manager Name.....................................______________________ 2. Rollover Amount (a) Company Options with exercise price of $1.10 (if any)...______________________ (b) Company Options with exercise price of $4.00 (if any)...______________________ 3. The Manager is an "accredited investor" (as defined below). Please circle the applicable response: YES NO "Accredited investor" means any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person: a. Any bank as defined in section 3(a)(2) of the Securities Act of 1933, as amended (the "Act"), or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; b. Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; c. Any organization described in section 501(c)(3) of the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; 2 d. Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; e. Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; f. Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; g. Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); and h. Any entity in which all of the equity owners are accredited investors. EX-10.4 9 f96399exv10w4.txt EXHIBIT 10.4 EXHIBIT 10.4 FORM OF OPTION ROLLOVER AGREEMENT (CANADIAN EMPLOYEES) OPTION ROLLOVER AGREEMENT dated as of January 23, 2004 (the "Agreement") between CPI Acquisition Corp., a Delaware corporation, (the "Acquiror"), and the manager named on Schedule A (the "Manager"). WHEREAS, the Acquiror, CPI Merger Sub Corp. (the "Merger Sub"), Communications & Power Industries Holding Corporation (the "Company") and Green Equity Investors II, L.P. have entered into an Agreement and Plan of Merger, dated as of November 17, 2003 (the "Merger Agreement"); WHEREAS, pursuant to the Merger Agreement, as of the Closing which occurs on the Closing Date (each as defined in the Merger Agreement), the Merger Sub will merge with and into the Company, with the Company surviving, and the Company shall be a wholly owned subsidiary of the Acquiror; and WHEREAS, the Manager and other members of the Company management team currently hold options to acquire shares of the Company's common stock ("Company Options") and have agreed that, as of the Closing Date, Company Options shall be converted into options to purchase shares of the Acquiror; NOW THEREFORE, in consideration of the foregoing, and the covenants and promises and representations set forth herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and accepted, the parties hereto agree as follows: 1. This Agreement shall constitute a binding obligation of the parties hereto as of the date hereof; provided that the operative provisions of this Agreement shall only take effect upon the occurrence of the Closing Date. In the event the Merger Agreement is terminated for any reason without the Closing Date having occurred, this Agreement shall be terminated without further obligation or liability of any party hereunder. Defined terms not otherwise defined herein shall have the meanings set forth in the Merger Agreement. 2. Notwithstanding any provision in the Merger Agreement, as of the date hereof, the Manager agrees not to exercise any Company Options. 3. With respect to each grant of Company Options held by the Manager as of the Closing Date, the Manager agrees that the number of Company Options subject to such grant set forth on Schedule A attached hereto (the "Continuing Options") shall be converted into options to purchase shares of the Acquiror ("Acquiror Options"). The remaining Company Options shall be cancelled and shall be converted into the right to receive a cash payment as set forth in the Merger Agreement. Each Acquiror Option shall be subject to the same terms and conditions as the corresponding Company Option (provided that the vesting of such Acquiror Option shall accelerate to the extent that the vesting of the corresponding Company Option accelerates pursuant to the Merger Agreement) and, in the aggregate, shall, as of immediately 2 following the Closing Date, preserve the difference between (a) the Per Share Amount minus (b) the exercise price per share of such Company Option. The shares of Acquiror issued upon exercise of the Acquiror Options will be subject to the terms and conditions of the stockholders' agreement described in the Information Memorandum previously provided to the Manager. The Manager agrees that, notwithstanding any provision in the Merger Agreement, the Manager shall not be entitled to receive, with respect to the Continuing Options, (x) the Per Share Additional Amount (if any) or (y) the payment described in Section 2.3.1(e) of the Merger Agreement and distributions from the Expense Escrow Amount and the Working Capital Escrow Amount (collectively, the "ADDITIONAL PAYMENTS"), which Additional Payments, if any, the Manager shall cause to be delivered to the Acquiror or such other entity as designated by the Acquiror in its sole discretion; provided, however, that the Manager shall be entitled to additional options to purchase shares of Acquiror with an aggregate exercise price equal to the excess of (i) the aggregate fair market value of the shares subject to such options on the date of grant over (ii) the Additional Payments. 4. The Manager represents and warrants to the Acquiror as follows: (a) The Manager is as of the date hereof an employee of the Company and in such capacity has acquired at least a general understanding of the Company and its business. The Manager has been given the opportunity to obtain any additional information or documents (and to ask questions and receive answers about such information and documents) about the Acquiror and its business (and the Company and its business) which he deems necessary to evaluate the merits and risks related to his investment in the Acquiror Options (which, for purposes of this Section 4 shall include the underlying shares of the Acquiror). (b) In making his decision to invest in the Acquiror, the Manager has relied upon independent investigations made by him and, to the extent believed by the Manager to be appropriate, his representatives, including his own professional, financial, tax and other advisors. (c) The Manager is able to bear the economic risk of a total loss of the Manager's investment in the Acquiror, and the Manager has adequate means of providing for the Manager's current needs and foreseeable personal contingencies and has no need for the Manager's investment in the Acquiror Options to be liquid. (d) The Manager understands that an investment in the Acquiror is a speculative investment which involves a high degree of risk of loss of his investment therein, there are substantial restrictions on the transferability of the Acquiror Options, and, on the date hereof and for an indefinite period following the date hereof, there will be no public market for the Acquiror Options and, accordingly, it may not be possible for the Manager to liquidate his investment in case of emergency, if at all. (e) The Manager understands and has taken cognizance of all risk factors related to the retention of the Acquiror Options, and the Manager has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of his purchase of the Acquiror Options as contemplated by this Agreement. 3 5. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 6. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement, it being understood that all parties need not sign the same counterpart. [SIGNATURE PAGES FOLLOW THIS PAGE] [CPI ACQUISITION CORP. SIGNATURE PAGE - OPTION ROLLOVER AGREEMENT] CPI ACQUISITION CORP. By: ______________________________ Name: Title: [MANAGER SIGNATURE PAGE - OPTION ROLLOVER AGREEMENT] ______________________________ Name: 1 Schedule A 1. Manager Name.......................................____________________ 2. Rollover Amount (a) Company Options with exercise price of $1.10 (if any).....____________________ (b) Company Options with exercise price of $4.00 (if any).....____________________ 3. The Manager is an "accredited investor" (as defined below). Please circle the applicable response: YES NO "Accredited investor" means any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person: a. Any bank as defined in section 3(a)(2) of the Securities Act of 1933, as amended (the "Act"), or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; b. Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; c. Any organization described in section 501(c)(3) of the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; 2 d. Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; e. Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; f. Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; g. Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); and h. Any entity in which all of the equity owners are accredited investors. EX-10.5 10 f96399exv10w5.txt EXHIBIT 10.5 EXHIBIT 10.5 FORM OF MANAGEMENT STOCKHOLDERS AGREEMENT DATED AS OF JANUARY ____, 2004 among CPI ACQUISITION CORP. CYPRESS MERCHANT BANKING PARTNERS II L.P. CYPRESS MERCHANT BANKING II C.V. 55TH STREET PARTNERS L.P. CYPRESS SIDE-BY-SIDE LLC and THE MANAGEMENT STOCKHOLDERS NAMED HEREIN TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS...................................................................... 2 Section 1.1. Definitions........................................................ 2 ARTICLE II CERTAIN RESTRICTIONS ON TRANSFERS............................................... 6 Section 2.1. Transfers in Accordance with this Agreement........................ 6 Section 2.2. Transfer Restriction Period........................................ 7 Section 2.3. Share Register..................................................... 7 Section 2.4. Transfers to Permitted Transferees................................. 7 Section 2.5. Tag-Along Right.................................................... 7 Section 2.6. Drag-Along Right................................................... 8 ARTICLE III ADDITIONAL RIGHTS AND OBLIGATIONS OF MANAGEMENT STOCKHOLDERS AND THE COMPANY... 9 Section 3.1. Right of First Refusal............................................. 9 Section 3.2. Registration Rights................................................ 10 Section 3.3. Call Rights........................................................ 10 Section 3.4. Covenant Not to Compete; Non-Solicitation.......................... 12 Section 3.5. Confidential Information........................................... 14 Section 3.6. Representations and Warranties of the Management Stockholders...... 15 ARTICLE IV MISCELLANEOUS................................................................... 16 Section 4.1. No Inconsistent Agreements......................................... 16 Section 4.2. Voting Agreement................................................... 16 Section 4.3. Employment by the Company.......................................... 17 Section 4.4. Taxes.............................................................. 17 Section 4.5. Successors and Assigns............................................. 17 Section 4.6. No Waivers, Amendments............................................. 17 Section 4.7. Notices............................................................ 18 Section 4.8. Term of Agreement.................................................. 19 Section 4.9. Inspection......................................................... 19 SECTION 4.10. GOVERNING LAW; SUBMISSION TO JURISDICTION......................... 19 Section 4.11. Section Headings.................................................. 19 Section 4.12. Entire Agreement.................................................. 19 Section 4.13. Severability...................................................... 20 Section 4.14. Counterparts...................................................... 20 Section 4.15. Parties in Interest............................................... 20 Section 4.16. Enforcement; Further Assurances................................... 20 Section 4.17. Advice of Counsel................................................. 20 ARTICLE I DEFINITIONS...................................................................... 1
i Section 1.1. Definitions........................................................ 1 ARTICLE II REGISTRATION RIGHTS............................................................. 2 Section 2.1. Piggy-Back Registration............................................ 2 Section 2.2. Reduction of Offering.............................................. 2 ARTICLE III REGISTRATION PROCEDURES........................................................ 3 Section 3.1. Filings; Information............................................... 3 Section 3.2. Registration Expenses.............................................. 6 ARTICLE IV INDEMNIFICATION AND CONTRIBUTION................................................ 6 Section 4.1. Indemnification by the Company..................................... 6 Section 4.2. Indemnification by Holders of Registrable Securities............... 7 Section 4.3. Conduct of Indemnification Proceedings............................. 7 Section 4.4. Contribution....................................................... 8 ARTICLE V MISCELLANEOUS.................................................................... 9 Section 5.1. Participation in Underwritten Registrations........................ 9 Section 5.2. Rule 144........................................................... 9 Section 5.3. Holdback Agreements................................................ 10 Section 5.4. Other Registration Rights.......................................... 10

SCHEDULES Schedule I Management Stockholders Schedule II Senior Managers EXHIBITS Exhibit A Management Stockholder Form of Agreement to be Bound Exhibit B Permitted Transferee Form of Agreement to be Bound Exhibit C Registration Rights Exhibit D Form of Consent of Spouse ii MANAGEMENT STOCKHOLDERS AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT dated as of January __, 2004 (this "Agreement") among CPI Acquisition Corp., a Delaware corporation (the "Company"), Cypress Merchant Banking Partners II L.P., a Delaware limited partnership ("Cypress Onshore"), Cypress Merchant Banking II C.V., a Netherlands limited partnership ("Cypress Offshore"), 55th Street Partners II L.P., a Delaware limited partnership ("Cypress 55th Street"), Cypress Side-by-Side LLC, a Delaware limited liability company ("Cypress Side-by-Side," and together with Cypress Onshore, Cypress Offshore, Cypress 55th Street, "Cypress"), and certain management stockholders of the Company listed on Schedule I hereto (each such management stockholder, together with any other management stockholder who shall become a party to this Agreement by executing and delivering to the Company an instrument in form of Exhibit A hereto, or otherwise reasonably satisfactory to the Company, agreeing to be bound hereby as a "Management Stockholder" is hereinafter referred to as a "Management Stockholder"). Capitalized terms used but not otherwise defined herein have the meanings given to them in the Merger Agreement (as hereinafter defined). WITNESSETH: WHEREAS, the Company acquired Communications & Power Industries Holding Corporation ("Holding") pursuant to an Agreement and Plan of Merger, dated as of November 17, 2003 (the "Merger Agreement"), among Holding, the Company, CPI Merger Sub Corp., a Delaware corporation and wholly-owned Subsidiary (as hereinafter defined) of the Company prior to the Merger (as hereinafter defined) ("Merger Sub"), and Green Equity Investors II L.P., as Securityholders' Representative, pursuant to which Merger Sub merged with and into Holding on the date hereof with Holding as the surviving corporation (the "Merger") and a wholly-owned Subsidiary of the Company; WHEREAS, in connection with the Merger, certain Management Stockholders have entered into Option Rollover Agreements with the Company, each such agreement dated as of the date hereof, pursuant to which the Company agreed to convert certain options to acquire shares of Holding held by each such Management Stockholder prior to the Merger into options to acquire Shares (as hereinafter defined) ("Rollover Options"); WHEREAS, the parties hereto desire to restrict the sale, assignment, transfer, encumbrance or other disposition of the Shares and to provide for certain rights and obligations and other agreements in respect of the Shares and the Company, all as hereinafter provided. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. As used in this Agreement, the following terms have the following meanings: "Affiliate", as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities (the ownership of more than 50% of the voting securities of an entity shall for purposes of this definition be deemed to be "control"), by contract or otherwise. "Agreement" shall have the meaning set forth in the preamble of this Agreement. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks located in New York City are authorized or required to be closed. "Buyout Notice" shall have the meaning set forth in Section 2.6. "Call Exercise Notice" shall have the meaning set forth in Section 3.3(b). "Call Right" shall have the meaning set forth in Section 3.3(a). "Call Right Period" shall have the meaning set forth in Section 3.3(a). "Cause" shall mean (i) the Management Stockholder's continued failure to perform such Management Stockholder's duties (other than as a result of total or partial incapacity due to physical or mental illness) which is not cured for a period of 10 days following written notice by the Company or its Affiliates to the Management Stockholder of such failure, (ii) conviction or plea of guilty or no contest to a (x) felony, or (y) crime involving moral turpitude or the property or business of the Company or its Affiliates, (iii) willful malfeasance or willful misconduct in performance of duties to the Company or its Affiliates, or (iv) breach by the Management Stockholder of the material terms of any non-compete, non-solicitation or confidentiality provisions of this Agreement. "Change of Control" shall mean (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any "person" or "group" (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than Cypress or its Affiliates, or (ii) any person or group, other than Cypress or its Affiliates, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company, including by way of merger, consolidation or otherwise and Cypress or its Affiliates ceases to control the board of directors of the Company. 2 "Code" shall mean the U.S. Internal Revenue Code of 1986, as amended, and the regulations thereunder. "Common Stock" shall mean the common stock, par value $0.01 per share, of the Company. "Company" shall have the meaning set forth in the preamble of this Agreement. "Company Call Right" shall have the meaning set forth in Section 3.3(a). "Company Call Right Period" shall have the meaning set forth in Section 3.3(a). "Competitive Business" shall have the meaning set forth in Section 3.4(b). "Confidential Information" shall have the meaning set forth in Section 3.5(c). "Contract Date" shall have the meaning set forth in Section 3.1(d). "Cypress" shall have the meaning set forth in the preamble of this Agreement. "Cypress Call Right" shall have the meaning set forth in Section 3.3(a). "Cypress Call Right Period" shall have the meaning set forth in Section 3.3(a). "Cypress Onshore" shall have the meaning set forth in the preamble of this Agreement. "Cypress Offshore" shall have the meaning set forth in the preamble of this Agreement. "Cypress Side-by-Side" shall have the meaning set forth in the preamble of this Agreement. "Cypress 55th Street" shall have the meaning set forth in the preamble of this Agreement. "Employment Agreement" shall mean an employment agreement between a Management Stockholder and the Company or any of its Subsidiaries that is in effect as of the date hereof and continues to be effective thereafter in accordance with its terms. "Employment" shall mean (i) a Management Stockholder's employment if the Management Stockholder is an employee of the Company or any of its Affiliates, (ii) a Management Stockholder's services as an non-employee director, if the Management Stockholder is a non-employee member of the board of directors of the Company or an Affiliate or (iii) a Management Stockholder's services as an independent contractor, vendor or third-party service provider, if the Management Stockholder is an independent contractor, vendor or third-party service provider to the Company or any of its Affiliates; provided, however, that unless otherwise determined by a committee of the board of directors of the Company, a change in a 3 Management Stockholder's status from employee to a consultant shall constitute a termination of employment hereunder. "Exchange Act" shall mean the United States Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Fair Market Value" shall mean (i) if there is a public market for the Shares on such date, the average of the high and low closing bid prices of the Common Stock on such stock exchange on which the Shares are principally trading on the date in question, or, if there were no sales on such date, on the closest preceding date on which there were sales of Common Stock, or (ii) if there is no public market for the Shares on such date, the fair market value of the Shares as determined in good faith by the board of directors of the Company; provided that if the relevant Management Stockholder disagrees with the board of directors' determination, he or she may require the Company to retain an independent investment banker to determine the fair market value, which determination shall be binding on such Management Stockholder and the Company. The Company will bear the cost of such appraisal, unless the appraised value is 110% or less of the board of directors' determination of the fair market value, in which case the Management Stockholder will bear the cost of such appraisal. "First ROFR Option Period" shall have the meaning set forth in Section 3.1(b). "HSR" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Holding" shall have the meaning set forth in the recitals of this Agreement. "Initial Public Offering" shall mean the initial Public Offering (other than pursuant to a registration statement on Form S-8 (or comparable form for a private issuer or otherwise relating to equity securities issuable under any employee benefit plan)) of the Common Stock. "Lapse Date" shall have the meaning set forth in Section 2.1. "Majority Management Stockholders" shall mean, at any time, Management Stockholders and their Permitted Transferees holding a majority of the number of Shares (including any Shares issuable upon the conversion, exchange or exercise of Share Equivalents) then outstanding and held by the Management Stockholders and their Permitted Transferees. "Management Stockholder" shall have the meaning set forth in the preamble of this Agreement. "Merger" shall have the meaning set forth in the recitals of this Agreement. "Merger Agreement" shall have the meaning set forth in the recitals of this Agreement. "Merger Sub" shall have the meaning set forth in the recitals of this Agreement. 4 "Offer" shall have the meaning set forth in Section 3.1(a). "Offered Securities" shall have the meaning set forth in Section 3.1(a). "Offering Notice" shall have the meaning set forth in Section 3.1(a). "Offeror" shall have the meaning set forth in Section 3.1(a). "Permitted Transferee" shall mean: (i) with respect to Cypress, (a) any Affiliate (other than an individual), any general or limited partner, member, director, officer or employee of Cypress (or its Permitted Transferees), (b) the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of Cypress (or its Permitted Transferees), (c) for estate planning purposes, any trust, the beneficiaries of which include only Permitted Transferees referred to in clauses (a), (b) and (c) and spouses and lineal descendants of Permitted Transferees referred to in clause (a), (d) a corporation, partnership or other entity, a majority of the equity of which is owned and controlled by Cypress (or its Permitted Transferees) and (e) any bank or financial institution to which a bona fide pledge of Shares is made, provided that immediately following any foreclosure upon such pledged Shares, such bank or financial institution shall cease to be a Permitted Transferee for all purposes of this Agreement; and (ii) with respect to any Management Stockholder, (a) in the event of such Management Stockholder's death, the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of such Management Stockholder (or their Permitted Transferees), (b) such Management Stockholder's spouse and lineal descendants and (c) trusts, partnerships, limited liability companies or other entities of which such Management Stockholder and/or such Management Stockholder's spouse or lineal descendants are the sole owners and beneficiaries; provided, further that any such Permitted Transferee referred to in the foregoing clauses agrees in writing to be bound by the terms of this Agreement in accordance with Section 2.4. "Person" shall mean an individual, partnership, corporation, business trust, joint stock company, limited liability company, unincorporated association, joint venture or other entity of whatever nature. "Public Offering" shall mean any public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act. "Qualified Public Offering" shall mean the first firm commitment underwritten Public Offering that results in a number of shares sold in such Public Offering equal to at least 20% of the issued and outstanding shares of Common Stock following such Public Offering. "Restricted Period" shall have the meaning set forth in Section 3.4(a). "ROFR Option Periods" shall have the meaning set forth in Section 3.1(b). "Rollover Options" shall have the meaning set forth in the recitals of this Agreement. "Second ROFR Option Period" shall have the meaning set forth in Section 3.1(b). 5 "Securities Act" shall mean the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Selling Management Stockholders" shall have the meaning set forth in Section 3.1(a). "Senior Manager" shall mean each of the persons listed on Schedule II hereto. "Share Equivalents" shall mean securities of any kind (including "phantom" securities) issued by the Company convertible into or exchangeable for Shares or options, warrants or other rights to purchase or subscribe for Shares or securities convertible into or exchangeable for Shares. "Shares" shall mean, with respect to any Stockholder, any and all shares of Common Stock, whether now owned or hereafter acquired (including upon exercise of options, preemptive rights or otherwise), held by such Stockholder. "Stockholder" shall mean each of Cypress and the Management Stockholders. "Subsidiary" shall mean, with respect to any Person, any corporation or other entity of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar function at the time directly or indirectly owned by such Person. "Third Party" shall mean any prospective Transferee of Shares (other than the Company) that is not a Permitted Transferee of the Stockholder proposing the Transfer of such Shares to such prospective Transferee. "Transfer" shall have the meaning set forth in Section 2.1. "Transferee" shall mean any Person who or which acquires Shares from a Management Stockholder or a Transferee (including Permitted Transferees) of a Management Stockholder subject to this Agreement. ARTICLE II CERTAIN RESTRICTIONS ON TRANSFERS Section 2.1. Transfers in Accordance with this Agreement. No Management Stockholder (or Permitted Transferee of a Management Stockholder) shall, directly or indirectly, transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of, all or any portion of any Shares or any economic interest therein (including without limitation by means of any participation or swap transaction) (each, a "Transfer") to any Person unless this Agreement expressly permits such Transfer. Any attempt to Transfer any Shares in violation of the terms of this Agreement shall be null and void, and neither the Company nor any transfer agent shall register upon its books any Transfer of Shares by a Management Stockholder to any Person except a Transfer in accordance with this Agreement. 6 Section 2.2. Transfer Restriction Period. No Management Stockholder (or Permitted Transferee of a Management Stockholder) shall Transfer any Shares prior to the earliest to occur of (i) a Qualified Public Offering, (ii) the occurrence of a Change of Control and (iii) the seventh anniversary of the date hereof (the earliest of such dates being referred to as the "Lapse Date"); provided that any Transfer of Shares by a Management Stockholder (or Permitted Transferee of a Management Stockholder) to the Company or Cypress (and its Permitted Transferees) or pursuant to Section 2.5 or 2.6 shall be permitted at any time after the date hereof. Section 2.3. Share Register. A copy of this Agreement shall be kept with the records of the Company, and the share register of the Company shall, so long as it is true, contain a notation, with respect to all Shares subject to this Agreement reading substantially as follows: THE SHARES OF CPI ACQUISITION CORP. (THE "COMPANY") HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THESE SHARES ALSO ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE MANAGEMENT STOCKHOLDERS AGREEMENT, DATED AS OF JANUARY __, 2004, COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY. NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE SHARE REGISTER OF THE COMPANY OR OTHERWISE BE EFFECTIVE UNLESS THE BOARD OF DIRECTORS OF THE COMPANY IS SATISFIED THAT THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT. Section 2.4. Transfers to Permitted Transferees. None of the restrictions contained in this Agreement with respect to Transfers of Shares (other than Sections 2.2, 2.3 and 2.4(b)) shall apply to any Transfer of Shares by any Management Stockholder to a Permitted Transferee of such Management Stockholder; provided that prior to any such Transfer, such Permitted Transferee shall have executed and delivered to the Company, as a condition precedent to such Transfer, an instrument in the form of Exhibit B hereto or otherwise reasonably satisfactory to the Company agreeing to be bound hereby as a Permitted Transferee of such Management Stockholder. Section 2.5. Tag-Along Right. (a) If at any time prior to a Qualified Public Offering Cypress (and/or its Permitted Transferees) proposes to Transfer, in one or a series of related transactions, more than 25% of the Shares then held by Cypress (and its Permitted Transferees) to a Third Party, then Cypress shall send written notice to the Management Stockholders (and their Permitted Transferees) which shall state (i) that Cypress and/or its Permitted Transferees desires to make such a Transfer, (ii) the identity of the Third Party and the number of Shares proposed to be sold or otherwise transferred, (iii) the proposed purchase price per Share to be paid and the other material terms and conditions of such Transfer and (iv) the 7 projected closing date of such Transfer, which in no event shall be prior to 15 days after the giving of such written notice to the Management Stockholders. (b) For a period of 15 days after the giving of the notice pursuant to clause (a) above, each Management Stockholder (and his/her Permitted Transferees) shall have the right to sell to the Third Party in such Transfer at the same price and upon the same terms and conditions as Cypress (and/or its Permitted Transferees) (which may include making representations or providing indemnities; provided, however, that in no event shall any Management Stockholder (or his/her Permitted Transferees) be required to make any representations or provide any indemnities (i) other than on a proportionate basis or (ii) with respect to matters relating solely to Cypress (and/or its Permitted Transferees), such as representations as to title to Shares to be transferred by Cypress (or its Permitted Transferees)) that percentage of the total number of Shares held by such Management Stockholder equal to the percentage of the total number of Shares then held by Cypress (and its Permitted Transferees) to be Transferred to such Third Party. (c) The rights of the Management Stockholders (and their Permitted Transferees) under Section 2.5(b) shall be exercisable by delivering written notice thereof, prior to the expiration of the 15-day period referred to in clause (b) above, to Cypress with a copy to the Company. The failure of any Management Stockholder (or his/her Permitted Transferees) to respond within such period to Cypress shall be deemed to be a waiver of such non-responding party's rights under this Section 2.5 with respect to that Transfer, so long as such Transfer takes place on the terms and conditions contained in the notice pursuant to clause (b) above within a period of 180 days following the expiration of such 15-day period. Section 2.6. Drag-Along Right. If at any time prior to a Qualified Public Offering Cypress (and/or its Permitted Transferees) proposes to sell or causes the sale of, in one or a series of related transactions, more than 25% of the Shares then held by Cypress to a Third Party, then Cypress shall have the right to deliver a written notice (a "Buyout Notice") to each Management Stockholder (and his/her Permitted Transferees) which shall state (i) that Cypress proposes to effect such transaction, (ii) the identity of the Third Party and the proposed purchase price per Share to be paid and any other material terms and conditions, and (iii) the projected closing date of such sale. Each Management Stockholder (and his/her Permitted Transferees) agrees that, upon receipt of a Buyout Notice, such Management Stockholder (and his/her Permitted Transferees) shall be obligated to sell in such transaction the same percentage of the Shares held by such Management Stockholder (and his/her Permitted Transferees) as Cypress and its Permitted Transferees propose to sell upon the terms and conditions of such transaction (and otherwise take all necessary action to cause consummation of the proposed transaction); provided that in no event shall any Management Stockholder (or his/her Permitted Transferees) be required to make any representations or provide any indemnities (A) other than on a proportionate basis and (B) with respect to matters relating solely to Cypress (and/or its Permitted Transferees), such as representations as to title to Shares to be transferred by Cypress (or its Permitted Transferees). ARTICLE III 8 ADDITIONAL RIGHTS AND OBLIGATIONS OF MANAGEMENT STOCKHOLDERS AND THE COMPANY Section 3.1. Right of First Refusal. (a) Right. At any time following the Lapse Date and prior to a Qualified Public Offering, if any Management Stockholder (and/or his/her Permitted Transferees) proposes to Transfer Shares then held by such Management Stockholder (and his/her Permitted Transferees) to any Person (other than a Permitted Transferee), and such Management Stockholder (together with his/her Permitted Transferees, a "Selling Management Stockholder") has received an arm's length offer (the "Offer") to purchase all or any portion of his/her Shares (the "Offered Securities") from any Person (the "Offeror") which the Selling Management Stockholder wishes to accept, such Selling Management Stockholder shall cause the Offer to be reduced to writing and shall notify the Company and Cypress in writing of his/her wish to accept the Offer (the "Offering Notice"). The Offering Notice shall contain an irrevocable offer to sell the Shares to the Company and Cypress at a price equal or equivalent (as determined in the manner set forth in Section 3.1(b)(i) below) to the price contained in, and otherwise on the same terms and conditions of, the Offer and shall be accompanied by a copy of the Offer (which shall identify the Offeror). (b) Rightholder Option; Exercise. (i) For a period of 15 Business Days after the date upon which the Company shall have received the Offering Notice (the "First ROFR Option Period"), the Company shall have the right to elect to purchase the Offered Securities either (A) at the same price and on the same terms and conditions as the Offer or (B) if the Offer includes any consideration other than cash, then at the sole option of the Company, at the equivalent cash price, determined in good faith by the board of directors of the Company. If the Company does not subscribe for all of the Offered Securities pursuant to this Section 3.1(b) or if it fails to exercise such right during the First ROFR Option Period, then Cypress shall have the right to purchase the Offered Securities on the terms and conditions set forth above for a period commencing on the date of the expiration of the First ROFR Option Period and ending 15 Business Days thereafter (the "Second ROFR Option Period" and, together with the First ROFR Option Period, the "ROFR Option Periods"). If Cypress does not subscribe for all of the Offered Securities pursuant to this Section 3.1(b), then the Selling Management Stockholder may, Transfer all of the Offered Securities to the Offeror in accordance with Section 3.1(d). (ii) The right of the Company or Cypress, as the case may be, to purchase the Offered Securities under Section 3.1(b)(i) shall be exercisable by delivering written notice of the exercise thereof, prior to the expiration of the applicable ROFR Option Period, to the Selling Management Stockholder. The failure of the Company or Cypress to respond within the applicable ROFR Option Period to the Selling Management Stockholder shall be deemed to be a waiver of the Company's or Cypress's rights under Section 3.1(b)(i); provided that the Company and Cypress may each waive its rights under this Section 3.1(b)(ii) prior to the expiration of the applicable ROFR Option Period by giving written notice to the Selling Management Stockholder. 9 (c) Closing. The closing of the purchases of Offered Securities subscribed for by the Company or Cypress, as applicable, under Section 3.1(b) shall be held at the executive office of the Company at 11:00 a.m., local time, on the 30th Business Day after the receipt of the Offering Notice pursuant to Section 3.1(a) or at such other time and place as the Company or Cypress, as applicable, and the Selling Management Stockholder may agree. At such closing, the Selling Management Stockholder shall deliver certificates representing the Offered Securities, duly endorsed for transfer and accompanied by all requisite transfer taxes, if any, and such Offered Securities shall be free and clear of any encumbrances or liens (other than those arising hereunder and those attributable to actions by the purchasers thereof) and the Selling Management Stockholder shall so represent and warrant, and shall further represent and warrant that it is the sole beneficial and record owner of such Offered Securities. The Company or Cypress, as applicable, shall deliver at the closing payment in full in immediately available funds for the Offered Securities purchased by it. At such closing, the Company or Cypress, as applicable, and the Selling Management Stockholder shall execute such additional documents as are otherwise necessary or appropriate. Notwithstanding the foregoing, any closing pursuant to this Section 3.1(c) may be delayed in connection with any required HSR filing or similar filing in any jurisdiction; provided that each filing Person shall be required to seek all appropriate clearances in connection therewith as soon as possible, including seeking early approval of the proposed purchase or termination of any applicable waiting period, as applicable. (d) Transfer to the Offeror. Unless the Company or Cypress elects to purchase all of the Offered Securities under Section 3.1(b), the Selling Management Stockholder may Transfer all of the Offered Securities to the Offeror on terms and conditions no less favorable to the Selling Management Stockholder than those set forth in the Offering Notice; provided, however, that such Transfer is bona fide and made pursuant to a contract entered into within 60 days after the earlier to occur of (i) the waiver by each of the Company and Cypress of its option to purchase the Offered Securities and (ii) the expiration of the Second ROFR Option Period (the "Contract Date"); and provided, further, that such Transfer shall not be consummated unless and until (A) such Offeror shall represent in writing to the Company and Cypress that it is aware of the rights and obligations of the Stockholders contained in this Agreement and (B) prior to the purchase by such Offeror of any of such Offered Securities, such Offeror shall have executed and delivered to the Company, as a condition precedent to such Transfer, an instrument or instruments in form and substance reasonably satisfactory to the Company confirming that the Offeror agrees to be bound by the terms of this Agreement with respect to the Shares so Transferred to the same extent applicable to the Selling Management Stockholder. If such Transfer is not consummated within 60 days after the Contract Date for any reason, then the restrictions provided for herein shall again become effective, and no transfer of such Offered Securities may be made thereafter by the Selling Management Stockholder without again offering the same to the Company and, if applicable, Cypress, in accordance with this Section 3.1. Section 3.2. Registration Rights. The Company hereby grants to the Management Stockholders (and their Permitted Transferees) the registration and other rights set forth in, and the Management Stockholders (and their Permitted Transferees) agree to comply with the terms and conditions contained in, Exhibit C hereto. Section 3.3. Call Rights. 10 (a) Prior to the occurrence of the Lapse Date, upon the termination of a Management Stockholder's Employment with the Company or any of its Subsidiaries for any reason, the Company shall have the right (the "Company Call Right"), for a period of 181 days from the later of (i) the date of such termination of Employment or (ii) in the case of Shares issued upon the exercise of Share Equivalents, the date of the exercise of such Share Equivalents (the "Company Call Right Period"), to purchase from such Management Stockholder and his/her Permitted Transferees all or a portion of their Shares. Upon the expiration of the Company Call Right Period, if the Company does not exercise the Company Call Right, Cypress shall have the right (the "Cypress Call Right" and, together with the Company Call Right, the "Call Right") to purchase from such Management Stockholder and his/her Permitted Transferees all or a portion of their Shares for a period of 30 days from the expiration of the Company Call Right Period (the "Cypress Call Right Period" and, together with the Company Call Right Period, the "Call Right Period"). All references to Shares in this Section 3.3 shall include Shares issuable upon the conversion, exchange or exercise of Share Equivalents. (b) The Company or Cypress, as applicable, will exercise its rights hereunder with respect to any particular Shares by sending written notice, not later than the expiration of the applicable Call Right Period (the "Call Exercise Notice"), to the relevant Management Stockholder of its intention to purchase the Shares. The closing of the purchase shall be held at the executive office of the Company, on the 30th day after the receipt of the Call Exercise Notice or at such other time and place as the Company or Cypress, as applicable, and the relevant Management Stockholder may agree. At such closing, such Management Stockholder and his/her Permitted Transferees shall deliver certificates representing the Shares subject to the Call Right, duly endorsed for transfer and accompanied by all requisite transfer taxes, if any, and such Shares shall be free and clear of any encumbrances or liens (other than those arising hereunder and those attributable to actions by the purchasers thereof) and such Management Stockholder and his/her Permitted Transferees shall so represent and warrant, and shall further represent and warrant that they are the sole beneficial and record owner of such Shares. The Company or Cypress, as applicable, shall deliver at the closing payment in full in immediately available funds for the Shares purchased by it. At such closing, the Company or Cypress, as applicable, and such Management Stockholder and his/her Permitted Transferees shall execute such additional documents as are otherwise necessary or appropriate. Notwithstanding the foregoing, any closing pursuant to this Section 3.3(b) may be delayed in connection with any required Hart Scott Rodino filing or similar filing in any jurisdiction; provided that each filing Person shall be required to seek all appropriate clearances in connection therewith as soon as possible, including seeking early approval of the proposed purchase or termination of any applicable waiting period, as applicable. (c) The purchase price paid pursuant to Section 3.3(b) by the Company or Cypress, as applicable, shall be (i) the Fair Market Value per share on the date of exercise of such Call Right upon the termination of a Management Stockholder's Employment under any circumstances other than for Cause; provided that with respect to the Shares held by the Management Stockholder on the date hereof and the Shares issued upon exercise of the Rollover Options, the purchase price shall be no less than the imputed price per share paid by the Company pursuant to the Merger Agreement, and (ii) the lower of the cost and the Fair Market Value per share on the date of exercise of such Call Right upon the termination of a Management Stockholder's Employment for Cause. The purchase price may be paid in cash, or, in respect of 11 a Company Call Right, if and only to the extent the Company is prohibited from paying cash under any financing arrangement, (i) by a note payable in installments of up to five years, bearing interest at the prime rate published in The Wall Street Journal on the date of purchase or (ii) by delaying the exercise of the Company Call Right until such financing restrictions expire; provided, however, that if the Company elects to pay with a note, the Management Stockholder may elect to either accept the note or allow the Company to delay the exercise of the Company Call Right (it being understood that if the exercise of the Company Call Right is so delayed, the date of the exercise shall be the day the Company Call Right is actually exercised following such delay). Section 3.4. Covenant Not to Compete; Non-Solicitation. Each Senior Manager acknowledges and recognizes the highly competitive nature of the businesses of the Company and its Subsidiaries and accordingly agrees that, if such Senior Manager is subject to an Employment Agreement, he/she will abide by the non-competition and non-solicitation covenants contained therein which are incorporated herein by reference with respect to such Senior Manager. If no such covenants are contained in the Employment Agreement or if there is no such agreement, then each Senior Manager agrees, subject to Section 3.4(f), as follows: (a) During the term of Employment by the Company or any of its Subsidiaries and for the period of time set forth on Schedule II opposite such Senior Manager's name following the date such Senior Manager ceases to be employed by the Company for any reason (the "Restricted Period"), such Senior Manager will not, whether on his/her own behalf or on behalf of or in conjunction with any Person, directly or indirectly solicit or assist in soliciting in competition with the Company or any of its Subsidiaries, the business of any client or prospective client: (i) with whom such Senior Manager had personal contact or dealings on behalf of the Company or its Subsidiaries during the one year period preceding such Senior Manager's termination of Employment; (ii) with whom employees reporting to such Senior Manager have had personal contact or dealings on behalf of the Company or any of its Subsidiaries during the one year immediately preceding such Senior Manager's termination of Employment; or (iii) for whom such Senior Manager had direct or indirect responsibility during the one year immediately preceding such Senior Manager's termination of Employment. (b) During the Restricted Period, such Senior Manager will not directly or indirectly: (i) engage in any business that competes with the business of the Company or its Subsidiaries (including, without limitation, businesses which the Company or its Subsidiaries have specific plans to conduct in the future and as to which such Senior Manager is aware of such planning) in any geographic area in which the Company or its Subsidiaries conducts such business (a "Competitive Business"); 12 (ii) enter the employ of, or render any services to, any Person (or any division or controlled or controlling Affiliate of any Person) who or which engages in a Competitive Business; (iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or (iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its Subsidiaries, on the one hand, and customers, clients, suppliers partners, members or investors of the Company or its Subsidiaries, on the other hand. (c) During the Restricted Period, such Senior Manager will not, whether on such Senior Manager's own behalf or on behalf of or in conjunction with any Person, directly or indirectly: (i) solicit or encourage any employee of the Company or its Subsidiaries to leave the Employment of the Company or its Subsidiaries; or (ii) hire any such employee who was employed by the Company or its Subsidiaries as of the date of such Senior Manager's termination of Employment with the Company or who left the Employment of the Company or its Subsidiaries coincident with, or within one year prior to, the termination of such Senior Manager's Employment with the Company (other than any such employee whose Employment with the Company is terminated by the Company without Cause). (d) During the Restricted Period, such Senior Manager will not, directly or indirectly, encourage or solicit to cease to work with the Company or its Subsidiaries any consultant then under contract with the Company or its Subsidiaries. (e) Notwithstanding anything to the contrary in this Agreement, any Senior Manager may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its Subsidiaries which are publicly traded on a national or regional stock exchange or on the over-the-counter market if the Senior Manager (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person. (f) It is expressly understood and agreed that although the Senior Managers and the Company consider the restrictions contained in this Section 3.4 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the relevant Senior Manager, the provisions of this Agreement will not be rendered void but will be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding will not affect the enforceability of any of the other restrictions contained herein. 13 Section 3.5. Confidential Information. (a) No Management Stockholder will at any time (whether during or after such Management Stockholder's employment with the Company) (i) retain or use for the benefit, purposes or account of such Management Stockholder or any other Person; or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information - including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, business strategies, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approval - concerning the past, current or future business, activities and operations of the Company, its subsidiaries, Affiliates or any third party that has disclosed or provided any of same to the Company on a confidential basis ("Confidential Information") without the prior written authorization of the board of directors of the Company. (b) "Confidential Information" will not include any information that is (i) generally known to the industry or the public other than as a result of such Management Stockholder's breach of this covenant or any breach of other confidentiality obligations by third parties; (ii) made legitimately available to the Management Stockholder by a third party without breach of any confidentiality obligation; or (iii) required by law or a court of competent jurisdiction to be disclosed; provided that such Management Stockholder will give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment. (c) Except as required by law or a court of competent jurisdiction, no Management Stockholder will disclose to anyone, other than such Management Stockholder's legal, tax and financial advisors, the existence or contents of this Agreement; provided that each Management Stockholder may disclose to any prospective future employer the provisions of Sections 3.4 and 3.5 of this Agreement, provided that they agree to maintain the confidentiality of such terms. Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of transactions entered into by the Company or any of its subsidiaries and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws. (d) Upon termination of such Management Stockholder's employment for any reason, the Management Stockholder will (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its Affiliates; (ii) immediately destroy, delete, or return to the Company, at the Company's option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in such 14 Management Stockholder's possession or control (including any of the foregoing stored or located in the Management Stockholder's office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company and its Affiliates, except that such Management Stockholder may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which the Management Stockholder is or becomes aware. Section 3.6. Representations and Warranties of the Management Stockholders. Each Management Stockholder represents and warrants to the Company as follows: (a) Such Management Stockholder is acquiring the Shares for the Management Stockholder's own account and not with a view to distributing or reselling the Shares in any transaction that would be in violation of any federal or state securities laws. (b) Such Management Stockholder understands that the Shares have not been registered under the Securities Act, or registered or qualified under the securities laws of any state, and that the Management Stockholder may not sell or otherwise transfer the Shares unless the Shares are subsequently registered under the Securities Act and registered or qualified under applicable state securities laws, or unless an exemption is available that permits the sale or transfer without such registration and qualification. (c) Such Management Stockholder acknowledges that he/she has been advised that (i) a restrictive legend in the form set forth in Section 2.3 will be placed on any certificate representing the Shares and (ii) a notation will be made in the appropriate records of the Company indicating that the Shares are subject to restrictions on transfer and appropriate stop transfer restrictions will be issued to the Company's transfer agent with respect to the Shares. (d) If any Shares are to be disposed of in accordance with Rule 144 under the Securities Act or otherwise, such Management Stockholder will promptly notify the Company of such intended disposition and will deliver to the Company at or prior to the time of such disposition such documentation as the Company may reasonably request in connection with such sale and, in the case of a disposition pursuant to Rule 144, will deliver to the Company an executed copy of any notice on Form 144 required to be filed with the Commission. (e) Such Management Stockholder is as of the date hereof an employee of the Company and in such capacity has acquired at least a general understanding of the Company and its business. Such Management Stockholder has been given the opportunity to obtain any additional information or documents (and to ask questions and receive answers about such information and documents) about the Company and its business which s/he deems necessary to evaluate the merits and risks related to his/her investment in the Shares. (f) In making his/her decision to invest in the Company, such Management Stockholder has relied upon independent investigations made by him/her and, to the extent believed by the Management Stockholder to be appropriate, his/her representatives, including his/her own professional, financial, tax and other advisors. 15 (g) Such Management Stockholder is able to bear the economic risk of a total loss of such Management Stockholder's investment in the Company, and such Management Stockholder has adequate means of providing for such Management Stockholder's current needs and foreseeable personal contingencies and has no need for such Management Stockholder's investment in the Shares to be liquid. (h) Such Management Stockholder understands that an investment in the Company is a speculative investment which involves a high degree of risk of loss of his/her investment therein, there are substantial restrictions on the transferability of the Shares, and, on the date hereof and for an indefinite period following the date hereof, there will be no public market for the Shares and, accordingly, it may not be possible for such Management Stockholder to liquidate his/her investment in case of emergency, if at all. (i) Such Management Stockholder understands and has taken cognizance of all risk factors related to the retention of the Shares, and such Management Stockholder has such knowledge and experience in financial and business matters that s/he is capable of evaluating the merits and risks of his/her purchase of the Shares as contemplated by this Agreement. (j) If such Management Stockholder is resident in a community property state, such Management Stockholder's spouse, if any, has duly executed or will duly execute a Consent of Spouse, a form of which is attached hereto as Exhibit D, and such Consent of Spouse has been delivered as of the date of this Agreement, or, if later, the date such party became a party. Such Consent of Spouse was duly authorized, executed and delivered by such Spouse and effectively binds such spouse to the terms set forth therein. ARTICLE IV MISCELLANEOUS Section 4.1. No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Management Stockholders in this Agreement. Section 4.2. Voting Agreement. (a) Each Management Stockholder and each of his/her Permitted Transferees hereby agrees that, until the Lapse Date, s/he will (i) vote all of the Shares owned or held of record by him/her, either in person or by proxy, whether at a meeting of the Company's stockholders or by executing a written consent, consistent with the vote of Cypress or as Cypress directs and (ii) ratify, approve and adopt any and all actions adopted or approved by the board of directors of the Company. (b) Until the Lapse Date, each Management Stockholder and each of his/her Permitted Transferees, in his/her capacity as a stockholder, hereby irrevocably appoints the Company or any designee of the Company the lawful agent, attorney-in-fact and proxy of such Management Stockholder and Permitted Transferees during the term of this Agreement (which proxy shall be automatically revoked without any further action on the part of such Stockholder upon the termination of this Agreement or the Lapse Date, whichever is earlier) to vote the 16 Shares of such Management Stockholder and Permitted Transferees in accordance with the agreement to vote Shares set forth in Section 4.2(a) of this Agreement at any meeting of the Company's stockholders. Each such Management Stockholder and Permitted Transferee intends this proxy to be irrevocable and coupled with an interest and will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by such Management Stockholder or Permitted Transferee with respect to his/her Shares. (c) Nothing contained in this Agreement shall be deemed to vest in the Company any direct or indirect ownership or incidence of ownership of, or with respect to, any Shares. All rights, ownership and economic benefits of and relating to the Shares of any Management Stockholder and Permitted Transferee of a Management Stockholder shall remain vested in and belong to such Management Stockholder or Permitted Transferee, and the Company shall have no authority to exercise any power or authority to direct the Management Stockholders or Permitted Transferees in the voting of any of the Shares, except as otherwise provided herein, or in the performance of the Management Stockholders' and Permitted Transferees' duties or responsibilities as stockholders of the Company. Section 4.3. Employment by the Company. Nothing contained in this Agreement or any option agreement entered into by the Company and any Management Stockholder (a) obligates the Company or any Subsidiary or Affiliate of the Company to employ any Management Stockholder or his/her Permitted Transferees in any capacity whatsoever or (b) prohibits or restricts the Company (or any such Subsidiary or Affiliate) from terminating the Employment of any Management Stockholder at any time or for any reason whatsoever, with or without Cause, and each of the Management Stockholders and their Permitted Transferees hereby acknowledges and agrees that neither the Company nor any other Person has made any representations or promises whatsoever to such Management Stockholder or Permitted Transferee concerning such person's Employment or continued Employment by the Company or any Subsidiary or Affiliate of the Company. Section 4.4. Taxes. The Company will have the right to deduct from any cash payment made under this Agreement to any Management Stockholder any federal, state or local income or other taxes required by law to be withheld with respect to such payment. Section 4.5. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Section 4.6. No Waivers, Amendments. (a) Except as expressly set forth herein, no failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (b) Any amendment, modification or supplement to this Agreement shall not be enforced against any party hereto unless such amendment, modification or supplement is 17 signed by the Company and the Majority Management Stockholders, provided, however that notwithstanding the foregoing, any amendment, modification or supplement to this Agreement with respect to a matter that does not directly or indirectly adversely affect the rights of any of the Management Stockholders shall be enforceable without requiring that such amendment, modification or supplement be signed by the Majority Management Stockholders. (c) Any provision of this Agreement may be waived if, but only if, such waiver is in writing and is signed by the party against whom the enforcement of such waiver is sought. Section 4.7. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telex, telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth below, or such other address or telecopier number as such party may hereinafter specify for the purpose to the party giving such notice. Each such notice, request or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate answerback is received or, (b) if given by overnight courier or express mail service, when delivery is confirmed or, (c) if given by any other means, when delivered at the address specified in this Section 4.7. In each case, notice shall be sent to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company: CPI Acquisition Corp. 811 Hansen Way, Mail Stop A-028 Palo Alto, California 94303 Attention: Joel A. Littman Telecopier: (650) 846-3276 with a copy to: The Cypress Group L.L.C. 65 East 55th Street New York, New York 10022 Attention: Michael F. Finley Telecopier: (212) 705-0199 and Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Attention: Marni J. Lerner Telecopier: (212) 455-2502 (ii) if to Cypress: c/o The Cypress Group L.L.C. 18 65 East 55th Street New York, New York 10022 Attention: Michael F. Finley Telecopier: (212) 705-0199 with a copy to: Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Attention: Marni J. Lerner Telecopier: (212) 455-2502 (iii) if to a Management Stockholder, at the address for such Management Stockholder listed below such Management Stockholder's signature hereto. Section 4.8. Term of Agreement. This Agreement shall terminate (a) in full on the earlier to occur of (i) the tenth anniversary of the date hereof (provided that the registration rights in Exhibit C hereto shall survive any such termination until such time as all Management Stockholders hold no Registrable Securities) and (ii) when all Management Stockholders cease to beneficially own any Shares, and, if earlier, (b) with respect to any Management Stockholder, when such Management Stockholder ceases to beneficially own any Shares; provided that any termination pursuant to this Section 4.8 will not relieve any party for any liability arising from a breach of representation, warranty, covenant or agreement occurring prior to such termination. Section 4.9. Inspection. So long as this Agreement shall be in effect, this Agreement and any amendments hereto shall be made available for inspection by any Management Stockholder at the principal offices of the Company. SECTION 4.10. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. Each of the parties hereto hereby (a) submits to the jurisdiction of the courts of the State of Delaware and the United States District Court for the District of Delaware with respect to matters arising out of or relating hereto, (b) agrees that all claims with respect to such matters may be heard and determined in an action or proceeding in such Delaware courts, and (c) agrees that a final judgment in any such action or proceeding will be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Section 4.11. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof. 19 Section 4.13. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdictions, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. Section 4.14. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which together shall constitute one and the same agreement. Section 4.15. Parties in Interest. This Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and Permitted Transferees. Except as expressly set forth herein, neither this Agreement nor any of their rights hereunder shall be assigned by any of the parties hereto who are not Permitted Transferees without the prior written consent of the other parties. Section 4.16. Enforcement; Further Assurances. (a) The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. (b) The parties hereto agree to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments, agreements and documents, and to do all such other acts and things, as may be required by law or as may be necessary or advisable to carry out the intent and purposes of this Agreement. Section 4.17. Advice of Counsel. Each Management Stockholder and Permitted Transferee of a Management Stockholder acknowledges that, in executing this Agreement, he or she has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 20 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above. CPI ACQUISITION CORP. By: ______________________________ Name: Title: CYPRESS MERCHANT BANKING PARTNERS II L.P. By: Cypress Associates II LLC, as general partner By: ______________________________ Name: Title: CYPRESS MERCHANT BANKING II C.V. By: Cypress Associates II LLC, as managing general partner By: ______________________________ Name: Title: CYPRESS SIDE-BY-SIDE LLC By: ______________________________ Name: Title: 55TH STREET PARTNERS II L.P. By: Cypress Associates II LLC, as general partner By: ______________________________ Name: Title: Joe Caldarelli __________________________________ Address: _________________________ _________________________ Robert Fickett __________________________________ Address: _________________________ _________________________ Don Coleman __________________________________ Address: _________________________ _________________________ Joel Littman __________________________________ Address: _________________________ _________________________ Mike Cheng __________________________________ Address: _________________________ _________________________ 2 John Beighley __________________________________ Address: _________________________ _________________________ 3 SCHEDULE I MANAGEMENT STOCKHOLDERS Joe Caldarelli Robert Fickett Don Coleman Joel Littman Mike Cheng John Beighley SCHEDULE II SENIOR MANAGERS Name Restricted Period Joe Caldarelli 18 months Robert Fickett 18 months Don Coleman 12 months Joel Littman 18 months Mike Cheng 12 months John Beighley 12 months EXHIBIT A MANAGEMENT STOCKHOLDER FORM OF AGREEMENT TO BE BOUND [DATE] To the Parties to the Management Stockholders Agreement dated as of January __, 2004 Ladies and Gentlemen: Reference is made to the Management Stockholders Agreement, dated as of January __, 2004 (as may be amended, supplemented or modified from time to time in accordance with the terms thereof, the "Management Stockholders Agreement"), among CPI Acquisition Corp., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and the other stockholders party thereto and each other person who shall become party to the Management Stockholders Agreement as provided therein, as the same may be subsequently modified, supplemented or amended in accordance with its terms. Capitalized terms used herein and not defined have the meanings ascribed to them in the Management Stockholders Agreement. In consideration of the mutual covenants and agreements contained in the Management Stockholders Agreement, the undersigned hereby confirms and agrees that it shall be bound by all of the provisions thereof as a Management Stockholder. This letter shall be construed and enforced in accordance with the laws of Delaware. Very truly yours, __________________________________ [Management Stockholder] EXHIBIT B PERMITTED TRANSFEREE FORM OF AGREEMENT TO BE BOUND [DATE] To the Parties to the Management Stockholders Agreement dated as of January __, 2004 Ladies and Gentlemen: Reference is made to the Management Stockholders Agreement, dated as of January __, 2004 (as may be amended, supplemented or modified from time to time in accordance with the terms thereof, the "Management Stockholders Agreement"), among CPI Acquisition Corp., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and the other stockholders party thereto and each other person who shall become party to the Management Stockholders Agreement as provided therein, as the same may be subsequently modified, supplemented or amended in accordance with its terms. Capitalized terms used herein and not defined have the meanings ascribed to them in the Management Stockholders Agreement. In consideration of the mutual covenants and agreements contained in the Management Stockholders Agreement, the undersigned hereby confirms and agrees that it shall be bound by all of the provisions thereof as a Permitted Transferee of [Name of Transferor]. This letter shall be construed and enforced in accordance with the laws of Delaware. Very truly yours, __________________________________ [Permitted Transferee] EXHIBIT C REGISTRATION RIGHTS ARTICLE I DEFINITIONS Section 1.1. Definitions. Terms defined in the Management Stockholders Agreement, dated as of January __, 2004 (as may be amended, supplemented or modified from time to time in accordance with the terms thereof, the "Management Stockholders Agreement"), among CPI Acquisition Corp., Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and the stockholders listed on Schedule I thereto and each other person who shall become party to the Management Stockholders Agreement as provided therein, are used herein as therein defined. In addition, the following terms shall have the meanings ascribed to them below: "Commission" means the United States Securities and Exchange Commission. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. "Holder" means any Management Stockholder and any Permitted Transferee of a Management Stockholder, in each case holding Registrable Securities. "Indemnified Party" has the meaning set forth in Section 4.3. "Indemnifying Party" has the meaning set forth in Section 4.3. "Inspectors" has the meaning set forth in Section 3.1(h). "Piggy-Back Registration" has the meaning set forth in Section 2.1. "Records" has the meaning set forth in Section 3.1(h). "Registrable Security" means any outstanding shares of Common Stock held by a Holder until (i) a registration statement covering such Common Stock has been declared effective by the Commission and such stock has been disposed of pursuant to such effective registration statement or (ii) such stock is sold pursuant to Rule 144 (or any similar provisions then in force) under the Securities Act. "Registration Expenses" has the meaning set forth in Section 3.2. "Selling Holder" means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act. "Underwriter" means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer's market-making activities. C-2 ARTICLE II REGISTRATION RIGHTS Section 2.1. Piggy-Back Registration. If at any time following the consummation of an Initial Public Offering the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account and/or for the account of any of its security holders of any common stock (other than (i) a registration statement on Form S-4 (or F-4) or S-8 (or any substitute form that may be adopted by the Commission) or (ii) a registration statement filed in connection with an exchange offer or an offering of securities solely to the Company's existing securityholders), then the Company shall give written notice of such proposed filing to the Holders as soon as practicable (but in no event less than 15 days before the anticipated filing date), and such notice shall identify the anticipated filing date and offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request (which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof and shall be delivered to the Company at least two days prior to the anticipated filing date) (a "Piggy-Back Registration"). The Company shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.1 by giving written notice to the Company of its request to withdraw. The Company may withdraw a Piggy-Back Registration at any time prior to the time it becomes effective, provided that, in such event, the Company shall reimburse Holders requested to be included in such Piggy-Back Registration for all Registration Expenses (including reasonable counsel fees and expenses) incurred prior to such withdrawal. Section 2.2. Reduction of Offering. Notwithstanding anything contained herein, if the managing Underwriter(s) of an offering described in Section 2.1 determine that the offering that the Holders, the Company and/or such other Persons intend to make is such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then the Company shall include in such registration: (i) first, the shares, if any, proposed to be registered by the Company for its own account or for the account of a holder exercising "demand registration rights"; and (ii) second, an amount of securities requested to be included in such registration (including pursuant to Section 2.1) by the holders exercising "piggy-back registration rights" (such amount to be allocated among such holders in proportion to the number of shares of Common Stock held by such holders). Holders may not sell shares in a Public Offering if the managing Underwriter(s) determine in their reasonable business judgment that such participation will have an adverse impact on such Public Offering. Notwithstanding any provision in this Agreement to the contrary, no Holder may exercise piggyback registration rights to the extent it would otherwise result in the sale by him or her, on a cumulative basis taking into account all prior sales, of a greater percentage of the Common Stock that has ever been held by him than the percentage sold by Cypress. The Holders agree that they will not sell any shares in an Initial Public Offering. 2 C-3 ARTICLE III REGISTRATION PROCEDURES Section 3.1. Filings; Information. Whenever the Holders have requested that any Registrable Securities be registered pursuant to this agreement, the Company will use its reasonable efforts to effect the registration of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request: (a) The Company will as expeditiously as practicable prepare and file with the Commission a registration statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof (it being understood that the Company shall use Form S-3 (or any replacement form) if such form is then available), and use its commercially reasonable efforts to cause such filed registration statement to become effective. (b) The Company will prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the Selling Holder or Selling Holders thereof set forth in such registration statement. (c) The Company will, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder, counsel representing any Selling Holders, and each Underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, together with exhibits thereto, which documents will be subject to review by the foregoing within 5 Business Days after delivery, and thereafter furnish to such Selling Holder, counsel and Underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder. (d) After the filing of the registration statement, the Company will promptly notify each Selling Holder covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (e) The Company will use its commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States and such other jurisdictions as any Selling Holder reasonably (in light of such Selling Holder's intended plan of distribution) requests and (ii) cause such 3 C-4 Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction. (f) The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and will promptly make available to each Selling Holder any such supplement or amendment. (g) The Company will enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities in accordance with the intended plan of distribution of the Selling Holders. (h) The Company will deliver promptly to each Selling Holder of such Registrable Securities and each Underwriter, if any, subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all correspondence between the Commission and the Company and its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and make available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to perform a reasonable and customary due diligence investigation, and cause the Company's officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; provided that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors' obligation not to disclose such Records; and provided, further, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the 4 C-5 Inspectors may disclose that portion of the Records which counsel has advised the Inspectors that the Inspectors are compelled to disclose. Each Selling Holder of such Registrable Securities agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. (i) The Company will furnish to each Underwriter, if any, (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the managing Underwriter, if any, therefor reasonably requests. (j) The Company will use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. (k) The Company will use its commercially reasonable efforts (a) to cause all such Registrable Securities to be listed on a national securities exchange (if such shares are not already so listed) and on each additional national securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange or (b) to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD. (l) The Company will appoint a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement. The Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration. Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1(f) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(f) hereof, and, if so directed by the Company such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the 5 C-6 Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 3.1(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 3.1(f) hereof to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 3.1(f) hereof. Section 3.2. Registration Expenses. In connection with any registration statement filed pursuant to Section 2.1, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the "Registration Expenses"): (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) the Company's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and not more than one counsel for the Selling Holders, as may be chosen by a majority of the Selling Holders, and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 3.1(i) hereof) and (vii) reasonable fees and expenses of any special experts retained by the Company in connection with such registration. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities. ARTICLE IV INDEMNIFICATION AND CONTRIBUTION Section 4.1. Indemnification by the Company. To the fullest extent permitted by law, the Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors, employees and agents, and each person, if any, who controls such Selling Holder within the meaning of the Securities Act from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Common Stock) to which such Selling Holder, officer, director, employee or agent or controlling Person may become subject under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement, preliminary prospectus or final prospectus or any amendment or supplement thereto relating to the Registrable Securities or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading and shall reimburse each Selling Holder and each such officer, director, employee, agent and controlling Person for any legal and other expenses reasonably incurred by that Selling Holder, officer, director, employee, agent or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred, except insofar as the same are contained in any information furnished in writing to the Company by such Selling Holder expressly for use therein; provided, however, that the Company shall not be liable to any 6 C-7 Selling Holder or such Person's directors, officers, agents or controlling Persons, in any such case for any such loss, claim, damage or liability to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in connection with such registration statement, preliminary prospectus, final prospectus or amendments or supplements thereto, in conformity with written information relating to such Selling Holder furnished to the Company by such Selling Holder expressly for inclusion therein in connection with such registration; and, provided, further, that as to any preliminary prospectus or any final prospectus, this indemnity agreement shall not inure to the benefit of any Selling Holder or such Person's directors, officers, agents or controlling Persons, on account of any loss, claim, damage or liability arising from the sale of Registrable Securities to any Person by such Selling Holder if such Selling Holder or its representatives failed to send or give a copy of the final prospectus or a prospectus supplement, as the case may be (excluding documents incorporated by reference therein), as the same may be amended or supplemented, to that Person within the time required by the Securities Act, and the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in such preliminary prospectus or final prospectus was corrected in the final prospectus or such prospectus supplement, as the case may be (excluding documents incorporated by reference therein), unless such failure resulted from the non-compliance by the Company with Section 3.1(f). The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.1. The indemnities provided by this Section 4.1 shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or Underwriter. Section 4.2. Indemnification by Holders of Registrable Securities. To the fullest extent permitted by law, each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company its officers, directors and agents and each Person, if any, who controls the Company within the meaning of the Securities Act to the same extent as the indemnity from the Company to such Selling Holder pursuant to clauses (i) and (ii) of Section 4.1, but only with reference to information related to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder's behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus; provided that the obligation to indemnify will be individual to each Selling Holder and will be limited to the net amount of proceeds received by such Selling Holder from the sale of Registrable Securities pursuant to such Registration Statement. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.2, subject to the proviso in the first sentence of this Section 4.2. Notwithstanding the foregoing, the indemnity set forth in this Section 4.2, shall not apply to amounts paid in settlements effected without the consent of such Selling Holder (which consent shall not be unreasonably withheld or delayed). Section 4.3. Conduct of Indemnification Proceedings. Promptly after receipt by any person in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the person against whom such 7 C-8 indemnity may be sought (an "Indemnifying Party") notify the Indemnifying Party in writing of the claim or the commencement of such action, provided that the failure to notify the Indemnifying Party shall not relieve it from any liability which it may have to an Indemnified Party otherwise than under Section 4.1 or 4.2, except to the extent of any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party, and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding. Section 4.4. Contribution. If the indemnification provided for in this Article IV is unavailable to the Indemnified Parties in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the 8 C=9 Company and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Selling Holder were offered to the public (less underwriting discounts and commissions) exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each Selling Holder's obligations to contribute pursuant to this Section 4.4 are several in proportion to the proceeds of the offering received by such Selling Holder and not joint. ARTICLE V MISCELLANEOUS Section 5.1 Participation in Underwritten Registrations. No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these Registration Rights. Section 5.2. Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent required from time to time 9 C-10 to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. Section 5.3. Holdback Agreements. If any registration hereunder shall be in connection with an underwritten public offering, each Holder of Registrable Securities agrees not to effect any sale or distribution of the securities being registered or of a similar security of the Company or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during (i) the 180-day period beginning on the consummation of the Initial Public Offering, unless the investment banks or underwriters managing the public offering otherwise agree, and (ii) the 90-day period beginning on, the effective date of any other public offering to be underwritten on a firm commitment basis (except as part of such underwritten registration), unless the investment banks or underwriters managing the public offering otherwise agree. Section 5.4. Other Registration Rights. Notwithstanding anything contained in this agreement or the Management Stockholders Agreement to the contrary, no provision herein or therein shall be interpreted to limit (i) the right of the Company to grant Cypress or any other Person any right of registration in respect of any securities of the Company (provided, however, that the Company shall not enter into any agreement with respect to the Registrable Securities which would prevent the Company from complying with its obligations under this Agreement or (ii) the number of times the Company may grant any such right of registration under the Securities Act to any Person (including Cypress). 10 EXHIBIT D FORM OF CONSENT OF SPOUSE Reference is made to the Management Stockholders Agreement, signed by _________________ (the "Management Stockholder") and dated January __, 2004 (the "Management Stockholders Agreement"), among CPI Acquisition Corp., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and the stockholders listed on Schedule I thereto and each other person who shall become party to the Management Stockholders Agreement as provided therein, as the same may be subsequently modified, supplemented or amended in accordance with its terms. Capitalized terms used but not otherwise defined herein will have the meanings set forth in the Management Stockholders Agreement. The undersigned is the spouse of the Management Stockholder and hereby acknowledges that s/he has read the attached Management Stockholders Agreement and knows its content. The undersigned is aware that by its provisions, his/her spouse agrees to sell all or a portion of his/her Shares, whether now owned or later acquired through the exercise of stock options or otherwise, including his/her community property interest therein, if any, upon the occurrence of certain events. The undersigned hereby consents to the sale, approves the provisions of the Management Stockholders Agreement, and agrees that those securities and his/her interest in them, if any, are subject to the provisions of the Management Stockholders Agreement and that s/he will take no action at any time to hinder operation of the Management Stockholders Agreement on those securities or his/her interest, if any, in them, and, to the extent required, will take any further action that is necessary to effectuate the provisions of the Management Stockholders Agreement. __________________________________ Name EX-31 11 f96399exv31.txt EXHIBIT 31 EXHIBIT 31 CERTIFICATION I, O. Joe Caldarelli, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries Holding Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 Signature: /s/ O. Joe Caldarelli ------------------------ O. Joe Caldarelli, Chief Executive Officer CERTIFICATION I, Joel A. Littman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries Holding Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 Signature: /s/ Joel A. Littman ------------------------ Joel A. Littman, Chief Financial Officer CERTIFICATION I, O. Joe Caldarelli, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 Signature: /s/ O. Joe Caldarelli ------------------------ O. Joe Caldarelli, Chief Executive Officer CERTIFICATION I, Joel A. Littman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 Signature: /s/ Joel A. Littman ------------------------ Joel A. Littman, Chief Financial Officer EX-32 12 f96399exv32.txt EXHIBIT 32 EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Communications & Power Industries Holding Corporation (the "Company") on Form 10-Q for the period ending January 2, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, O. Joe Caldarelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ O. Joe Caldarelli O. Joe Caldarelli Chief Executive Officer February 11, 2004 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Communications & Power Industries Holding Corporation (the "Company") on Form 10-Q for the period ending January 2, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joel Littman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joel Littman Joel Littman Chief Financial Officer February 11, 2004 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Communications & Power Industries, Inc. (the "Company") on Form 10-Q for the period ending January 2, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, O. Joe Caldarelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ O. Joe Caldarelli O. Joe Caldarelli Chief Executive Officer February 11, 2004 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Communications & Power Industries, Inc. (the "Company") on Form 10-Q for the period ending January 2, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joel Littman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joel Littman Joel Littman Chief Financial Officer February 11, 2004 EX-99 13 f96399exv99.txt EXHIBIT 99 EXHIBIT 99 RISK FACTORS RELATED TO THE OFFERING OF 8% SENIOR SUBORDINATED NOTES DUE 2012 The following risk factors were included in the offering memorandum provided in connection with the offering of the 8% Senior Subordinated Notes due 2012 (the "Notes"). The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties may also adversely impact and impair the Company. If any of the following risks actually occur, the Company's business, results of operations or financial condition would likely suffer. RISKS RELATING TO OUR BUSINESS THE COMPANY'S INDEBTEDNESS IS, AND WILL BE, SUBSTANTIAL, WHICH COULD ADVERSELY AFFECT ITS FINANCIAL HEALTH AND LIMIT ITS ABILITY TO OBTAIN FINANCING IN THE FUTURE AND TO REACT TO CHANGES IN ITS BUSINESS. After completing the Merger (as defined in the Company's Quarterly Report on Form 10-Q for the quarter ended January 2, 2004 (the "10-Q")) and the related transactions (together with the Merger, the "Transactions"), we will have a large amount of debt. As of October 3, 2003, on a pro forma basis, after giving effect to the Transactions, our total consolidated indebtedness would have been $215.0 million and we would have had $40.0 million of additional borrowings available under our revolving credit facility and term loan facility to be entered into in connection with the Merger (the "Senior Credit Facilities"). Our high degree of debt could have important consequences to you, including, but not limited to, the following: - it will require the Company to dedicate a substantial portion of its cash flow from operations to payments on indebtedness, which will reduce the funds available for working capital, capital expenditures and other general corporate expenses; - it could make it more difficult for the Company to satisfy its obligations under the Senior Credit Facilities and the Notes; - it could place the Company at a disadvantage compared to its competitors that have proportionately less debt; and - it could limit the Company's ability to borrow additional funds in the future, if needed, because of applicable financial and restrictive covenants of its indebtedness. THE COMPANY'S DEBT AGREEMENTS HAVE RESTRICTIONS THAT WILL LIMIT ITS FLEXIBILITY IN OPERATING ITS BUSINESS. The Senior Credit Facilities and the indenture under which the Notes will be issued (the "Indenture") will have a number of significant covenants that, among other things, restrict the Company's ability to: - incur additional indebtedness; - sell assets or consolidate or merge with or into other companies; o pay dividends or repurchase or redeem capital stock; - make certain investments; and - enter into certain types of transactions with our affiliates. These covenants, as well as the Company's level of indebtedness, could have the effect of limiting the Company's flexibility in planning for, or reacting to, changes in its business and the markets in which it competes. In addition, under the Senior Credit Facilities, we will be required to satisfy and maintain specified financial ratios and tests. Events beyond our control may affect our ability to comply with those provisions and we may not be able to meet those ratios and tests, which would result in a default under the Senior Credit Facilities. In the event of a default, the lenders under the Senior Credit Facilities could elect to declare all amounts borrowed under the Senior Credit Facilities, together with accrued interest, to be due and payable and could proceed against the collateral securing that indebtedness. Borrowings under the Senior Credit Facilities are senior in right of payment to the Notes. If any of our indebtedness were to be accelerated, our assets may not be sufficient to repay in full that indebtedness and the Notes. 2 THE COMPANY'S ABILITY TO GENERATE THE SIGNIFICANT AMOUNT OF CASH NEEDED TO SERVICE ITS DEBT AND TO FUND CAPITAL EXPENDITURES OR OTHER LIQUIDITY NEEDS DEPENDS ON MANY FACTORS BEYOND ITS CONTROL. The Company's ability to make scheduled payments of principal and interest on its indebtedness, to refinance its indebtedness and to fund its planned capital expenditures will depend on its ability to generate cash and to obtain financing in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors affecting our industry that are beyond the Company's control. If we do not generate sufficient cash flow from operations, and sufficient future borrowings are not available to the Company under its Senior Credit Facilities or from other sources of financing, the Company may not be able to repay its debt or fund capital expenditures or its other liquidity needs. THE COMPANY HAS HAD HISTORICAL LOSSES. In fiscal year 2003, the Company had its first profitable year since fiscal year 1998. However, the Company had net losses of $6.7 million and $18.8 million in fiscal year 2002 and 2001, respectively. As of October 3, 2003, the Company had an accumulated deficit of $84.5 million. The Company's ability to generate revenues and profits is subject to the risks and uncertainties encountered by companies in competitive markets, including many of the factors described elsewhere in these risk factors. We have recently generated significant increases in our gross margin. Our gross margin has increased from 18.0% in 2001, to 23.5% in 2002 to 30.7% in 2003. These increases have resulted from, among other things, gains in production efficiencies, increase in sales volume, the relocation of the Satcom manufacturing facility, resolution of technical problems for products and manufacturing, favorable product mix, improved pricing for certain products, completion of contracts with lower pricing in prior periods and the sale of our Solid State Product Division in 2002. In addition, we have historically experienced margin fluctuations from period to period due to variations in the mix of products sold during any period. If we are not able to maintain our current level of gross margin, our results of operations and financial condition would be adversely affected. IF WE ARE UNABLE TO RETAIN KEY MANAGEMENT AND OTHER PERSONNEL, OUR BUSINESS AND OPERATING RESULTS COULD BE ADVERSELY AFFECTED. The unanticipated departure of any key member of our management team could have an adverse effect on our business and results of operations. In addition, because of the specialized and technical nature of the Company's business, our future performance is dependent on the continued service of, and on our ability to attract and retain, qualified technical, marketing, sales and managerial personnel. In addition, certain management and other personnel involved with the manufacture of some of our products are required to have various levels of security clearance, which is a time intensive process. There is competition for such personnel, and the failure to retain and/or recruit additional or substitute key personnel in a timely manner could have an adverse effect on the Company's business and operating results. THE MARKETS IN WHICH THE COMPANY SELLS ITS PRODUCTS ARE COMPETITIVE, WHICH CAN RESULT IN REDUCED REVENUES AND LOSS OF MARKET SHARE. The domestic and international markets in which we sell our products are competitive. Certain of our competitors have substantially greater resources than those of the Company. In addition, some of our competitors offer a variety of products for applications similar to those of our products. The Company's ability to compete in these markets depends to a large extent on its ability to provide high quality products with shorter lead times at competitive prices, and its readiness in facilities, equipment and personnel. There can be no assurance that we will be able to compete successfully against our current or future competitors or that the competitive pressures we face will not result in reduced revenues and market share or seriously harm our business. THE END MARKETS IN WHICH THE COMPANY OPERATES ARE SUBJECT TO TECHNOLOGICAL CHANGE, AND CHANGES IN TECHNOLOGY COULD ADVERSELY AFFECT OUR SALES. The change of technology is a feature of both our defense and commercial end markets. There is an inherent risk that advances in existing technology, including solid state technology, or the development of new technology could adversely affect the Company's financial condition and results of operations. Historically, the Company has relied on a combination of internal research and development and customer activities. To succeed in 3 the future, the Company must continually engage in effective and timely research and development efforts in order to introduce innovative new products for technologically sophisticated customers and end markets and benefit from activities of our customers. We may not be able to continue to allocate sufficient financial and other resources to our research and development activities or receive support from our customers. If we fail to adapt successfully to technological changes or fail to obtain access to important technologies, our business may suffer. A SIGNIFICANT PORTION OF THE COMPANY'S SALES IS, AND IS EXPECTED TO CONTINUE TO BE, FROM CONTRACTS WITH THE U.S. GOVERNMENT THAT ARE SUBJECT TO COMPETITION, GOVERNMENT REGULATION, CHANGES IN GOVERNMENTAL APPROPRIATIONS, NATIONAL DEFENSE POLICIES AND RISKS PARTICULAR TO GOVERNMENT CONTRACTS. A significant portion of the Company's sales results from, and is expected to continue to result from, contracts with the U.S. Government, either directly or through prime contractors or subcontractors. Over 30% of our sales in fiscal year 2003 were made directly or indirectly to the U.S. Government. A significant disruption or decline in U.S. military expenditures in the future or of our relationship with the U.S. Government would result in a material decrease to our sales, earnings and cash flow. In addition, the loss or significant reduction in government funding of programs in which we participate could also result in a material decrease to our future sales, earnings and cash flows and thus limit our ability to satisfy our financial obligations, including those related to the Notes. U.S. Government contracts are also conditioned upon congressional approval and the continuing appropriation of necessary funds. Congress usually appropriates funds for a given program each fiscal year even though contract periods of performance may exceed one year. Consequently, at the outset of a major program, multi-year contracts are usually funded for only the first year, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future fiscal years. In addition, we are subject to risks particular to companies supplying defense-related equipment and services to the U.S. Government. These risks include the ability of the U.S. Government to unilaterally: - suspend us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations; - terminate existing contracts, including for the convenience of the government; - reduce the value of existing contracts; - audit our contract related-costs and fees, including allocated indirect costs; and - control and potentially prohibit the export of our products, technology or other data. The U.S. Government may review our costs and performance on certain contracts, as well as on our accounting and general business practices. Based on the results of such audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. In addition, under U.S. Government purchasing regulations, some of our costs, including most financing costs, portions of research and development costs, and certain marketing expenses may not be reimbursable under U.S. Government contracts. Further, because of its business with the U.S. Government, the Company may also be subject to "qui tam", or whistle blower, suits brought by private plaintiffs in the name of the U.S. Government upon the allegation that the Company submitted a false claim to the U.S. Government, as well as to false claim suits brought by the U.S. Government. A judgment against the Company in a qui tam or false claim suit could cause the Company to be liable for substantial damages and could carry penalties of suspension or debarment which would make the Company ineligible to receive any U.S. Government contracts for a period of up to three years and, therefore, could potentially have a material adverse effect on the Company's financial condition and results of operations. Significant changes to appropriations, national defense policy, a disruption of our relationship with the U.S. Government or termination of our U.S. Government contracts would have a material adverse effect on the Company's results of operations and financial condition. THE COMPANY GENERATES SALES FROM CONTRACTS WITH FOREIGN GOVERNMENTS, AND SIGNIFICANT CHANGES IN POLICIES OR TO APPROPRIATIONS OF THOSE GOVERNMENTS COULD HAVE AN ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. 4 Approximately 17% of our fiscal year 2003 sales were sales generated from foreign governments. Significant changes to appropriations, national defense policies, disruptions of our relationships with foreign governments or terminations of our foreign government contracts could have an adverse effect on the Company's results of operations and financial condition. OUR INTERNATIONAL OPERATIONS SUBJECT US TO SOCIAL, POLITICAL AND ECONOMIC RISKS OF DOING BUSINESS IN FOREIGN COUNTRIES, ANY OF WHICH COULD NEGATIVELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS. We conduct a substantial portion of our business and employ a substantial number of employees in our direct sales force and in external sales organizations in Canada and in other countries outside of the United States. In fiscal year 2003, we generated approximately 34% of our sales from customers outside the United States. As a result, we are subject to risks of doing business internationally. Circumstances and developments related to international operations that could negatively affect our business, financial condition or results of operations include, but are not limited to, the following factors: - difficulties and costs of staffing and managing international operations; - currency restrictions, which may prevent the transfer of capital and profits to the United States; - changes in currency rates with respect to the U.S. dollar; - changes in regulatory requirements; - domestic and foreign government policies; - potentially adverse tax consequences; - restrictions imposed by the U.S. Government on the export of certain products and technology; - the responsibility of complying with multiple and potentially conflicting laws; - the impact of regional or country-specific business cycles and economic instability; and - geopolitical developments and conditions, including international hostilities, acts of terrorism and governmental reactions, trade relationships and military and political alliances. We have committed resources to expand our worldwide sales and marketing activities, to globalize our service offerings and products in selected markets and to further develop local sales and support channels. If we are unable to successfully implement these plans, to maintain adequate long-term strategies that successfully manage the risks associated with our global business or to adequately manage operational fluctuations, our business, financial condition and results of operations could be harmed. In addition, our international operations and, specifically, the ability of our non-U.S. subsidiaries to dividend or otherwise transfer cash among our subsidiaries, including transfers of cash to pay interest and principal on our debt, may be affected by limitations on imports, currency exchange control regulations, transfer pricing regulations and potentially adverse tax consequences, among other things. WE MAY NOT BE SUCCESSFUL IN OBTAINING THE NECESSARY EXPORT LICENSES AND TECHNICAL ASSISTANCE AGREEMENTS TO CONDUCT OPERATIONS ABROAD AND CONGRESS MAY PREVENT PROPOSED SALES TO FOREIGN CUSTOMERS. Licenses for the export of many of our products are required from government agencies in accordance with various statutory authorities, including the Export Administration Act of 1979, the International Emergency Economic Powers Act, the Trading with the Enemy Act of 1917 and the Arms Export Control Act of 1976. We can give no assurance that we will be successful in obtaining these necessary licenses in order to conduct business abroad. Termination or significant limitation on our ability to export would have an adverse effect on our results of operations and financial condition. OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY INCREASED OR UNEXPECTED COSTS INCURRED BY US ON OUR CONTRACTS AND SALES ORDERS. The terms of virtually all of our contracts and sales orders require us to perform the scope of work under the contract or sales order for a predetermined fixed price. As a result, we bear the risk of increased or unexpected costs associated with a contract or sales order, which may reduce our profit or cause us to sustain losses. Future increased or unexpected costs on a significant number of our contracts and sales orders could adversely affect our results of operations and financial condition. 5 ENVIRONMENTAL REGULATION AND LEGISLATION, LIABILITIES RELATING TO CONTAMINATION AND CHANGES IN OUR ABILITY TO RECOVER UNDER VARIAN'S INDEMNITY, COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS. The Company is subject to a variety of U.S. federal, state and local as well as foreign environmental laws and regulations relating, among other things, to wastewater discharge, air emissions, handling of hazardous materials, disposal of solid and hazardous wastes, and remediation of soil and groundwater contamination. We use a number of chemicals or similar substances, and generate wastes, that are classified as hazardous, and require environmental permits to conduct many of our operations. Violation of such laws and regulations can result in substantial fines, penalties, and other sanctions. Changes in environmental laws or regulations (or in their enforcement) affecting or limiting, for example, our chemical uses, certain of our manufacturing processes, or our disposal practices, could restrict the ability of the Company to operate as it is currently operated or is permitted to be operated. In addition, we may experience releases of certain chemicals or other events, including the discovery of previously unknown contamination, that could cause us to incur material cleanup costs or other damages. The Company is involved from time to time in legal proceedings involving compliance with environmental requirements applicable to its ongoing operations, and may be involved in legal proceedings involving exposure to chemicals or the remediation of environmental contamination. Pursuant to the stock sale agreement by and between Varian Associates, Inc., the predecessor of Varian Medical Systems, Inc., and CPI dated June 9, 1995, as amended (the "Varian Agreement"), Varian has agreed to indemnify us for, and retained, various environmental liabilities relating to Varian's Electron Devices Business prior to the closing of the sale of that business, with certain exceptions and limitations (the "Varian Environmental Indemnity"). With certain limited exceptions, the Company is not indemnified under the Varian Environmental Indemnity with respect to liabilities resulting from the Company's operations after the closing of the Varian Agreement. Varian is undertaking environmental investigation and remedial work at three of the Company's manufacturing facilities, Palo Alto, California, Beverly, Massachusetts and Georgetown, Ontario, Canada. The Company subleases a portion of the larger Varian Palo Alto campus, for which Varian has entered into a Consent Order with the California Environmental Protection Agency for remediation of soil and groundwater contamination. The Palo Alto site abuts a federal Superfund site and a state Superfund site. In addition, Varian has been sued or threatened with suit with respect to some of the above-mentioned manufacturing facilities. The Company's San Carlos, California facility also has soil and groundwater contamination that has been the subject of some remediation. Although the Company believes that Varian currently has sufficient financial resources to satisfy its obligations to the Company under the Varian Environmental Indemnity, because of the long-term nature of Varian's remediation obligations, there can be no assurance that Varian will continue to have the financial resources to comply fully with those obligations, or will continue to take the same view with respect to the scope of those obligations. In either case, our results of operations and financial condition could be materially adversely affected. There can also be no assurance that material costs or liabilities will not be incurred by the Company in connection with obligations, proceedings or claims related to environmental conditions arising from the Company's operations or properties. Such costs or liabilities, if significant, could have a material adverse effect on the Company's results of operations and financial condition. WE HAVE ONLY A LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WHICH ARE IMPORTANT TO OUR SUCCESS. Our success depends, in part, upon our ability to protect our proprietary technology and other intellectual property. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure and other contractual arrangements, and patent, copyright and trademark laws to protect our intellectual property rights. The steps we take in this regard may not be adequate to prevent or deter infringement or other violation of our intellectual property, and we may not be able to detect unauthorized use or take appropriate and timely steps to enforce our intellectual property rights. Although it is our intention to avoid infringing or otherwise violating the intellectual property rights of others, we cannot be certain that our processes and products do not or will not infringe or otherwise violate the intellectual property rights of others. Infringement or other violation of intellectual property rights could cause us to incur significant costs and prevent us from selling our products and could have a material adverse effect on our business, financial condition and results of operations. 6 OUR INABILITY TO OBTAIN CERTAIN NECESSARY RAW MATERIALS AND KEY COMPONENTS COULD DISRUPT THE MANUFACTURE OF OUR PRODUCTS AND CAUSE OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS TO SUFFER. Certain raw materials and key components necessary for the manufacture of the Company's products, such as molybdenum, cupronickel, OFHC copper, and some cathodes, are obtained from a limited group of, or occasionally sole, suppliers. If any of these suppliers fails to meet our needs, we may not have readily available alternatives. If the Company is unable to procure these and other necessary raw materials and key components from its suppliers, its ability to manufacture products could be disrupted, and the Company's financial condition and results of operations could suffer. CYPRESS CONTROLS US AND MAY HAVE CONFLICTS OF INTEREST WITH US OR YOU IN THE FUTURE. After giving effect to the Transactions, affiliates of The Cypress Group L.L.C. ("Cypress") will beneficially own approximately 96%, on a fully diluted basis, of the outstanding shares of common stock of CPI Acquisition Corp., CPI's indirect parent. As a result, Cypress will, following the closing of the Transactions, have control over our decisions to enter into any corporate transaction and will have the ability to prevent any transaction that requires the approval of stockholders regardless of whether or not other stockholders or holders of the Notes believe that any such transaction is in their own best interests. Cypress may also have an interest in causing us to pursue acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investment, even though such transactions may involve risks to you as a holder of the Notes. RISKS RELATING TO THE NOTES THE NOTES ARE SUBORDINATED TO ALL OUR EXISTING AND FUTURE SENIOR INDEBTEDNESS, WHICH MAY LIMIT OUR ABILITY TO REPAY YOU. The Notes are contractually subordinated in right of payment to our existing and future senior indebtedness. As of October 3, 2003, on a pro forma basis, after giving effect to the Transactions, we would have had $90.0 million outstanding, and availability of $40.0 million, under our Senior Credit Facilities, all of which, if borrowed or drawn upon, would be senior debt. In addition, subject to compliance with certain covenants under the Indenture for the Notes, we may incur additional indebtedness, which may be senior to the Notes and may materially adversely impact our ability to service our debt, including the Notes. Due to the subordination provisions of the Notes, in the event of our insolvency, funds that would otherwise be used to pay the holders of the Notes and any other senior subordinated indebtedness will be used to pay the holders of senior indebtedness to the extent necessary to pay the senior indebtedness in full. As a result of these payments, general creditors may recover less, ratably, than the holders of senior indebtedness and the general creditors may recover more, ratably, than the holders of the Notes or any other subordinated indebtedness. In addition, holders of senior indebtedness may, under certain circumstances, restrict or prohibit us from making payments on the Notes. THE GUARANTEES ARE SUBORDINATED TO THE SENIOR DEBT OF THE GUARANTORS. The guarantees are subordinated to all existing and future senior debt of the guarantors, which will consist of all of the indebtedness and other liabilities of the guarantors designated as senior indebtedness, including guarantees of borrowings under the Senior Credit Facilities. As of October 3, 2003, on a pro forma basis, after giving effect to the Transactions, our guarantors would have had $90.0 million outstanding, and availability of $40.0 million, under our Senior Credit Facilities, all of which, if borrowed or drawn upon, would be senior debt. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, if, among other things, any guarantor, at the time it incurred the debt evidenced by its guarantee of the Notes: - received less than reasonably equivalent value or fair consideration for the guarantees; and - was insolvent or rendered insolvent as a result of issuing the guarantees; 7 - was engaged in a business or transaction for which that guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay as those debts matured; or - intended to hinder, defraud that guarantor's creditors, then the guarantee of that guarantor could be voided, or claims by holders of the Notes under that guarantee could be subordinated to all other debts of that guarantor. In addition, any payment by that guarantor pursuant to its guarantee could be required to be returned to that guarantor, or to a fund for the benefit of the creditors of that guarantor. The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, was greater than the saleable value of all of its assets at a fair valuation; - the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. Each subsidiary guarantee will contain a provision intended to limit the subsidiary guarantor's liability to the maximum amount that it could incur without causing the incurrence of obligations under its subsidiary guarantee to be a fraudulent transfer. This provision may not be effective to protect the subsidiary guarantees from being voided under fraudulent transfer law. If a court voided a guarantee by one or more of our subsidiaries as the result of a fraudulent conveyance, or held it unenforceable for any other reason, holders of the Notes would cease to have a claim against the subsidiary based on the guarantee and would only be creditors of CPI and any guarantor whose guarantee was not similarly held unenforceable. OUR CANADIAN SUBSIDIARY AND OUR OTHER FOREIGN SUBSIDIARIES ARE NOT GUARANTORS, AND YOUR CLAIMS WILL BE SUBORDINATED TO ALL OF THE CREDITORS OF THE NON-GUARANTOR SUBSIDIARIES. Our Canadian subsidiary is not a guarantor. This non-guarantor subsidiary generated approximately 30% of our sales, 26% of our net income, 20% of our EBITDA and 19% of our cash provided by operating activities for the fiscal year ended October 3, 2003. In addition, it held approximately 26% of our consolidated assets as of October 3, 2003. The amounts currently generated by the other non-guarantor subsidiaries are not material. Any right of ours to receive the assets of any of our non-guarantor subsidiaries upon their bankruptcy, liquidation or reorganization (and the consequent right of the holders of the Notes to participate in those assets) will be subject to the claims of that subsidiary's creditors, including trade creditors. To the extent that we are recognized as a creditor of that subsidiary, we may have such claim, but it would still be subordinate to any security interests in the assets of that subsidiary and any indebtedness and other liabilities of that subsidiary senior to that held by us. As of October 3, 2003, on a pro forma basis to give effect to the Transactions, these Notes would have been effectively junior to approximately $14.7 million of liabilities (including trade payables) of these non-guarantor subsidiaries. WE MAY NOT HAVE THE ABILITY TO RAISE FUNDS NECESSARY TO FINANCE ANY CHANGE OF CONTROL OFFER REQUIRED UNDER THE INDENTURE. If a change of control occurs as described in the Indenture, we would be required to offer to purchase your Notes at 101% of their principal amount together with all accrued and unpaid interest and additional interest, if any. If a purchase offer obligation arises under the Indenture, a change of control could also have occurred under the Senior Credit Facilities, which could result in the acceleration of the indebtedness outstanding thereunder. Any of our future debt agreements may contain similar restrictions and provisions. If a purchase offer were required under 8 the indenture for our debt, we may not have sufficient funds to pay the purchase price of all debt, including your Notes, that we are required to repurchase or repay. A change of control is defined in the Indenture to include, among other things, any person, other than one or more permitted holders, directly or indirectly beneficially owning 50% or more of the voting power of the total outstanding voting stock of CPI. Permitted holders is defined in the Indenture to include (i) Cypress, (ii) any person which is directly or indirectly controlled by Cypress, and (iii) in certain circumstances, any person with whom Cypress and any person which is directly or indirectly controlled by Cypress (x) is part of a group within the meaning of Section 13(d)(3) of the Exchange Act or (y) are parties to a securityholders' agreement (as defined in the Indenture). See the definitions of "Change of Control", "Permitted Holder" and "Securityholders' Agreement" in the Indenture. -----END PRIVACY-ENHANCED MESSAGE-----

(a)		General and administrative expense includes foreign currency gain (loss).

(b)		EBITDA represents earnings before provision for income taxes, interest expense, depreciation and amortization. Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. Management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because they assist in analyzing and benchmarking the performance and value of our business. Although we use EBITDA as a financial measure to assess the performance of our business, the use of EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance or net cash provided by operating activities in accordance with GAAP as a measure of liquidity. For reconciliation of EBITDA to Income before taxes, see Note 5 of the Notes to Consolidated Condensed Financial Statements.

•		the Company’s indebtedness is substantial;

•		the Company’s debt agreements have restrictions that limit its flexibility in operating its business;

•		the Company’s ability to generate the significant amount of cash needed to service its debt and to fund capital expenditures or other liquidity needs depends on many factors beyond its control;

•		the Company has had historical losses;

•		the Company may be unable to retain and/or recruit key management and other personnel;

•		the markets in which the Company sells its products are competitive;

•		the end markets in which the Company operates are subject to technological change;

•		a significant portion of the Company’s sales is, and is expected to continue to be, from contracts with the U.S. Government;

•		the Company generates sales from contracts with foreign governments;

•		the Company’s international operations subject it to social, political and economic risks of doing business in foreign countries;

•		the Company may not be successful in obtaining the necessary export licenses and technical assistance agreements to conduct operations abroad and Congress may prevent proposed sales to foreign customers.

•		the Company’s results of operations and financial condition may be adversely affected by increased or unexpected costs incurred by it on its contracts and sales orders;

•		the Company’s business could be adversely affected by environmental regulation and legislation, liabilities relating to contamination and changes in our ability to recover under Varian Medical Systems Inc.’s indemnity;

•		the Company has only a limited ability to protect its intellectual property rights;

•		the Company’s inability to obtain certain necessary raw materials and key components could disrupt the manufacture of its products and cause its financial condition and results of operations to suffer; and

•		the Company is controlled by affiliates of The Cypress Group L.L.C.


	A report on Form 8-K was filed on November 21, 2003 under Item 5 to announce that Holding entered into the Agreement and Plan of Merger dated as of November 17, 2003.